What taxes are payable on the sale of real estate and can these be reduced or offset in any way?
Capital gains from the sale of real estate by a Hungarian company, limited partnership or unlimited partnership are subject to tax at a rate of 9%. In certain circumstances, local business tax (at a rate of up to 2%) may also apply.
Capital gains from the sale of real estate by a non-resident investor are also subject to tax at the general rate of 9% if the income is attributable to a permanent establishment in Hungary. In certain circumstances, local business tax (at a rate of up to 2%) may also apply if there is a permanent establishment for tax purposes.
Real estate investment funds are not subject to direct taxation in Hungary.
REITs and their wholly owned special purpose vehicles are, as a rule, exempt from corporate income tax and local business tax.
As from 1 January 2010, the Corporate Income Tax Act introduced non-resident taxation in respect of real estate companies. The term ‘real estate company’ refers to a business entity (and its related parties owning Hungarian real estate), other than a company listed on a regulated market, whose assets include Hungarian real estate with a fair market value exceeding 75% of the total assets (on a consolidated basis).
Also, for a company to qualify as a real estate company, at least one of the owners (including the owners of the company’s related parties if such related parties own Hungarian real estate and are subject to the Corporate Income Tax Act in Hungary) must be tax resident in a country which does not have a double taxation convention with Hungary or, if it does, the convention allows the taxation of capital gains in Hungary.
Taxpayers are obliged to report to the tax authorities if they qualify as (or no longer qualify as) a real estate company.
A foreign tax resident company is subject to a 9% tax in Hungary if it realizes a gain on transferring its shares in, or reducing the capital of, a real estate company.