Lakatos, Köves and Partners
Can anyone (including foreigners) own and occupy real estate in your jurisdiction (including shares in property owning companies)? Are there any restrictions?
In general, yes, foreigners may own and occupy real estate and can hold shares in property owning companies, but acquisition of real property in Hungary by foreign (non-EU) legal and private persons is subject to the approval of the competent government agency. However, the acquisition of agricultural lands is highly regulated, and several restrictions apply and as a rule, only Hungarian or EU citizens qualifying as a farmer may acquire the ownership of agricultural lands. Also, special FDI (foreign direct investment) restrictions can apply in case of acquiring certain businesses, which may involve property.
Are there restrictions on lending for the purchase of real estate by foreign companies? If so briefly give an outline?
There are no special legal restrictions on lending for the purchase of real estate for foreign companies. However, banks may perform special procedure relating to their internal KYC/anti-money laundering procedures, especially in case of foreign companies from non-EU countries. The available loans are subject to actual market conditions and largely depend on the property asset type.
Buying
Please provide a short summary of the fees and costs (including tax) relating to buying real estate in your jurisdiction.
Acquisition of real estate is subject to transfer tax. The general rate of transfer tax is 4% (up to HUF 1 billion, and 2% above that; maximised in HUF 200M per property) levied on the market value of the real estate. Various allowances are available for real estate traders, financial institutions and investment funds.
In general, the transfer of real estate is exempt from VAT under the VAT Act unless (i) the seller opted to apply VAT (the general rate is 27%), or (ii) building plot or new real estate is being sold. In the (i) case, the VAT is subject to reverse charge, i.e. to be assessed and paid by the purchaser.
Owning
Are there taxes applicable to owning real estate and can the burden of the taxes be passed to someone else (e.g. a tenant or an occupier - not being the owner
Yes, in general, real estate is subject to land and building tax levied by the municipality where they are located. The taxes are levied, by the respective municipalities’ regulations on local taxes, based on the market value or floor space of the real estate.
Further taxes may arise if business activity is carried out in relation to the real estate, such as corporate income tax, local business tax or VAT.
Depending on the asset type, such tax burdens are passed onto tenants, as occupiers in the form of ‘service charge’.
Tax Breaks
Are there tax breaks or other incentives for foreigners to buy real estate in your jurisdiction? If so, what are they?
There are no general tax breaks or other incentives for foreigners to buy real estate in Hungary. There are however special rules for state subsidies (direct cash grant, tax allowances, etc.) for certain larger greenfield investments into Hungary, which can involve – among others - property acquisition and development.
How is the ownership of Real Estate evidenced in your jurisdiction?
All real properties located in Hungary are registered in the centrally organized Land Registry system. The main data kept by the Land Registry (i.e. area, classification of use, data on owners, encumbrances registered) is accessible to the public and authentically proves the accuracy of the registered information (i.e. “public credibility”).As a result, it protects the rights of a good faith buyer who purchased the real property based on the information registered.
Is it possible to keep the identity of owners of real estate confidential in your jurisdiction?
As the Land Registry is publicly available, it is not possible to keep the identity of the owner of the real estate hidden. The owner’s main data (name, seat/address; and in case of a company, the company’s registration number) is visible from the Land Registry. If the owner of the real estate is a private fund or private company limited by shares, the ultimate beneficial owner may not be revealed from the publicly available Land Registry and Company Registry data.