Tax changes affecting the real estate industry have been adopted as part of the Government’s recent budgetary reforms. Most will come into force on 1 January 2010.
The key changes are:
- shareholders deriving capital gains from a real estate company will be subject to Hungarian corporate income tax as long as they are resident in a country with a double tax treaty allowing Hungary to tax the capital gains (or with which Hungary has no treaty). Investors should seek expert advice when reviewing their current arrangements given the complexity of the issues involved
- transfer tax on property purchases will be reduced from 10% to 4% of the market value up to HUF 1 billion and 2% of the market value above HUF 1 billion, with maximum tax of HUF 200 million per property (ie no further tax is payable on the market value of any property above HUF 9 billion)
- transfer tax (as above) is payable on the acquisition of 75% or more of the shares in a (Hungarian or foreign resident) company owning real estate in Hungary. Transfer tax will also be levied on indirect acquisitions, even those taking place outside Hungary
- the preferential 2% rate of transfer tax available to real estate traders reselling property within two years of purchase can now be extended to four years on request under certain conditions (including some cases where the deadline for resale has already passed). This period of grace is intended to help traders during the current economic crisis
- shareholdings in companies predominantly owning real estate will not (contrary to earlier plans) be excluded from the scope of the participation exemption regime
- the cultural contribution (currently levied at 0.2% on the construction of non-residential buildings with a development value exceeding HUF 120 million) will be abolished
- the general VAT rate increased from 20% to 25% from 1 July 2009 under an earlier amendment
