income tax on hungarian property

[DonKing]

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.

If you have financed the purchase of the property through a mortgage then when you offset the interest against the rental income you may find that there is not too much taxable rental profit in Ireland so I think in in this situation it may be benificial to be as tax efficient as possible in Hungary.

 

[asdfg]

when you offset the interest against the rental income you may find that there is not too much taxable rental profit in Ireland

No matter how tax efficient you are in Hungry you still have to make a return in Ireland and therefore pay tax probably at 41% less tax paid in Hungry.

 

[budapest]

This is true only in certain cases. As you can offset expenses in Ireland, e.g. mortgage interest against your Hungarian rental income, your tax bill may be a little less. It also makes a difference for those with no mortgages or other expenses, who are on the lower tax band in Ireland.

Incidentally, Tower are a little late in suggesting this way of paying tax to their clients. It's been in existence for a couple of years now. It's also not the best solution for everyone. All methods of paying tax in HU should be examined before making a decision.

 

[DonKing]

No matter how tax efficient you are in Hungry you still have to make a return in Ireland and therefore pay tax probably at 41% less tax paid in Hungry.

I don't know where I suggested that you did not have to make a tax return in Ireland?

If you financed your Hungarian property 100% through a mortgage then based on average rent levels in Hungary after you make your expense deductions (mortgage interest, maintanence expenses, 12.5% depreciation on fixtures & fittings) when making your tax return in Ireland and deduct tax already paid in Hungary you probably will not have a tax liability in Ireland and therefore it would be worthwhile to ensure that you are as tax efficient as possible in Hungary.

Also if you have a spouse who is not working or earning little then you can have the rental income paid to him/her to avail of a 20% tax rate if you do find yourself having a rental profit in Ireland.

 

[PATMAC]

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

Hi Budapest,
They are charging €300+VAT which is also tax deductable. Our situation is that we remortgaged to buy the property. We get €350 per month in rent and have been renting for 18 months now and we have paid 25% tax on all rent so far. We are both working and paying the top rate of tax. This is our only overseas property so any advice would be grateful as we are complete novices at this.

 

[budapest]

300 euro + VAT for doing this is extremely expensive. It must really eat into your monthly rental income! I've send you a recommendation by PM, which you should think about for next year!

 

[BudaRich]

Can you send me that recommendation also Budapest?

Thanks.

 

[asdfg]

This is our only overseas property so any advice would be grateful as we are complete novices at this.

Don't forget about your liability to Irish Revenue. See my post above for details.

 

[seánieboy]

love to hear the reccommendation from budapest also i do know that there are 3 ways to do you're tax in h% hungary 1. the straight 25% tax without claiming expenses over there and no health levy

2. i think you can deduct a certain amount and i think the tax rate is about 18% and if you earn something like over 1700000 you pay 38% tax but i think theres a third way of doing it and you can deduct expences from it and theres something like a 14% health levy to be paid also.

from my understanding and im on the 41% tax rate in Ireland that if you have 1 property in budapest that the flat rate of tax would be more benificial to work from and deduct youre expenses from youre tax in ireland especially from youre fittings and fixtures 12.5% you deduct them as if they were expenses for a house here at home but if you have a few propertys thats when the other rates of tax come into play

ive been told the flat rate of tax would be best for me but im still researching it

 

[Budda]

300 euro + VAT for doing this is extremely expensive. It must really eat into your monthly rental income! I've send you a recommendation by PM, which you should think about for next year!

I'd appreciate if you would give me contact details for a Hungarian accountant. I have to make a return on two properties - I've been in touch with an Irish accounting firm who offer foreign tax returns but their Hungarian facility isn't up and running yet...

 

[Budda]

According to my Hungarian accountant you are not eligible for the 18% taxation option unless you have other sources of income, besides rental income, in Hungary.
I had hoped to minimise my Hungarian tax bill by going this route.
Some of you seem to avail of the 18% option so I'd appreciate if you'd let me know if this is because your accountant interprets the rules differently or do you have other sources of Hungarian income? Can the interest I earn on the money in my Hungarian bank account be regarded as another source of income etc?

 

[budapest]

Your accountant is incorrect. It is all too common here, as tax laws change quite frequently and professionals often find it difficult to keep up to date.

 

[Budda]

Thanks for clarifying this, Budapest. We bought as individuals so at least the 18% option writes off 10% for our costs - as well as being less severe than 25%.

 

[budapest]

Further to this, the 18% option is not available to you if you earn more than 1.7M HUF per year. Above this, tax should be paid at the 36% rate. For this reason, some investors with higher rental income would pay less tax altogether by choosing to pay at the standard 25% rate.

 

[CUBA]

300 euro + VAT for doing this is extremely expensive. It must really eat into your monthly rental income! I've send you a recommendation by PM, which you should think about for next year!

I have an apartment in Budapest and need to find a Hungarian accountant to do the returns. Could you please send me the details of the accountant you mentioned. Many thanks.