The Tax Aspects of Hungarian Real Estate

Startbeitrag von Moderator. am 07.10.2017 08:34

The Tax Aspects of Hungarian Real Estate

No wonder that real estate plays a major role in the overall M&A market, since these properties represent financial and emotional security too. Both buyer and seller try to maximize their cost-benefit ratio, and are dependent on reliable data. In this article we would like to give an insight into the specialties of real estate taxation in Hungary.
Judit Jancsa-Pék, Tax Advisor, Partner, LeitnerLeitner

Next to identifying, for example, future rental income and maintenance costs, the owner/lessor has to be absolutely sure about the funding of fiscal circumstances, including taxes.

In terms of real estate, Hungary levies taxes on the owner for holding, utilization and alienation of the property. Taxes are assessed both at the level of central administration and local municipalities. Upon alienation, moreover, taxes may be imposed for the alienator (capital gain taxation both for corporations and private persons) and the purchaser (real estate transfer tax, gift tax depending on the form of acquisition) too. Although in some cases real estate holdings are also taxable, it is still worth considering structuring real estate investments by share instead of asset deal – it is especially advantageous to combine that with a so-called reported participation scheme, which grants full exemption from the taxation of any capital gains in a future sale of the shares.

It is also advisable to be aware of potential tax savings concerning real estate investments. In planning the investment, one may consider the development reserve that represents a kind of accelerated depreciation. In the case of long-term used tangible assets – such as real estate with a yearly depreciation of 2-6% – this is a good development loan from the budget.

Moreover, a special tax advantage may also be used for the maintenance costs of monument buildings and locally listed buildings (double deductibility of costs). For renovation and investments aimed at safeguarding cultural heritage, the tax base may be reduced by triple the renovation cost. Moreover, the latter is not even limited by the amount of pre-tax profits either, i.e. resulting in losses carry-forward.

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