income tax on hungarian property

S

solomon

Guest
Hi all, I have an apartment in Budapest and would like to know how to calculate the income tax I owe in Ireland, after paying whatever tax I owe in Hungary. Does anyone know what the rate of tax is over there on property? I am self-employed and pay tax @40%, so how do I calculate what I would owe here on my rental income? Thanks for all your help.
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solomon said:
Hi all, I have an apartment in Budapest and would like to know how to calculate the income tax I owe in Ireland, after paying whatever tax I owe in Hungary. Does anyone know what the rate of tax is over there on property? I am self-employed and pay tax @40%, so how do I calculate what I would owe here on my rental income? Thanks for all your help.

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Hi
I have just completed my returns at both ends for 2006 and 2007.
My accountant here advised that the simplest way for me (as a private individual rather than a company) was to pay the full 25% of Gross Income in Hungary in the first instance. He has then deducted expenses on my local tax return (Inspection Trip/Furnishing Trip/Management charges etc.) to create zero additional liability in Ireland (NI in my case).
Furniture is being written off at 10% per annum. In year 3 I would expect to have a small amount extra to pay.
jwf
 
i have bought a place in budapest and was just wondering about the tax issues especially what it said on yesterdays sunday business post on the tax implications of buying foreign property

it said quote ‘‘In any year in which you open a foreign bank account you are a ’chargeable person’. This means that you are required to file a tax return in which you must declare, among other things, the name and address of the financial institution where the account is located, the date on which the account was opened, the lodgement made to open the account and details of any intermediary [individual or company] in Ireland who assisted you in opening the account.”

There is also a legal obligation to ensure that any money used to purchase the overseas property has been, or will be, fully declared for tax purposes and that all due taxes have been paid, whatever the source of the money.

If you have borrowed money to buy the property, the money used to repay this loan must also be declared. One of the most frequently asked questions is whether an overseas buyer can claim mortgage interest relief on a loan taken out in Ireland and secured on an Irish property, but used to purchase a foreign property.


In my instance i have used a sizeable deposit from my own bank account and the rest of it ive released equity from my house and took out a loan.

Surely i won't have to pay more tax on the money that i saved so carefully over the years and declare it again to be taxed how for instance the revenue will be interested to see where the money came out of what evidence will they look for that it has been got in the proper channels surely i wont have to produce a bank statement to them i think that would be way out of order, i'm a hard worker and have never done anything wrong to escape my taxes and always have paid up on time surely im entitled to some privacy.

Am i looking into this too deeply or am i missing something here
 
seánieboy said:
Surely i won't have to pay more tax on the money that i saved so carefully over the years
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If you have paid the correct amount of tax then you won't have to pay more tax except of course tax on the interest you have made on your "sizable" savings.

If you are PAYE and you have no other income streams and you can reasonable explain how you managed to save your "sizeable" savings then I can't see you having any difficulties.

If you are self employed and work in a cash orientated industry, then they may delph a little deeper

You should probably look to get some tax advice from a professional if you are unsure.
 
i am p.a.y.e. but i have one more stream of income coming in but i have always paid my taxes on time and are paid up to date im on the 41% bracket of tax.

are you saying after paying my dirt on that sizeable amount of savings that they would also tax my interest again. im in my job 23 years and i always have been a saver and was very careful building up money for a deposit for this place overseas in budapest.

I have nothing to hide from the revenue commisioners but i don't want to be drawing a tow on myself for no reason. is this the case ?
 
Seanieboy
I bought a couple of Bp apartments in exactly the same way as yourself. (N.Ireland but same declaration rules apply).

My accountant wanted to see a clean transaction where I drew a specific equity amount and converted it to Forints for the purchase. He now deducts all interest I am paying (in NI) as an expense against my foreign rental income.

I found it difficult to find a reliable accountant in Budapest - hope you have better and quicker luck!)
jwf
 
thanks jwf when you mean a clean transaction does that mean all the revenue want to know is that the money came from you're bank acccount and not from money laundering as the money i have in the bank came about from saving carefully over the years and i have paid my dirt tax of 20% on it. I have the slip of paper from my bank the A.I.B. saying how much i took from my bank in forints and in Euro to open my bank account will this piece of paper suffice?

i havent taken over my apartment yet in Budapest but i am to do it very soon i'm taking a guarenteed rental option and this will give me a lump sum and will more than enough pay for the furniture and fittings and some left over. I know that i won't have to pay tax on this until 20th May 2009 so does that mean that i pay my Hungarian tax of 25% first next year, get the tax credit from the tax authority and then declare my place in Ireland my bank account in Budapest etc?

