For a foreign investor who wants to purchase real estate in Budapest there are two ways to proceed:

1.- The buyer can apply for a permit as a private person, which means submitting an application to the local authorities to acquire the properties(s). The costs associated with the procedure is approximately €250

2.- Foreign buyers can establish a local Hungarian company, usually a limited liability company. This is preferable if the purchaser wishes to acquire multiple properties. (This is adapted if a buyer wishes to acquire more than a property.)

To create a society is recommendable specially if the buyer wants to follow activity real estate or wishes to rent its floors. Of another way to have several floors as physical person does not have any disadvantage.

As a Private Person: The application for a permit can be denied though it is unlikely as EU integration rapidly approaches, but it will take approximately 2 -3 months. If a requested permit is denied it is still possible to establish a Hungarian limited liability company to acquire the property. The individual must ask for the permission of the Office of the Public Administration whenever it buys a floor, but the number of the floors that can have in property a Spanish citizen, is not limited.

Establishing a Company: The advantage of buying property through a company is that it saves time. In addition to this all expenses relating to the apartment can be written off (e.g.) travel, accommodation, legal & agency fees, purchase (stamp) duty, renovation costs, furniture, utilities, and all associated services, including the interest on the purchasers loan.

Under this approach, the company can be sold along with the property, which makes it attractive for future buyers, as no purchase duty needs to be paid. The only disadvantage is that the company shall require an accountant and need to submit annual reports; we can assist with this issue though. One disadvantage is that the company shall require an accountant and need to submit annual reports; Hungarian Investment Properties Ltd. can assist with this issue though.

The process of the transaction of a building in Hungary has several differences with respect to the Spanish process. First: the contract is not signed whit a  notary but with a lawyer. According to the Hungarian laws, so that the contract is valid, and it is sufficient to register it in the Registry of the Property, is necessary that it has the sign of a lawyer (authenticated by a lawyer). Second: In Hungary the registry of the properties is obligatory, and has a system, that exists from the times of Maria Teresa (1740-80), nowadays completely it is computerized, and it is the registry of the most homogenous property of Europe.

When the price and the conditions are decided verbally with the salesman, the following step is to initiate a contact with a lawyer. The lawyer asks for a simple note of the building, reviews if it is free of loads and burdens and if the salesman is the true proprietor. In Hungary, the parts celebrate a definitive contract, it is to say does not exist private contract (and the definitive contract authenticated by the lawyer corresponds to the notarial writing). The contract will be valid after the buyer pays the signal that they have a value of 10% of the price of the property. Immediately afterwards, the lawyer presents the contract to the Registry of the Property where the transaction is registered, with reserve of property right. From this moment the salesman no longer can sell the floor to one third person, although this one continues being the proprietor until the last part of the price is not paid.

The parts can establish in the contract two terms of payment (initial deposit and the rest), but this depends on their will: if they ask for a bank loan or is necessary to cancel the mortgage, is advisable to pay to several terms. After paying the last remaining amount of the price, the salesman must sign a declaration of transmission of the property right (or this declaration can be deposited in the writing desk of the lawyer from the company/signature of the contract). In the last act, the lawyer presents the declaration of abandonment of property in the Registry of the Property, and thus the property will be enrolled with the name of the buyer.

To buy a property in Hungary is straight forward and will require the following to be done:

1.- Appointing a Hungarian legal representative and placing the initial deposit of Euro 1 000/property

2.- Going to a notary public and certifying the buyer’s identity to initiate the permit approval process. If the permit is refused (which is a remote possibility) establishing a company is the next suggested option – see below. The issue with the public notary can be done at any Hungarian embassy or consulate but opening hours vary the price abroad for this service is much higher then doing it locally.

3- Signing the buy-sell agreement is can be taken care of in your home country if time is an issue whereby the agreement is signed by yourself and then mailed / DHLd to your local legal representative.

The basic procedure is as follows: 1.- The company’s Articles of Association needs to be signed in front of a lawyer*. 2.- The lawyer will also need the name of the new company, its seat, and the personal data of the owner(s).After the statutes of the society are signed, it is necessary to prepare a company/signature unit before the public notary. The following step is to open an account for the share capital of the company. 3.- After the Articles of Association are prepared, specimens of signature need to be signed in front of a public notary, then a bank account must be opened. 4.- Once the share capital already is given( 500.000 HUF (2000€) ), the statutes and the unit of company are prepared, the lawyer will be able to present/display them in the Mercantile Registry. The foundation of a limited society has a state cost of 55.000, - HUF (220€). The Mercantile Registry is 30 to register the society, but from the moment, that the statutes are presented/displayed in the Mercantile Registry, the society already can work like preventive society: it has such right that a registered society, is to say can buy, sell etc. *Note: It is not necessary to be in Hungary in order to sign the Articles of Association; the procedure can be done at any Hungarian Embassy abroad BUT this can be a slow process.

