Rental income is calculated as (i) 90% of the rental revenues (in this case costs do not have to be documented) or (ii) the actual difference between rental revenues and actually incurred qualifying costs (however, costs should be supported by sufficient documentation). Rental income received by individuals upon the rent of a Hungarian real estate is subject to personal income tax. The rental income of individuals is taxed as part of a taxpayer’s annual income. Rental income of RE properties Rental income of Individuals In case a company offers a part of its final corporate income tax amount, the further tax credit may be claimed up to an effective 2.16% of the corporate income tax offering.Ģ. The final corporate income tax payment obligation may further be decreased via corporate income tax offering. The so-called development tax credit may be applied up to 80% of the calculated corporate income tax obligation, while all the other tax credits may be applied up to 70% of the remaining corporate income tax obligation. The calculated CIT obligation may be reduced by different tax credits (if applicable as per the state aid and tax regulations which must always be reviewed in detail). Besides, Hungary has almost 100 effective double tax treaties as well as 20 effective social security conventions. the interest deductibility rules as well as the taxation of certain preferential transactions (preferential merger, transfer of assets and exchange of shares). Not only the Hungarian VAT system is based on the EU VAT Directive, but Hungarian transfer pricing rules and several corporate taxation rules are also based on international regulations, e.g. The Hungarian tax regime is well harmonized with the international and EU tax rules. It means that no Hungarian withholding tax applies on dividends, interest, or royalties paid to foreign corporate taxpayers (any withholding tax in B2C relations or in transactions carried out by foreign look-through entities are to be determined on a case-by-case basis). Hungary is quite unique as it does not levy withholding tax in B2B relations. The effective tax rate however may be further reduced if applying certain tax allowances and tax credits, which makes Hungary one of the most favorable target countries from a corporate tax point of view. In Hungary, the corporate income tax rate is 9%, which is the lowest within the EU. Lowest corporate income tax rate within the EU and no withholding tax between corporations In practice, it means that a company can start operating within a week from the decision of its establishment in the Real Estate sector as well. Besides, there are various forms of presence in form of which one may conduct business activity in Hungary, such as permanent establishment, branch, or subsidiary. The Hungarian Government provides a quick electronic company registration process and via an electronic system remote company formation is also possible without actually traveling to Hungary. Should a foreign investor decide to establish a Hungarian subsidiary (either a holding or an SPV) for its Hungarian real estate businesses, Hungary has one of the easiest company formation processes within the EU. Why choose Hungary for your Real Estate related plans? 1.1. Quick overview of Hungarian Real Estate Taxationġ.
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