In what order do i continue this purchase and payment of tax?

When you say youre accountant deducts you're interest that you're paying in northern Ireland do you mean off you're equity release on you're mortgage therefore deducting it as an expense rather than interest relief on you're private principal residence?
 
seánieboy said:
thanks jwf when you mean a clean transaction does that mean all the revenue want to know is that the money came from you're bank acccount and not from money laundering as the money i have in the bank came about from saving carefully over the years and i have paid my dirt tax of 20% on it. I have the slip of paper from my bank the A.I.B. saying how much i took from my bank in forints and in Euro to open my bank account will this piece of paper suffice?



i havent taken over my apartment yet in Budapest but i am to do it very soon i'm taking a guarenteed rental option and this will give me a lump sum and will more than enough pay for the furniture and fittings and some left over. I know that i won't have to pay tax on this until 20th May 2009 so does that mean that i pay my Hungarian tax of 25% first next year, get the tax credit from the tax authority and then declare my place in Ireland my bank account in Budapest etc?

In what order do i continue this purchase and payment of tax?

When you say youre accountant deducts you're interest that you're paying in northern Ireland do you mean off you're equity release on you're mortgage therefore deducting it as an expense rather than interest relief on you're private principal residence?
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Hi, Can anyone help? I'm am having a hard time finding a reliable english speaking accountant in budapest.

Can anyone reccomend one? Thanks
 
seánieboy said:
thanks jwf when you mean a clean transaction does that mean all the revenue want to know is that the money came from you're bank acccount and not from money laundering as the money i have in the bank came about from saving carefully over the years and i have paid my dirt tax of 20% on it. I have the slip of paper from my bank the A.I.B. saying how much i took from my bank in forints and in Euro to open my bank account will this piece of paper suffice?

Apparently so!

i havent taken over my apartment yet in Budapest but i am to do it very soon i'm taking a guarenteed rental option and this will give me a lump sum and will more than enough pay for the furniture and fittings and some left over. I know that i won't have to pay tax on this until 20th May 2009 so does that mean that i pay my Hungarian tax of 25% first next year, get the tax credit from the tax authority and then declare my place in Ireland my bank account in Budapest etc?

As I understand it from my Hungarian accountant we are really supposed to pay tax monthly. As I get rental income transferred quarterly, she thinks APEH will agree to accept quarterly transfers. (I bought as a private individual - it may differ for companies.) It took me so long to find a reliable accountant, I have just this week wired back-taxes for 2006 and 2007. My accountant in NI has noted on my UK return - Tax already paid in Foreign Jurisdiction (or whatever is the phrase on the form) - £xxxx

In what order do i continue this purchase and payment of tax?

Pass? If it is any help, the Hungarian Tax year runs Jan to Dec. On my 06/07 Tax Return, my NI accountant reports just Jan-Dec '06 income and expenditure. The 1st quarter '07 income etc will appear on my 08 return. This keeps the records easier to reconcile also.

When you say youre accountant deducts you're interest that you're paying in northern Ireland do you mean off you're equity release on you're mortgage therefore deducting it as an expense rather than interest relief on you're private principal residence?
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It is a deductable expense which cannot be claimed in Hungary as far as I am aware.

Hope some of this helps! I am only relaying my experience in trying to wade through the treacle :)
jwf
 
He has then deducted expenses on my local tax return (Inspection Trip/Furnishing Trip/Management charges etc.) to create zero additional liability in Ireland (NI in my case).
Furniture is being written off at 10% per annum
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As this is mainly an ROI site afaia inspections trips are not an allowable exp
Furniture is written off at 12.5% per annumn
Losses can be carried forward
2008 rental income is not due to be paid until Oct 2009 (PAYE)
See [broken link removed]and [broken link removed]
 
In a nutshell, if you receive rental income from a foreign property, you will have to pay tax on the net profit to the Irish authorities on or before 31st October of each tax year. It doesn’t matter whether you bring the money into Ireland or leave it in a foreign bank account. For a detailed guide to taxation on rental income, please click here.

If you are already paying income tax in the country where your property is being rented, you are still liable to pay income tax in Ireland, although you will be able to reduce your tax liability to take into account some or all of the income tax already being paid abroad. The actual amount of this reduction mostly depends on whether or not Ireland has a double taxation agreement with the country where your property is. Click here for a list of these countries. Hungary is one of them.

