Reduced Stamp Duty in Hungary

The purchase tax (stamp duty) payable after acquiring property in Hungary has been reduced by roughly 2%, effective January 1, 2010. 2% is due for the first 4 million HUF (14,800 EUR) of the purchase price, which is 80,000 HUF (296 EUR), then a further 4% for the remaining amount. Until now buyers had to pay 6% on the remaining amount. So in case of an apartment worth 15 million HUF (55,555 EUR), the tax is 296 EUR + 4% of the remaining 40,000 EUR, which is 1630 EUR, altogether 1926 EUR. In case of an apartment which cost 75,000 EUR, the tax is 2700 EUR. A 100,000 EUR apartment would require 3800 EUR in taxes, and a 150,000 EUR apartment would mean 5700 EUR in taxes. Previously it would have been 8400 EUR in case of the latter.

In case of new-built property bought as a first user directly from the builder, no purchase tax has to be paid for the first 15 million HUF (55,555 EUR), and only 4% is due for the remainder of the purchase price up to 30 million HUF (111,111 EUR). Until the end of 2009 the stamp duty on holiday homes, garage space, and storage rooms in Hungary used to be 10%. This has also been reduced to 4% as of January 1.

In case of plots for development, the previous 10% tax has also been reduced to 4%. If the buyer intends to build residential property on the plot within 4 years, the payment of the stamp duty may be delayed. Once the usage permit of the new building is presented to the tax authority, the stamp duty is canceled. Otherwise it must be paid with interest.

Until now it was easy to avoid paying stamp duty when buying property in case the property was owned by a company and the buyer merely bought the shares. Now, if more than 75% of the assets of a project company are real estate, the buyer of the shares is liable to pay the relevant stamp duty. When the transaction value is over 1 billion HUF (3.7 million EUR), the stamp duty is reduced from 4% to 2%, and may not exceed 200 million HUF (740,740 EUR) for each property involved

2010 is an election year both in Hungary and Slovakia, with parliamentary elections due April 11 in Hungary and June 12 in Slovakia. Both elections are followed by elections in the local governments (October and November, respectively), which determine local property tax. This means taxation issues will be a campaign issue in both countries and may change as the new governments begin looking for income, so look out for changes regarding property and rental income.

In Slovakia currently there is no stamp duty on purchased property.

“Central and eastern European markets have been the strongest performers in the world in the past six months, in a sharp turnaround of fortunes as the concerns of investors have switched to the mounting debts in the developed world.” January 31 2010 – Financial Times

Andras Patkai (CE Invest). www.ceinvest.hu