rent in Budapest

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focus

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Hi.

My brother bought a new1 apartment with parking in Budapest 2 years ago and has now completed, he was talking to the letting agent and they told him that he could get up to 100,000 forint per month furnished furnishing costing 5,000€.
Rent per month 100,000 = 397 €

12% managment fee 47.64 euro
Insurance 12.5
Accountant 12.5
Total 72.64

397 rent - costs 72.64 = 324.36
25% source tax = 81.09 profit ever month 243.27 which will sent in his Irish account.

Are we right in all off these costs ?

My brother is self employed and borrowed 70k in Ireland against his site.
His mothly repayments interest only are 262.5 can he reduce the source tax anyway by telling the accountant in Hungary that he has borrowings of 262.5 in Ireland.

Any help would be appriciated.



 
Unfortunately mortgage interest in Ireland has no bearing on his tax liability in Hungary. He will have to pay 25% tax regardless, if he purchased as a private person.
 
He is enquiring into the will situation now. Thanks for your help Budapest.
 
Hi Budapest.

Have you any experience of getting a mortgage in Hungary ?
 
It's possible to get a mortgage over here, but usually only up to 65/70% LTV. Foreigners can borrow in Euro, Swiss Franc or HUF. If you borrow in Euro, you can avail of lower interest rates (roughly 1% more than what Irish banks currently offer). CIB have an introductory offer at the minute and offer very low interest rates for the first two years:
 
I suspect that your brother may have 2 properties (legal titles): in my experience the apartment is usually held on one legal title and the parking space is usually held on a separate legal title. If so, he may find (as I did) that he can finance (or re-finance) the apartment, but not the parking space!

I agree with the LTV range referred to by Budapest. It commonly happens that a lender will value at only 90% of the "market value" (not necessarily the purchase price) and will lend say 70% of that amount, giving an overall percentage of 63%. I found that the Fidentia Group (financial intermediaries based in the UK) were very helpful: http://www.fidentiagroup.com (www.fidentiagroup.com)

In particular, Fidentia have some new products in the pipeline in relation to loans and leasing (where the bank acquires the title(s) under a tri-partite transaction with the buyer and seller). Also, the LTV can vary depending on whether the buyer is an individual or a Kft. Good luck!
 
focus said:
My brother is self employed and borrowed 70k in Ireland against his site.
His mothly repayments interest only are 262.5 can he reduce the source tax anyway by telling the accountant in Hungary that he has borrowings of 262.5 in Ireland.
Click to expand...
Are you suggesting that he should lie to reduce his tax bill?
 
Rainyday; I think what op means is that his/her brother has interest only payments of 262.50 per month and can he reduce the source tax in Hungary buy offsetting the interest against the tax.
 
cuchulainn said:
Rainyday; I think what op means is that his/her brother has interest only payments of 262.50 per month and can he reduce the source tax in Hungary buy offsetting the interest against the tax.
Click to expand...


THAT IS ONE RISKY PUNT 240 PLUS LOSS OF INTEREST IN HOPE OF CAPITAL APPRECIATION WITH A FLOOR AT -72K....THAT IS ONE HEFTY UP FRONT PREMIUM FOR BASICALLY AN OPTION TO BUY, WITH HIS LOSSES RESTRCITED TO 72K....

HE WOULD WANT ONE HELL OF A RISK-REWARD FOR THAT.

AS FOR TAX, NO, HE PAYS HIS HUNGARIAN TAX, AND ANY PROFIT CAN BE OFFSET IN IRELAND AS PER USUAL...AS HE'S MAKING NO PROFIT, NO INCOME TAX...HE CAN'T USE THIS TO OFFSET HIS CGT EITHER WHEN HE SELLS AS FAR AS I KNOW..
 
baby_tooth said:
AS FOR TAX, NO, HE PAYS HIS HUNGARIAN TAX, AND ANY PROFIT CAN BE OFFSET IN IRELAND AS PER USUAL...AS HE'S MAKING NO PROFIT, NO INCOME TAX...HE CAN'T USE THIS TO OFFSET HIS CGT EITHER WHEN HE SELLS AS FAR AS I KNOW..
Click to expand...

In Ireland he can carry his Rental income loss on his Hungarian property forward every year and then offset it against future Hungarian rental profit. You cannot offset a rental loss on foreign proerties against rental profits on any rental income you may be getting in Ireland.
 
cuchulainn said:
Rainyday; I think what op means is that his/her brother has interest only payments of 262.50 per month and can he reduce the source tax in Hungary buy offsetting the interest against the tax.
Click to expand...

Thanks for the clarification.
 
Ireland has a double taxation agreement with Hungary. for income tax purposes would you show the gross amount of rents received , less the costs, less the source tax? or do you show the net rent and pay full irish whack on it? ie the gross rent less the source tax of 25% might mean either no irish tax or at most 16% (from 1st jan 2007)
 
To whom may concern

From January 1, 2007 tax on rent is modified:

- source tax 25%
- health care contribution 14%
- both taxes are to paid monthly to Tax authority till 12 day of each month (Tax in January is to be paid till February 12)

If annual rent is lower than HUF1 million, source tax is to be paid only. Otherwise, rent income is affected by both taxes

Further to that, tax on rent can be paid in another way as well as personal income according to personal income tax rules:

- 18% income tax up to rent < HUF1,550,000
- 36% income tax over HUF1,550,001
- health care contribution is 11%
- in this case, taxable base is 90% of rent income (fixed 10% as deductable cost)!

Tax authority has to be informed about chosen option when you apply for tax card or till December 20. If you do not specify your choice normal flat rate (25+14%) option is registered by Tax authority.

I suggest you discuss it with your accountant soon.
 
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