Buying a Property in Budapest – A Guide
Buying a property in Budapest is a clear-cut process that requires diligent planning, local expertise, and a skillful lawyer to ensure that investors make a sound financial decision. Individuals looking to purchase a property in Budapest should also consider the option to establish a company which can substantially streamline the property purchasing process.
To purchase a property in Budapest, an individual needs to obtain the following documents:
- A purchase permit from the district council of the local municipality.
- Approval from the Administrative Office (only for non-Hungarian citizens)
Most foreigners should receive a permit from the district council within 2-3 months. It is paramount that one finds an experienced and trustworthy real estate lawyer that understands the market landscape.
The purchase process is identical for non-EU citizens except for two factors. 1) They are required to obtain purchase permission and 2) are also subject to stricter mortgage conditions.
Outlined below is the conventional purchasing process:
- Tour the apartments, and make a verbal offer to the seller.
- Meet with a lawyer to prepare a legal contract.
- Sign a written purchase offer consisting of the following details:
- Payment Period
- Final signing date
- Purchase Price
- Leave a reservation deposit of approximately 1% of the purchase price.
- Sign the purchase contract prepared by the lawyer upon which 10-30% of the purchase price will be paid as a down payment.
- The lawyer will ask for a purchase permit from the Hungarian government. Once the permit is received, the ownership rights of the property are transferred to the new owner.
For more information on the associated fees and taxes of buying a property in Budapest, refer to our article here.
Setting up a Company
There are three main benefits of purchasing real estate as a company:
- Lower Taxes: Companies renting properties in the long-term are subject to a 9% corporate tax and a 2% business tax as opposed to a 15% tax on net annual profit for individuals.
- Faster Buying Process: Unlike individual buyers, companies buying property are not required to receive a permit from the district council which can dramatically save time during the buying process.
- Ability to Write-Off Expenses: All expenses involved in the running of the company including the set-up of the company itself can be written off when filing income taxes.
The entire procedure typically takes 1-3 days. Once the name of the company, scope of activities and other details have been established, the following steps need to be taken in order to complete the company registration procedure:
- Notarize the articles of association.
- Open a company bank account.
- Register the company.
Once the company is registered, it will be assigned a tax number and can henceforth issue invoices and incur expenses. Upon registration, an accountant needs to be appointed to take care of the books of the company.
The main cost associated with establishing a company are the one-off legal fees for preparing and presenting the documents to the Court of Registry. An accountant is also needed to file a yearly and quarterly report to tax authorities. Lawyers and Accountants typically charge €500 and €230 for their services respectively.