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

Disclaimer: The following information is based on information from the Hungarian tax authorities and experience in the market 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. 

Taxation rules for sellers of real estate in Hungary: What do you need to know?

Principle: The seller of the property must pay income tax if the property sold was acquired within five years prior to the sale. 

When do I not have to pay income tax after selling the property in Hungary?

Holding period: 
If you purchased your sold property or apartment at least 5 years ago

No profit:
If your expenses reach the amount of your income

Tax-free transactions: 

• For example, the amount the spouse paid for the repurchased property at the time of divorce is tax-free
• Value received in exchange for the property under a maintenance, inheritance or annuity agreement entered into with an individual

What date should I consider as the date of acquisition of the property in Hungary?

In principle, it is the date on which a valid contract or deed for the acquisition of the property was submitted to the land registry. In the case of inheritance, however, the date of death of the deceased must be taken into account as the date of acquisition. In the case of property acquired under a leasing contract, the date of conclusion of the contract is the date of acquisition.

How much income tax do I have to pay after selling the property in Hungary?

If you have taxable income from the sale of the property, you must pay 15 percent of this as tax.

How much tax is due if less than 5 years have passed since the purchase of the sold property in Hungary?

For the assessment basis, the actual income is offset against the allowable costs and a time-dependent reduction is calculated.

Actual income:
To calculate income tax, the actual revenue from the sale must be determined. The receipts are typically: Sales price, value of the property received in exchange, interest paid by the buyer.

The eligible costs must be deducted from this. 

Eligible costs:
Eligible costs are expenses issued in the name of an individual or other owner and confirmed by an invoice or other document. They can be considered as expenses up to the amount of the income, but only if they were not previously recorded as expenses. The sum of the costs may not be higher than the income.

Eligible costs include:

• Amount spent on the acquisition of the property
• Costs associated with the acquisition of the property, e.g. taxes, legal fees
• Costs of value-adding investments
• Costs associated with the sale of the property, e.g. advertising fees, estate agents, legal fees

The amount determined in this way is the calculated income as a basis. Taxes of 15% are to be applied to this amount as a basis for calculation.

Time-dependent reduction:
The taxable amount is reduced each year that has passed since the purchase. If the sale takes place in the 5th year after acquisition or later, no taxable income is generated.

The amount of tax is therefore graduated according to the years of ownership as follows:
 

Simplified example: You bought a house for EUR 300,000, renovated it for EUR 100,000 and sell it after 4 years for EUR 500,000.

500,000 (sale amount) - 300,000 (original purchase price) - 100,000 (bills for renovations) = 100,000 (actual income)

15% of 100,000 = 15,000 (tax as a basis for calculation)

The tax burden in the 4th year after purchase is 30%.

30% of 15,000 = 4,500

You have to pay EUR 4,500 in taxes, i.e. 4.5% of the calculation basis

The “Real Estate Sales” calculator available on the website of the Hungarian Tax and Customs Authority (Nemezeti Adó- és Vámhivatal - NAV for short) will help you to calculate your income.

How and when do you have to declare income from the sale of real estate in Hungary and pay tax?

Income from the sale of real estate must be declared in the tax return by May 20 of the year following the submission of the purchase contract to the Land Registry. Every buyer of real estate is automatically assigned a tax number by the tax office upon purchase. 

In practice, many property owners do not remember receiving a tax number. However, in the case of a proper real estate transaction, it is issued by the tax office when the real estate transfer tax is levied.

The owner of a customer portal can also declare this income by completing the draft tax return prepared by the NAV and then accepting it. 

If no taxable income is generated from the sale of real estate, the income does not have to be included in the tax return.

What should I do if I cannot pay the tax?

In justified cases, the NAV may exempt the taxpayer from tax liability on the basis of their application and their income, assets and social circumstances, as well as the circumstances of the use of the income.

Do I have to pay VAT after selling my property?

Private individuals who are not sole traders are not subject to general sales tax and therefore do not have to pay sales tax when selling a home. The same applies to the sale of houses. Exceptions are serial sales.

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%.

If you are thinking about selling your property in Hungary, you can find a number of properties for comparison with us.

Houses in Hungary
Apartments in Hungary
Villas in Hungary
Houses at lake Balaton
Apartments in Hungary

If you need assistance in successfully selling a property in Ungaqrn, don't hesitate to give us a call.
 

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Sources:
Hungarian Tax Office 
VUI

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