For a detailed example of foreign tax liability in a country with versus a country without a double taxation agreement with Ireland, please view page 14 of this document.

I sell overseas property for a living and the above paragraphs are an extract from a short article I wrote on the subject on www.someplaceelseireland.blogspot.com

Regards
Colin.
 
Sorry to be a pan, but does anyone know of an english speaking accountant in budapest? just an email or site name would do for starters.

thanks
 
a pain! although a pan sounds appropriately stupid.

you could be saving my life!
 
ukguy said:
a pain! although a pan sounds appropriately stupid.

you could be saving my life!
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Hi
You could try Contir & Consulting Kft. (just off Deak Ter). Small outfit with one English speaking accountant who can be contacted by email - Bedics Andrea [andrea.bedics@contir.hu]

Dont expect fast responses but at least I got my job done.
jwf
 
Hi folks,
I just received this e-mail from my property management company, I presume it is ok to go with this:
Dear Sir/Madam,

I am happy to inform you about the improved accounting & professional services of (removed)!

You will be happy to hear that due to recent tax changes in Hungary buy to let investors have more opportunities to save money. In addition to that the implementation of our fully fledged financial back office system allowed us to bring all aspects of accounting in-house offering our clients wider range of financial planning, better quality customer service and more net rent for the property owner.

After many client enquiries regarding the standard 25% Linear Taxation (called Full Income Consideration) Tower decided to employ chartered accountants to be able to provide personalized tax advice, give quicker and more accurate information even on the most detailed aspects of financial planning.

Since 1st of January 2008 our in-house accounting team has worked for the purpose to save you hard earned rental revenue by applying the ‘Itemized Cost Structure’ system. In this tax payment system you will have to pay tax based on the tax band you are in. If you decide to choose this tax payment settlement as opposed to the 25% Linear Taxation you will only pay 18% of your profit. Another significant difference between this method and the 25% Linear Taxation is that you can use certain costs related to your buy to let investment to reduce your tax base.

For the details please read the attached PDF file, containing a summary about the Hungarian taxation and its general rules, procedures.

You will be happy to know that not only will our team of chartered accountants do your tax returns, do the administration of your accounts on a monthly basis, but they are also available for you to answer any personal questions in English or in Spanish related to Hungarian taxing.

Not only will our new accounting & professional services save you unnecessary tax payments, but they also make sure that no penalties occur due to delayed tax returns, missing documents, mistakes regarding security deposit - just to name a few common issues done by many accountants. For us this is unacceptable. Our goal is to maximize your returns, make your investments live up to its full potential!

With our improved financial and property management back office system you will get the fullest transparency of the status of your account.

Those clients who choose the 18% payment method will have to pay quarterly in advance and hand in their tax returns once a year by the 12th of May. For the previous year (2007) you will have to pay your full income tax by the 12th May 2008 unless your accountant had advised you differently. As soon as we receive the notice on the payable amounts regarding your Personal Income Tax for 2007 I will contact you again, of course.

In order to start the administration of your taxation for 2008 I kindly ask you for your assistance in sending back the following documents. Please sign the below mentioned documents:

  • <LI class=MsoNormal style="TEXT-ALIGN: justify; mso-list: l0 level1 lfo1">Power of Attorney, <LI class=MsoNormal style="TEXT-ALIGN: justify; mso-list: l0 level1 lfo1">Declaration about the way of Taxation <LI class=MsoNormal style="TEXT-ALIGN: justify; mso-list: l0 level1 lfo1">Form filled in to receive an internet based registration (08T108 tax form)
  • Appointment of Agent
At the same time you will be asked to issue the first quarterly payment for 2008. Although the Hungarian Tax Authority is not supervising advanced payments, it is highly suggested to pay without any delay. That’s why we need the Power of Attorney and Declaration signed as soon as possible.
 
If you decide to choose this tax payment settlement as opposed to the 25% Linear Taxation you will only pay 18% of your profit. Another significant difference between this method and the 25% Linear Taxation is that you can use certain costs related to your buy to let investment to reduce your tax base.
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Regardless what the hungarian tax authorities require, you still have to make a return under Irish rules and pay the difference in tax to the irish authorities. So to me it does not matter which method you choose in Hungary unless I'm missing something.
 
asdfg, you're right, but it would make a slight difference if e.g. you pay Irish income tax at the lower rate of 20% and/or if you have deductions such as mortgage interest in Ireland.

PATMAC, what are the Tower accountants charging you for paying your tax returns?
 
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