Tax on Rent for budapest apartment

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eddie10

Registered User
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I have a one bedroom apartment with an indoor car space in Budapest and its been rented out for the past 9 months..I have yet to sort out the tax side of things.Silly question, but where do i start??
The management company pay into my account every quarter and this basically covers the interest payment on the apartment. They also furnished the apartment. I have yet to get receipts for this, but i would hope this could be written as as expenses?? As far as i can see, the management company haven't taken any tax off as yet??
 
eddie10, If you bought as a private person, then you won't be able to use furniture as a deductable expense.

If you've rented the apartment for nine months, then you are already late in paying some of your taxes. The deadline for 2006 income was May 20th 2007. Fines are quite high, so you should try to rectify this situation as soon as possible. You are also late in making the declaration for your 2007 income but, more than likely, you will not be fined for this. However, this should also be sorted out asap.

Ask your management company if they can recommend an accountant. Unfortunately, a reliable accountant is very difficult to find in Bp. Most are only interested in more lucrative accounting for companies.
 
Thanks Budapest.
We have been renting the apartment since last September, but in our first return(this January) we actually didn't earn anything(€7), due to finders fees and other costs. Since then we have been paying enough to cover the rent..So hopefully we will only have to start paying from January...I'll get on the management company to sort out tax affairs..
 
Unfortunately you can't make simple deductions on income, such as management charges, so make sure to speak to an accountant in any case. Chances are, you're still liable for some tax from 2006.
 
Thank Budapest. After your initial post, i had a feeling that would be the case....
 
as far as i know if you furnish the place in budapest the same expenses are deductable in ireland if you get receipts as if you had an investment property in ireland look up www.revenue.ie and leaflet it 70 i think it is and that will tell you all you need to know on renting out a property as you bought as an individual in hungary you can't claim for it over there but when you get a receipt or receipts because theres a double tax agreement between our 2 countries you get a tax credit after paying youre tax in hungary and you can deduct expenses on the irish side of things as far as i know its 8.5% deductable for furnishings per year for 5 years.
 
Hi Budapest,
I too am sorting out my tax affairs, as i have only recently found an accountant and my management company did not want to know about tax returns .I have been receiving rent since 2005. I hope i am not in for a big fine as it was not really my fault. What percentage fines are we talking about? The rent was 400 euro a month, but the apt . was not rented all the time.
 
Thanks again guys.
Budapest, do i need to get an account in budapest to sort out my tax, or can i use a local(Ireland) one.
Also, with the double taxation agreement between the two countries, i assumed once the 20% tax was paid on the rent on Budapest, no further deductions would be needed from the Irish system. I will find this out myself soon, when i sort out an accountant, but any knowledge would be great.
PBrosnan, could you pm me details of the accountant you got in Budapest and the prices he charged...Is he both good and reliable??
Cheers ..
 
You'll definitely need a Hungarian accountant to file your returns.

The double taxation agreement means that you don't have to pay tax twice, but it's possible that you will still have tax liabilities on this income in Ireland, depending on your individual circumstances.
 
Tax in Budapest

Hi
I have a 1 bed apartment in District 6 99-101 Roza street purchased 1 year ago and rented since September. It is being rented through an agency who advised us that we pay tax on the rental, we paid once which was 25% of €350x3 but we didn't get any receipt and I am reluctant to pay again until I can contact the authorities. Is it possible to get in contact with the tax authorities in Hungary or should I get an accountant bearing in mind the returns are poor enough if we have to pay 10% to the letting agency as well? Any help would be appreciated.
Pat
 
Does the management company have their own accountant? If so, you should be able to get in contact with him or her directly. From January 2007, new tax laws were implemented and it's possible to pay tax on rental income in two different ways. (A third option is also available whereby you can use receipts rather than the standard 10% deduction of expenses). It's no longer a simple percentage (25%) of rental earnings. Your accountant should be able to advise you of your options as each have their benefits.

Also, is it rented to private individuals or to a company? If it's to a company, then tax should be deducted at source.
 
Talking about rental tax ,just how organised are the tax people over there? Have a friend with an apartment for the past 3 years and he has not paid any tax on his rental income. His attitude is that there are so many foreign owned properties/companies in Hungary that they could never trace them all. He plans to sell up and take his money back to Ireland to invest in the new celtic tiger in about 2 years - is he riding his luck???!!!
 
in relation to tax in Hungary i have seen a document saying that its 25% tax in Hungary and also a health levy to be paid of 14% on top of that.

this is on the basis that theres 3 ways to do youre tax in Hungary at the moment.

as far as i know the first way is to pay 25% on your tax and pay 14% on top of that which would be a total of 39% and that you cant deduct receipts. this is the cases if you earn more than 1,550,000 Huf per year

The other way i believe you can do it is to deduct youre expenses from youre gross with 10% taken off it from the start and then take youre answer and you then pay up to 38% tax and a 11% health levy.

At the moment im trying to study which way is best for me in the tax system in Ireland but at the moment the first way seems to be the best, as when you pay 25% tax and youre 14% health levy which is 39% then get you're tax credit on this for you're irish tax and include it in youre self assessment under schedule 111. At this time you can include youre receipts from Hungary as if you had a property here in ireland and claim accordingly for fixtures and fittings so on so forth.

I currently am on 41% at home in Ireland so by claiming youre tax credit in Hungary and submitting it in Ireland with youre expenses you probably wont have to pay any more tax in Ireland. Its fairly complicated to get my head around maybe someone knows better on this subject love to hear from you
 
Everyone's situation is different but the second way suits most people with smaller apartments (rent of €500/month or less):
18% Tax on Rental Income up to 1.550M HUF (36% thereafter)
11% Health Levy
-10% Deduction of Expenses

It's a complicated system and even accountants I've spoken to differ on their interpretation of the law. For example, one accountant I use suggests that foreign residents are exempt from paying the new health levy. A second (whose opinion I don't trust as much) claims that this is not the case. Seanieboy, it's essential that you get a good Hungarian accountant even before you rent out your property.
 
Dear All,

Since you are talking about a very serious issue I think accurate information is important. We discussed taxation issue with the Hungarian Tax Authority (APEH) and International Auditing Companies. Please mind the following if you are concerned with Tax rules in Hungary:

- Health levy is not paid by Foreigners who just purchased buy to let apartments in Hungary and they do not live/work in Hungary

- Alternative 1: flat rate of 25%, no deductable cost
- Alternative 2: 18% (below HUF1,550,000) and 36% (over ~), 10% fixed deductable cost so taxable base is equal to 90% of gross rental income
- Alternative 3: very same conditions like Alternative 2 but the following direct related costs are deductable:

- management fee
- finder's fee
- insurance fee
- accountant fee
- utilities during vacancy period
- basic maintenance (change locks for insntance)

This interpretation is given by the Hungarian Tax Authority. For more details I suggest you discuss with your accountant and or tax advisor.

Back to Budapest's note that Alternative 2 and 3 are availble from 2007, I confirm that these options are declared in 2005 and used from 1 January 2006.

Finally, professional tax advice is a critical point if you are an investor. In Hungary you will save 2 months rent if you use professional advisor and accountant.

Cheers

Dezso Ruzsik
Hungary
 
Ruzsik, there is a debate regarding the health Levy, do you have a clear reference in that matter?
 
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