What are the taxation rules for buying real estate in Hungary?

Disclaimer: The following information is based on information provided by the Hungarian tax authorities and market experience and is intended as a guide. It should be noted that any liability regarding, among other things, the timeliness, accuracy and completeness of the content is excluded. In case of doubt, information should be obtained directly from the tax authorities or a tax consultant.

How high is the tax after buying real estate? 

The real estate transfer tax is 4%

The tax must be calculated from the market value of the property. The market value of the property is determined by the tax office (NAV).

The market value is the value at which the property can normally be sold, so in many cases it corresponds to the purchase price agreed between the parties and stated in the purchase contract.

If only a certain proportion of the ownership of a property is acquired, a corresponding proportion of the market value of the property must be taken into account when calculating the tax.

What exceptions and reductions are there?

Relatives and spouses:
Sales between direct relatives and spouses are tax-free.

Trade-in rebate:
This is one of the most commonly used discounts when paying taxes.

If you buy a residential property and sell another residential property within the last three years or in the following year, you have to pay tax on the difference between the market value of the property you bought and the property you sold. 

So if you buy a higher-value property after selling it, you only have to pay 4% tax on the difference. 

If, on the other hand, you buy a property that is worth less than the property sold, you will not have to pay any tax at all. 

To qualify for the discount, the sale of the other property must be certified with a copy of the contract of sale or by other appropriate means.

Discount on land for new buildings:
The purchase of land suitable for the construction of a residential building is tax-free if you agree to construct a residential building within 4 years. 

In a built-up residential building, the floor space of the dwelling must reach 10 percent of the maximum built-up capacity specified in the settlement plan. 

The intention to construct a residential building must be declared at the latest before the payment order for the levy becomes legally binding. 

After the declaration, the NAV suspends the levy and cancels it permanently if the house is built within 4 years. Otherwise, the original levy plus a late payment fee must be paid.

Other discounts:
Many other discounts can be claimed in connection with the purchase of a property, which can reduce the obligation to pay. The most common additional tax exemptions and tax reductions for private individuals are
 

• Exemption due to the purchase of a home with the single-family home reduction discount (CSOK). These are state subsidies for adults starting a family/raising children
• Discount for the first home purchase. Anyone who has not yet reached the age of 35 at the time of purchase is entitled to a reduction of up to 50% of the tax payable on the purchase of their first residential property
• Discount for the purchase of a newly built home

A complete list of tax-free cases can be found under point 9 of the 19th NAV information brochure on the NAV website.

How should the property owner's tax be calculated if there is a usufruct right to the property?

If a usufructuary right is established at the same time as the acquisition of the property or if a property encumbered with a usufructuary right is sold, the purchaser of the property only has to pay tax on the sales value reduced by the value of the property.

How does the NAV determine the market value?

The NAV determines the market value on which the levy is based. To do this, the NAV can use data from previous purchase contracts, the buyer's declaration and, if necessary, an on-site inspection of the property.

Is there an obligation to register with the tax office for real estate purchases in Hungary?

The purchase of real estate and real estate-related property rights must be registered with the land registry office by submitting the contract. On the “B400 data sheet” to be submitted at the same time as this notification, the buyer can state his details as well as the tax exemption and tax reduction. Our lawyers will take care of the registration with the land registry. A tax advisor should be consulted for any specific tax issues.

When does the tax has to be paid? 

The land registry sends its decision to the tax office. The tax office decides (payment order) on the tax to be paid. The tax must be paid to the taxpayer no later than the 30th day after notification of the decision.

What should I do if I cannot pay the tax? 

You can apply to the tax office for a payment discount. This can be a payment in installments or a deferral of payment (information brochures 30.1 and 30.2).

Special case of a gift of real estate

The normal tax rate for gifts is 18% on the net value of the gift. For gifts of residential property and property rights associated with residential property, the tax rate is set at 9%.

Sources:
Hungarian Tax Office 
VUI

If you're already in real estate search mode, here are our main property types in Hungary and Lake Balaton:

Houses in Hungary
Apartments in Hungary
Villas in Hungary
Houses at lake Balaton
Apartments in Hungary
Land for sale in Hungary

If you have any questions or need help, don't hesitate to call us.
 

Contact us now!
Press me!

Author: Dr. Peik Langerwisch

After completing his studies in business administration with a degree in business administration and a magna cum laude doctorate in management, the author worked for twenty years in global management consultancies and banks and has now been using his expertise to act as a real estate agent for real estate in Hungary for several years.

Brief overview of expertise and career