To purchase a house or land for development, foreign individuals should request permission from local authorities. Obtaining this permit takes about two months and will cost about 200 euros. Refusal is possible if the municipal authorities consider that the sale of an object to a foreigner is contrary to the interests of the municipality, or a criminal trail is revealed. Therefore, it should be understood that, depending on the specific case, the authorities may refuse to purchase land for development despite the fact that the object has all the characteristics that are suitable according to the law. Without this permission, the contract of sale of real estate for a foreign individual is considered invalid.
Company registration
If the purchase of real estate is issued to a company established in Hungary, it is not required to obtain a permit, and many consultants (not only in Russia, but also in other countries) advise choosing this path. Other professionals, on the contrary, believe that this is an extra expense and hassle for the buyer.
Nevertheless, the most popular form of ownership among foreigners opening their own business in Hungary in the expectation of buying a home is Korlatolt Felelossegu Tarsasag (Kft) - a limited liability company.
Such a company is headed by one director (not a board of directors), who can be both resident and non-resident. The minimum authorized capital of Kft is 10,000 euros. Half of this amount is credited to the company's current account in a Hungarian bank when opening an account, the second must be received no later than one year from the date of registration of the company. It is also necessary to have a Hungarian person in the company, who will have a personal contract with the owner.
To register a company, it is necessary to determine the legal address, the type of activity of the company and come up with a name. The filing of documents by the founders may take only two days (if the lawyers have prepared the papers in advance), but it is better to count on at least a week.
The lawyer submits all the necessary documents with the signatures of the founders to the Chamber of Commerce and Industry and receives a temporary confirmation of the company's registration. The final decision on the registration of the company must be made by the court within 60 days, however, with a temporary confirmation, the company is assigned a tax number, the number of the Hungarian statistical office and health insurance.
All firms in Hungary are required to prepare and certify financial reports for the tax service with an auditor every year. The company's income tax in Hungary is 16%.
The procedure for concluding a transaction
In Hungary, you can search for real estate for purchase either with the help of a real estate agency or independently. At the same time, it should be understood that the agency's services in most cases are paid not by the buyer, but by the seller. After the desired object is found, a potential buyer should try to bargain in price: often, especially in the case of the secondary housing market or when interacting through an agent, it is quite easy to get a good discount.
The participation of a professional lawyer in a real estate transaction is mandatory, his services will cost about 1% of the cost plus VAT (20%). Reputable developers, when buying on the primary market, provide their lawyer for free.
When the price for the object is agreed by both parties, the lawyer, on behalf of the buyer, requests permission from the authorities for the right to purchase the object (if the foreigner registers the property for an individual). If the purchase and sale transaction is concluded on the secondary market, an important step is to check the number and names of owners, the legal purity of the object and the absence of financial encumbrances.
If necessary, the buyer agrees with the bank on a loan. In Hungary, Russians can get a mortgage loan from a Hungarian bank, reaching 50% of the cost. However, the rates for loans in forints are quite high – up to 10% per annum.
After that, the parties sign a contract of sale. This document prescribes a detailed description of the property, payment terms and liability of the parties in case of violation of the terms. When buying housing under construction, the document also usually specifies the construction period and the responsibility of the developer. When purchasing an object at the construction stage, it is better to choose those developers who accept payment in stages, in accordance with the construction stage, and their clients' funds are credited to escrow accounts available only upon completion of the project.
Then the buyer transfers a deposit to the seller's account, which usually amounts to 10-25% of the value of the object, and then pays for the services of a lawyer (he registers the contract with the cadastral service) and an agent. Permission to purchase from the local authorities, as a rule, comes at the moment when the contract has already been signed. As soon as the buyer receives permission, he is obliged to inform the seller about it.
The buyer enters into ownership only after paying the entire cost of the property in full. Thus, the last stage is the signing and sealing of the document on the closing of the transaction (the final contract of sale) and registration of ownership, which takes about six months.
Expenses when buying real estate
When transferring ownership, the buyer will have to pay a tax of 4% of the transaction value if the object has a price not exceeding 1 billion Hungarian forints (3 million euros). If the purchase amount is more, you will need to pay an additional 2%.
When buying a new building from January 1, 2021 to December 21, 2022 (as well as in the period from January 1, 2023 to December 31, 2026, if the construction permit was obtained no later than December 31, 20222), a preferential VAT rate of 5% may be applied in Hungary - if the living area is not exceeds 150 sq.m in apartment buildings and 500 sq.m if we are talking about the private sector.
In Hungary, VAT on the purchase of a new building is 27% and is usually included in the price indicated in the ad. The tax on the purchase of new housing is paid once - when registering the property with the Land Committee, and its amount depends on the price of the apartment:
- up to 60,000 euros - 0%;
- 60,000 – 110,000 euros - 4% for part of the amount over 60,000 euros;
- more than 110,000 euros – 2% for the amount of 60,000 euro + 4% for an amount over 60,000 euros.
When buying a home on the secondary market, a tax is levied on the transfer of property rights. It is 2% for the first 4 million forints (about 11,200 euros) and 6% for the remaining amount. When buying non-residential real estate at second hand, the tax is 10% of the full price. The registration fee in Hungary does not exceed 0.05%.
Regular taxes
According to Hungarian law, there is no annual property tax in the country. The only exceptions are resort areas, such as Balaton and Heviz. At the same time, there will be no tax in Budapest and other major cities. The tax system of the country assumes the accrual of interest depending on the degree of remoteness of the house or apartment from the resort. On average, the tax is 2 euros per 1 sq.m.
It is also important not to forget that a foreigner becomes a tax resident of Hungary if he lives in this country for more than 183 days a year, and his family and work are located here, as well as if his only permanent residence address is located here. In this case, it is necessary to pay taxes on all income received in Hungary.
If the owner rents out his property, the tax will be 16% of the amount of income received. But before becoming a landlord, you will need to get a permit and a tax number from the municipality.
Taxes on the sale of real estate
According to Hungarian law, the tax on the sale of real estate is 25% of the difference between the value of the sale and purchase of the object. But the seller will be exempt from it if he has been the owner for more than 5 years. Also, if the period of home ownership was from 4 to 5 years, then the tax will be half of the sale amount, if the time interval is 3-4 years, then the tax will be 70% of the base rate for the difference, if 2-3 years, then 90% of the base rate for the difference (from 25%).
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