2018 has brought several changes in taxation of real estate. Tax on renting of properties by individuals has been cut; more money can be paid tax-free to employees for rented flats and more flexible exemption from transfer tax on consecutive transactions. The Hungarian State will register pre-emption right on properties located on world heritage sites.
From 1 January, private individual landlords are not anymore subject to health care contribution (‘EHO’) of 14% which was due above 1 million HUF revenue from renting of properties. Practically, the effective tax burden for individuals has halved as they are now subject only to an income tax of 15%.
A significant increase took effect in the amount of tax-free subsidy paid by the employer for renting flats. The tax-free limit used to be 40% of the minimum wage and is now set at 60% in order to enhance mobility of human resources. As the minimum wage was also increased by 8%, this means that the cap of tax-free subsidy is now 82,800 HUF. Such subsidy may be provided maximum for 5 years and the highest cap is applicable only in the first two years, then it gradually decreases to 20% of the minimum wage.
More flexible exemption rules apply from this year on consecutive transaction of residential properties. Until the end of 2017, buyers could decrease the tax base of transfer tax imposed on a transaction with the purchase price of the property they sold within a year prior to the new purchase. This period is now extended to three years, i.e. those who sold their flats in 2015 or 2016 may now be exempt from transfer tax upon their new acquisitions.
A Government Decree took effect in the end of December specifying more than 80,000 properties on 8 world heritage sites where the Hungarian State will have pre-emption right. The full list of properties is available here. The online newspaper atlatszo.hu created an interactive map so you can check more easily whether your property is concerned. The pre-emption right means that the seller shall offer the property to the Hungarian State with the same conditions as to the prospective buyer and the State may decide within a short notice if it exercises its right. It is important to note that the appendix of the Decree enlists all properties located in a world heritage area, the Decree itself shall not apply to residential properties, agricultural land and forestry. Although the pre-emption right stipulated by law will also be registered, it already exists by virtue of the entry into force of the law. Since any purchase violating the pre-emption right shall be deemed void against the beneficiary (in this case: the State) and such beneficiary may exercise its right within 3 years from the purchase, unless you intend to purchase residential properties, agricultural land or forestry, we advise you to check the above list if the chosen property is included in it.