How is income arising from an investment in real estate taxed and can these taxes be reduced or offset in any way?
Income generated by a Hungarian company or by a limited or unlimited partnership from letting real estate is, in general, subject to tax at a rate of 9%. Corporate taxpayers are also subject to the local business tax of up to 2%, which is based on the net sales revenues after tax deductions (costs of goods sold, value of mediated services, sums paid to subcontractors, material costs, R&D costs) and adjustments have been made.
Real estate investment funds, however, are not subject to direct taxation. In general, the letting of Hungarian real estate by a non-resident company creates a permanent establishment in Hungary. Income generated by a permanent establishment is also subject to tax at the general rate of 9%. Local business tax at a rate of up to 2% also applies.
REITs and their wholly owned special purpose vehicles are, as a rule, exempt from corporate income tax and local business tax.
