Budapest District VIII

Thanks for that Valc

some posters seem shy about sharing info for some reason!!

Valc, can you me tell did you go the company or the private route when buying. According to my research new built apartments only attract stamp duty at 0% for the first 15m HUF (around 60K E), then 6% for the portion of the price above 60K. So you`ll only have to pay around 2100 E stamp duty on your 95K.

If yours had been a second-hand apartment, this attracts stamp duty at 2% on the first 4m HUF (around 16.2K E), then 6% on the rest. This would work out at around 5050 E on your 95K.

So you`v made a saving of 2950 on stamp duty, which isnt a fortune but would pay for a couple of years property management fees.

In any case, can you tell me Valc if you set up a Hungarian company or went private and what were your reasons in either case. If you set up a co. can you tell me who did this for you and what did it cost..

Cheers
Shane
 
Valc

Wondering if you set up a Hungarian company or bought privately and what were your reasons in either case. Did you feel you would save significantly by setting up a company or was it not worth the hassle

Cheers
Shane
 
shaneo said:
Id be interested in knowing the possibility or otherwise of obtaining a Hungarian mortgage - is this feasable.

Also can anyone recommend reputable estate agents or property management co.`s here or in Hungary..
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Up to 70% LTV mortgages are available. Also, you do seem to save money on stamp duty on new builds, but this is factored into their price. They tend to be approximately 30-40% more expensive.

Valc, I live on Sziv st, which is around the corner from Szinyei Merse. I would definitely furnish though as you will find it very hard to rent otherwise. 90% of people who rent in the city centre are non-Hungarians, with no furniture of their own.
 
shaneo said:
Valc

Wondering if you set up a Hungarian company or bought privately and what were your reasons in either case. Did you feel you would save significantly by setting up a company or was it not worth the hassle
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Shane, I set up a company for the following reasons:
1. buying two apartments, any future purchases would require company for permit
2. more expenses can be offset against tax (travel, management fees etc)
3. thought it would be easier getting hungarian mortgage in the future ( this is not the case , I read somewhere that its better to be a private individual, anyway hungarian mortgage not a good idea either way at the monment). In summary, if looking to build up portfolio and offset expenses the company setup looked better.

Budapest, interested in your clear bias towards older properties, don't you end up paying for overall building refurbishments and are you not subject to faults and issues with building infrastructure?

killian
 
My thinking is to get a Hungarian mortgage as a private individual - even though expensive this is the only way I can finance it - then use the apartment as security for the mortgage - this will ensure I am getting what I pay for
 
Killian, I am biased towards older properties for several reasons.

1. Design and build quality are streets ahead of any of the new builds I've seen. Most of the new apartments are plain ugly and seem to use the cheapest materials available.
2. Location tends to be better with older properties.
3. Price is at least 30-40% cheaper.
4. It is true that overall building refurbishment will need to be paid for at some stage if you buy an older property. However, this is almost always paid for by a fund that tenants have been paying into for almost two decades. When enough money is available, the entire building is refurbished. In my own case, the cost of refurbisment of a five storey building in the worst possible condition is going to be 100,000 euro divided among 20 apartments, so even if we all had to pay by cash (which is not the case) then the cost would only be 5000 euro each. This is much less than the current price difference between a second hand and a new build apartment on my street.
5. In ten years time, which will be a more desirable purchase-a ten year old poorly designed apartment built quickly and cheaply or a flat in a one hundred year old restored neo classical building on the same street?
 
hello there,
I considered buying an apartment under a ltd company and with advise changed my mind. for one reason im only buying one appartment
2. when i rang the revenue they told me since im a paye tax payer in Ireland that if i paid corporate tax in Budapest at 16% well then id have to pay my 42% Back here in Ireland also as it clashed with personal tax and as they quoted me it was a mismatch in tax.
3. They also told me that if i bought as an individual i wouldnt be able to claim expences in Hungary but under the double taxation agreement the same rules apply as if i had an investment property here at home thus being able to claim my expences for the hungarian appartment in Ireland thats what was told to me
4. you pay 2% stamp duty on the first €16000 and 6% on the remainder if the new build is over €120000
5 looking at the company v individual i thought it was really an amount of hassle and going to stick with individual tax
6. when you get youre taxes done in Hungary they give you a tax credit so you pay 25% in Hungary so when you come back to Ireland and do youre taxes if you're paying the high rate of tax well you pay the remainder 17% less youre expences of management, capital expences, service charges etc as the tax office told me to do submit every single receipt and get the management company to have a breakdown of charges as im led to believe there can be some dodgy charges to buyers especially if youre Irish as they said in one property magazine theres one price for locals another for tourists and a complete differant one for the Irish so one has to be careful. and Budapest thank you for youre answer earlier on i still say that parking is a problem and there are people actually parking on traffic islands in the centre and i believe you can rent them separately from the appartment all the best all of you anyway hopefully ill be able to get some more advice on my own purchase on akacfa utca its a new build and yes ive heard all about new builds being ugly but if district 7 is due a kind of urban renewal maybe its not such a bad place even though it could do with a bit of a facelift
 
Sounds interesting

I wonder is mortgage interest paid to a Hungarian bank treated as an expense from which you`ll get relief when you go to pay your 17% rental income tax in Ireland. Or can you get relief from this in Hungary from the 25% your paying..
 