1.- Share capital: 500.000, - HUF (2,000 €, -)

2.- State rate: 50.000, - HUF (200 €)

3.- Rate of publication: 5.000, - HUF (20 €)

4.- Notary honorarium: 5.000, - HUF (20 €)

5.- honorarium of the lawyer: according to personal consultación

Do I have to register for Hungarian social security if I am the managing director of a Hungarian company?

A: No, it is not necessary. Investors ask this question because of the high social security tax (44% of the salary) and other taxes to be paid after each employee. A company does not need to have employees, it can operate through subcontractors, who invoice the company for their services.

1. IVA

In case of purchase of first hand (it is to say the salesman is the promoter) it is necessary to pay 20% IVA. The price, that appears in the publicities of the promoters, already contains the IVA. In case of purchase of second hand IVA is not paid.

2. ITP

a.)Properties of second hand:

For example: If a properties have a price of 14.000.000, the ITP calculates thus:

Of a.1	4 millones 2% :80.000,- HUF
Of a.2	10 millones 6%: 600.000,- HUF
	Total:680.000,- HUF

b.) New properties :

15 millions or minor:	nothing
between 15-30 millions:	it´s necessary to calculate the sum of the first point point, and later to discount 740,000, - HUF
from 30 million:	It´s calculate according to point a.)

c.) Purchase with the intention of real estate activity:

This type of ITP payment only can ask for the societies those that have the real estate activity registered how main social activity. If they present a declaration, in which they are commited to sell the floor within a term of 2 years, the ITP that they have to pay is of 2%. If they do not sell the floor within 2 years, will have to pay the rest of the ITP calculated according to the general rules.

d.) Construction ground purchase:

Presenting a declaration in which the buyer is commited to inside construct to a house in the ground 4 years, it is not necessary to pay ITP. After the 4 years the authorities control, if the buyer has constructed a house or no. If it lacks the finished house, the buyer must pay 10% of ITP according to point e.)

e.) Purchase of buildings that do not serve to live in them (pej: a garage):

The general ITP for the other types of buildings is: 10%

The base of the tax is the entrance of the sale deduced with the costs related to the sale. The descontables costs are: the price of purchase of the floor, other expenses related to the purchase of the floor (p.ej: professional honoraria), investments that increase the value of the floor, and costs related to the sale. The measurement of the tax is: 25%. Until the fifth year from the sale it is not possible to discount the base of the tax. From the sixth year the base of the tax can be deduced annually with 10%. Thus from décimoquinto year tax is not paid.

As a Company: Yes, if a company sells its property 18% of any profit (after expenses incurred relating to the property) must be paid as tax plus 20% of what's left if money is withdrawn as income (dividend). After the 18% corporate tax is paid, we’re left with 82% of the profit in the company. 20% of 82%, that is 16.4% must be paid as dividend tax. Please note that the purchase price shall be further reduced with the annual amortization (2% or 5% per year), as well as other expenses, fees relating to the property.

Older Apartments: Renovated, fully furnished apartments in central areas – Districts V, VI, VII, IX and XIII in Pest and Districts I, II and III in Buda. The higher the standard of renovation, the more it appeals to the high quality, long term, western tenants. Ideally these tenants are business people, diplomats, or foreign students.

New Apartments: Apartments that are well located, near transport hubs (be it roads or public transportation) near areas that are of interest for the tenant (offices, universities, parks, etc). New builds have the advantage of having extended payment terms which means that the buyer can pay over time and sell when the property prices have increased further. Furthermore, new build apartments are guaranteed for 3 years after completion, which older apartments are not.

Remember – renters will have to want to live in the apartment. If the area around the property is not appealing to renters there is a high chance that the property will remain vacant.

Older Apartments: Renovated, fully furnished apartments in central areas – Districts V, VI, VII, IX and XIII in Pest and Districts I, II and III in Buda. The higher the standard of renovation, the more it appeals to the high quality, long term, western tenants. Ideally these tenants are business people, diplomats, or foreign students.

New Apartments: Apartments that are well located, near transport hubs (be it roads or public transportation) near areas that are of interest for the tenant (offices, universities, parks, etc). New builds have the advantage of having extended payment terms which means that the buyer can pay over time and sell when the property prices have increased further. Furthermore, new build apartments are guaranteed for 3 years after completion, which older apartments are not.

Remember – renters will have to want to live in the apartment. If the area around the property is not appealing to renters there is a high chance that the property will remain vacant.

If the apartment is privately owned (not by a company), then it is 25% of the rental income when renting a residential property to an individual or a business. Foreign nationals must apply for a tax ID and issue an invoice to the tenant; we can assist in this as well. As a company there is only an 18% corporate tax on any rental profits.

A: 10% of the monthly rent, or a month of the rate of the rent

One month's rent plus 20% VAT paid upon signing the contract if the apartment is rented for a year.