Capital’99 Kft. Information on property acquisition
The standard rate of the transfer tax
The general amount of the transfer tax – unless otherwise provided – is 4% of the market value – encumbrances not deducted- of the acquired asset (e.g. garage, holiday home, farm buildings, etc.).
In case of property title exchange the basis for the assessment of the levy is the difference between the value of the former property and the property – encumbrancies not deducted – acquired by exchange.
Exemption from tax:
- It applies when the value of the newly acquired property is lower than the property sold within one year prior or after the acquisition;
- In case of a purchase or sale agreement between spouses;
- In case of a purchase or sale agreement between first-degree relatives;
- If the commencement date of the construction of a residential building is within 4 years from a building plot acquisition;
- In case of acquisition of state-owned or local government-owned estates;
- In case of acquisition of a new estate, if it does not exceed the value of HUF 15,000,000.
- Under the age of 35, in the case of first property acquisition, up to a threshold of HUF 15,000,000, the half amount of the tax applies;
- In case of the acquisition of a new home exceeding a purchase price of HUF 15,000,000 but amounting to not more than HUF 30,000,000, the tax applies to the amount between the two sums;
- In case of property exchange (when the property sale and purchase occurs within a year) the property transfer tax applies merely to the difference between the prices of the two properties.
The standard rate of property transfer tax applicable to property and related rights
In the case of a property acquisition the real estate transfer tax basis – unless otherwise provided – is the market value of the property. The tax rate is 4% of the property value. In case of fractional ownership the tax rate is 4% of the proportionate value of the share owned.
In case of property exchange the tax basis is the difference of the market value – encumbrances not deducted – of the exchanged properties.
Taxation rules regarding the sale of real estates (land, and all the components related to it) and property rights (land use, tenancy rights) are as follows:
All incomes are to be considered as revenue that are acquired by an individual with regard of a transfer, e.g. sales price, the normal market value of what was received in exchange, in the case of a contribution in a business organization the asset value established in Articles of Association. The exchange is to be regarded as though the parties would have concluded separate sales agreements.
Eligible costs for the revenues:
- the property, the value of the property rights at the time of the acquisition of the property (in the case of inheritance, and giftgivings respectively the value consisting the tax basis is to be considered as the acquisition value, or if the acquisition sum cannot be established, the acquisition value should be settled at 75% of the revenue),
- expenditures incurred by acquisition and by transfer (lawyers’ fee, advertisement costs, tax regarding acquisition),
certified expenditure regarding value-adding investments (eg. works preserving condition of the property, enhancement works of amenities, include additional rooms, construction of an additional floor), provided it had not already been accounted for as expenditures for other activities. (The value of self-made individual works cannot be accepted as eligible costs.)
Taxation, exemption from taxes
The taxes applicable to incomes arising from property transfer amount to 15 %, that are to be declared in the annual PIT (Personal Income Tax) declaration. Revenues from property transfer need not be declared if incomes are not accrued or if the residential property has been in the ownership of the seller for more than 5 years or in case of other properties they have been in the ownership of the seller for more than 15 years.
The income deriving from the sale of a property and of property-rights and the income tax shall be declared in the annual PIT declaration, the tax is to be payed until the deadline for the actual year’s declaration submission.
The calculated sum shall be determined by deduction of the costs from the income (but costs can only be accounted for up to the amount of the revenue, so the sum cannot be less than null.)
What can be considered as revenue?
The sum earned by an individual through a transfer can be considered as revenue. The total amount of the purchase price shall be considered as revenue even if the purchase price is paid off in installments by the buyer, as the day of the obtainment of the income is the submission date of the sales agreement to the real estate authorities pursuant to the provisions of the PIT law.
What can be considered as costs?
The costs deductible from the revenue deriving from the transfer of a property and of property-rights are as follows:
- The amounts invested for the acquisition and other related costs,
- Investments enhancing the value of the property,
- The transfer-related expeditures proportionate to the revenue part gained at the date of the acquisition, including the verified payed sum in compliance with the obligation assumed towards the State in relation to the property.
Those expenditures accounted for as costs concerning own activities of an individual are not to be deducted from the revenue.
The expenditures must be certified by invoices and documents!
The amount of the tax basis and its yearly reduction rate?
The sellers of a real estate are liable to income tax. The tax rate amounts to 15 %, which is reduced according to the followings:
|Year of the acquisition||The calculated sum %|
|2018. 0. year||100|
|2017. 1. year||100|
|2016. 2. year||90|
|2015. 3. year||60|
|2014. 4. year||30|
|2013. 5. year||0|
This means that taxable income does not incur in case of a sale in 2018 of a property acquired in 2013 or earlier.
There is a series of special cases: e.g. cases in which the transfer is tax free: tax is not applicable in cases of dissolvement of community of property between spouses, when income arises from the purchase of the property, of the property right by the spouse, or when income arises from the transfer of a property, a property right as a remuneration pursuant to a maintenance, annuity or inheritance agreement concluded between individuals.
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