FREQUENTLY ASKED QUESTIONS

Q - How can a foreigner purchase a property in Budapest?

A - There are two ways for a foreigner to purchase a property in Budapest. The buyer can apply for a permit as a private person, which means submitting an application to the local authorities. The cost associated with this procedure is approximately 250 euros. The buyer can then establish a local Hungarian company, usually limited. This is preferable if the purchaser wishes to acquire multiple properties.

Q - What are the advantages and disadvantage of each option?

A - There are no ongoing costs when buying as an individual but permission must be granted by the Administrative Office of Budapest and this can take up to 3 months.
The advantage of buying through a company is it saves time, the company can be sold along with the property and the expenses can be written off against profits. The disadvantages are that the company should acquire an accountant and need to submit annual reports.

Q - How do you buy as a private individual?

A - A lawyer must be appointed and 1000 Euro must be deposited in a Hungarian bank account. A visit to the notary to certify the buyers identity and to initiate the permit approval process. You then sign the buy-sell agreement, which can be taken care of in your home country, if time is an issue, the agreement is signed by yourself and then mailed back to your lawyer.

Q - How do you set up a company?

A - The Company's Articles of Association need to be signed in front of a lawyer.
The lawyer will also need the name of the company, its address and the personal data of the owner/s. The founding capital of a Limited Liability Company is HUF 3M or Euro 12000 this amount can be applied to the purchase of the property.
After the Articles of Association are prepared, specimens of signature need to be signed in front of a public notary, and then a bank account must be opened.
All documents must then go to an accountant who will take care of all the administration and begin to prepare the required reports.

Q - What are the legal expenses when establishing and then running a company?

A - The initial fee is HUF 250,000 (Euro approx 1000), plus 25% VAT. There is an annual fee of HUF10,000 (Euro approx 40) plus 25% VAT for accounting and tax purposes if the company is not actively trading.

Q - What other costs are involved?

A -The following costs can be expected

• Lawyer fees: 1% of the property cost.
• Agency fees: 3% of the property cost plus Stamp duty.
• When buying a resale apartment 6% of the property cost.
• When buying a new development at a price of up to HUF 30M (Euro approx 120,000) there is no stamp duty.
• If the property costs more than HUF 30M the stamp duty is 6% above this figure.
• A company that intends to sell the property within two years can pay 2% stamp duty. For private individuals the price for a permit is HUF 50,000.

A - Yes but as a private person the tax is 20% and after the 6th year of ownership the tax base is reduced by 10% annually. You may also be able to deduct the costs of travel and service fees associated with the property as part of your global income. Hungary has long standing double taxation treaties with most countries, thus making this process quite straight forward. As a company the tax is 18% of any profit, plus 20% of what is left, if the money is withdrawn as income. The purchase price, is reduced with an annual amortization (2% or 5% per year), as well as other expenses, fees relating to the property.

Q - Is the property freehold or leasehold?

A - All properties in Budapest are freehold; the owners of the property are registered on the title.

Q - How do you take possession of the property?

A - When buying a re-sale property you pay a deposit upon signing the purchase contract (usually 10%) of the total price. Your name is then registered on the title sheet as a remark of intention to buy. Once you have paid the full amount, your name will be registered on the title as the exclusive owner to the property. When buying in a new development the registration will take place after the completion of the project.

Q - Can you get finance from a Hungarian bank?

A - It is possible to obtain a mortgage from a Hungarian bank as follows:

• The amount of the loan is up to 70% of the price of the property.
• The loan will be granted for a period of 1-20 years.
• Interest rate euro libor + 2.5% per annum.
• Monthly payments will include capital plus interest.
• The buyer must be a private individual and get permission to buy in Budapest

Q - How do you secure your money when buying a property in Budapest?

A - The first payment, usually 10% of the cost of the property is given to the lawyer , who, after transferring it to the seller , will register a remark in the land registry office on your behalf and then the last payment should be transferred to the lawyers escrow account. T he lawyer will then pay the money to the seller upon fulfilment of the following conditions.

1. The seller will prove that all debts on the apartment have been paid, and will produce zero statements from the utility companies.
2. The seller will sign a declaration approving that he has received the full amount of the money and that he has no objection to the registration of the property in the land registry office on the name of the buyer.
   The lawyer will then register your name as the new owner of the property.

Q - What is the anticipated rental income, one can expect to receive?

A - Euro 400 for a small 40-60 m² apartment, Euro 700 for a larger two bedroom apartment. You can expect an annual rental yield of between 6% and 9%.
Not only will the value of the underlying property increase in value but holding a HUF denominated asset which generates income in HUF will further magnify the value of your holdings in Euro terms.

Q - What is the tax on rent?

A - If the apartment is privately owned the tax is 20% of the rental income. Foreign nationals must apply for a tax ID and issue an invoice to the tenant. As a company there is only an 18% corporate tax on any rental profits.

Q - How much will it cost to furnish an apartment in Budapest?

A - Approximately Euro 5000 for a studio apartment, approximately Euro 6000 for a 1 bedroom apartment and approximately Euro 7000 for a 2 bedroom apartment.