Who is allowed to acquire…?

Properties (real estate registered in Hungary, except agricultural land) may be freely acquired by foreign EU citizens or companies registered in any EU countries. Non-EU country residents (i.e. USA citizens) still have to apply for a permission, which is to be granted by the Közigazgatási Hivatal, a government office residing in regions.  The procedure is quite automatic, there is a fee of HUF 50,000, the notarized passport of the buyer or the certified copies of the corporate document of the purchasing entity has to be attached.  The administrative procedure normally time takes 60 days that starts from the filing of the signed purchase contract. In case of a non-EU buyer it is advisory to draft the contract especially the payment terms with regards to the time limits this permission procedure. It is customary that the acting attorney drafts and files application on behalf of the buyer.

How to acquire…?

The transaction has to be drawn up in a written sale and purchase contract (“SPA”), which has to be countersigned by a Hungarian attorney, or public notary. The parties (seller, buyer, beneficiary) have to be present when signing the contract in front of the lawyer or the notary. Should one party wish to give a power of attorney (“POA”) for his/her representation such POA has to meet certain formal requirements.  If given abroad the POA has to be notarized and apostilled, preferably signed in Hungarian. If the POA is not issued in the Hungarian language, an official translation has to be made locally, that incurs further time and costs. If the new owner does not have a Hungarian address, a delivery agent has to be appointed to receive mail from the Hungarian officials. 

The SPA includes the personal details of the parties, the description of the purchase price, the payment terms and any other terms and conditions that are being discussed and agreed upon by the parties.  The SPA has to be signed in Hungarian as well (our practice is to prepare a “two-column” Hungarian – English version of the contract), or the English language text has to be officially translated into Hungarian.  For the conclusion of the contract the parties need to present their passport or ID cards.  For the purposes of complying with the obligations imposed on Hungarian attorney against money laundering, clients are asked to allow photo copies to be made of their personal identification documents.

What can be acquired…?

With the exception of the agricultural lands, properties are available for foreign investors.  If located in a condominium it is advisory to collect information about the deed of foundation of the house, it might provide certain rights for the other owners of the property. If jointly-owned, the co-owners shall have a statutory right of first refusal before the buyer can conclude the contract. 

How secure…?

In Hungary properties are registered in the land registry, title sheets are issued to evidence the ownership of the property, however, title insurance companies are getting access to the market as well.  Generally, the land registry information may be considered as official and reliable in Hungary.  Attorneys and notaries have electronic access to the updated information of the land registry.  Please note that each access and print report is to be charged by the government. Currently, HUF 7,500-8,000 is payable when asking for an official copy of the land registry sheet.

How much…?

In addition to the purchase price there are some expenses accompanying the purchase of the property. The land registry charges HUF 6,600 per property as a registration fee. Please note that this fee is collected per each pieces of property, if the sale affects more lot numbers (i.e. apartment with garage) then it is considered to be two or more properties.  Should the buyer be a corporate entity a recent certificate of registry has to be acquired and attached to the ownership application (HUF 3,000 per companies)

The legal fee for the drafting, countersigning, and filing of the SPA to the land registry is subject to the agreement of the parties, and generally VAT is added.

Transfer tax…?

In Hungary the government levies a transfer tax (stamp duty) on all property acquisitions. Certain exemptions are available, but generally 4% of the purchase price is to be paid within 30 days from receiving the note from the tax office.  For this purpose the Hungarian tax office issues a local tax number to all foreign buyers who do not have Hungarian tax numbers, and mails them directly to their foreign address within 6-10 month from the purchase.  The notice to pay the transfer tax may be expected within 2-6 months from the purchase.  In case of late payment the government charges the double of the official HUF base rate as interest (the base rate at the beginning of 2010 was 6%.  The notice may arrive at the foreign address together with an English translation, or simply gets delivered to the appointed delivery agent, the practice of the different tax offices may vary.  The notice includes precise description how and where to pay the transfer tax.

The most common exemption from the transfer tax applies if the property enjoys the “newly built” status.  If the property is being bought directly from the developer, pre- or following the construction, HUF 15 million from the purchase price shall be exempt from the transfer tax.  Please note that this rule is only applicable to apartments for residential purposes (garages, industrial properties, offices shall be subject to transfer tax at all times).

In case the buyer sells an apartment and purchases another within one (1) year, the law permits the buyer to set off the values.  In the case of this “residence swap” the difference between the two purchase prices will be taxable.

Capital gains…?

Private individuals are required to pay capital gains tax for all profits that are generated by the sale of the property, provided it is done within a certain period of time from its original acquisition.  In case of residential property the law prescribes five (5) years when capital gains tax is payable, for any other types of property this deadline is 15 years.  Capital gains tax may be subject to some deductions and benefits, and has to be returned and transferred the at the payday of the following calendar year.

Project companies…:

Until 31 December, 2009 in case of a sale of a Hungarian resident company holding a property was free from the transfer tax, since these transactions were considered as share deals and not property transfers.  Since 1 January, 2010 the acquisition of shares (representing more than 75% of the registered capital of the company) has been subject to property transfer tax, if the company, or any of its affiliates holds a Hungarian property.  In this case the transfer tax is also 4%, but capped at HUF 200 million.