Got this from the double taxation agreement between Ireland and Hungary in Article 24

"Nationals of a Contracting State shall not be subjected in the other Contracting State to any taxation or any requirement connected therewith, which is other or more burdensome than the taxation and connected requirements to which nationals of that other State in the same circumstances are or may be subjected"

Since we in Ireland are entitled to deduct mortgage interest paid before paying tax on rental income I wonder can we apply the same to Hungary, and deduct mortgage interest paid from rent recieved in Hungary and then pay the 25% tax on rent. Will have to dig deeper..
 
In my opinion, If you're just buying one apartment then it's much better to buy as a private person. If you're buying two, then it's better to buy as a company.

Shaneo, if you buy as a company, then mortgage interest is allowed as a deductable expense before paying tax. If you buy as a private individual, then it isn't.

Be very careful about believing anything that estate agents tell you about potential rents or projected capital appreciation. Prices aren't rising rapidly at the minute and probably won't move much for a few years, while rents are low as there are a lot of apartments available and not enough potential tenants. I would recommend furnishing your apartment nicely and renting out at a lowish sum to increase your chances.

I've had experience with Home Management and they seem okay. They're don't seem to get much business apart from what is thrown their way from Duna House sales. I'm not sure how easy they are to find by a potential tenant as they don't seem to advertise that much.
 
Shaneo


We went the private route purely as a least hassle option. Lazy I know, and hope we don't regret in the long term.


valc
 
Hi, how do you go about applying for this permit as an individual and how long does it take.

As rents come in, do you convert straight away back to euro or leave the money in a Hungarian Bank. Is anyone worried about the Exchange rate situation or is the whole basis of this investment awaiting Hundary joining the EMU?
 
thats a good point emnc i never thought about that from what i know the management company take out there expences and other management expences and do the tax for you also if youre an individual as opposed to a company i Believe you dont have to open a bank account if youre an individual but my solicitor told me in budapest that they would wire me back the remainder of the rent money to my account in Ireland so yes you are correct in saying that you could lose out in the exchange rate im wondering also how to get around that one any takers or advice appreciated
 
The hungarian forint (HUF) has been slowly increasing in value compared to the euro over the last 2 years - see

[broken link removed]

this trend is believed to continue so in this case it would be better to leave your money in your Hungarian account as long as you can but obviously draw on it if you can find a better use for the money. Also good to get a Hungarian account which does internet banking
 
Anyone out there any more ideas about reducing this tax bill of 25% on the rent when buying as an individual...
 
Seanieboy, the best thing to do is to open a Hungarian account and make sure that it has a cirrus card. Leave the rental income in Hungary for as long as you can and withdraw it in large amounts when necessary. Wiring the income to your Irish account will cost quite a bit in the long run.

emnc, you can't apply for a permit as an individual to buy property until you have chosen an apartment. It takes a month or two and most of the work is generally dealt with by your estate agent and solicitor. It's not much hassle and everyone who applies and wants to buy just one apartment will get it.
 
Shaneo.

The information I have is that you can't do anything about the 25% as an individual. However when you deduct your mortgage interest and other expenses and tax already paid in Hungary, your tax liabilitiy in Ireland should not be significant

Some good new though, VAT on property in Budapest has reduced from 25% to 20% from 1/1/06 so if anyone has any further monies to pay on a Hungarian property it should be 5% less (depending on contracts of course)
 
Budapest
thanks im not sure what the relevence of the cirrus card symbol does it mean i get the best exchange rate from ireland when i withdraw it in Ireland all i know that when i wire money from the AIB it costs €20 for a bulk sum but will the management company transfer these funds to a hungarian bank would there be a problem with this and what would be the story when i do my tax returns in Ireland i suppose they dont take an exchange rate into consideration

shaneo
as i said the only way to offset these taxes is to claim for them on youre irish tax form and thats what i was told by kpmg pricewaterhouse coopers and the irish revenue if thats any help and the other day about having a bank account in another country Brian cowen brought out a new bill to stop tax dodgers by banks across the eurozone to report on people that have a bank account with them and hungary is one of those countries and todays irish independant specifically talks about this in the business section the bones of it was that it could attract an audit from the irish revenue
 
Seánieboy,

There's no reason why you can't have a hungarian bank account and if fact if you wanted to leave your rental income in your Hungarian bank account permanently thats not a problem either.

As long as you ensure that you are tax compliant both in Hungary and Ireland then you will have no problems now or in the future.

You would have to agree with revenue the appropriate euro/Huf conversion rate, if it's steady throughput the year then it's not a problem, if it varies wildly then perhaps you could be diaadvantaged when you come to do your tax return.

As per other posts it's better to transfer larger sums of money. Be warned though I have heard that Hungarian banks can apply quite high bank charges. You may need to shop around.
 
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