HUNGARY Law and Practice Contributed by: Attila Ungár and Júlia Várkonyi, Lakatos, Köves & Partners
8.5 Tax Benefits The depreciation of assets is generally available for corporate income tax purposes. However, no depre - ciation may be accounted for in relation to the original cost of land, plots of land (other than those used for mining or the disposal of hazardous waste) or forests, or to the assets that were not activated. Special tax allowances are available from corporate income tax with regard to the maintenance and reno - vation of historical buildings, subject to the following further conditions. • Costs and expenses of the maintenance of histori - cal buildings in the tax year are deductible from the taxable base of corporate income tax (in addition to their counting as expense or cost) up to 50% of the pre-tax profit of a company. Such tax allow - ance cannot exceed the Hungarian forint equiva - lent of EUR50 million. • Twice the amount of the costs of the acquired tan - gible assets relating to the historical buildings and the costs of investment and renovation is deduct - ible from the taxable base of corporate income tax. Such allowance can be applied – regardless of whether the investment/renovation was put into use – from the tax year of the acquisition or the starting year of the investment until the fifth tax year following the completion of such investment. Such tax allowance cannot exceed the Hungarian forint equivalent of EUR100 million per investment project.
Historical buildings could also be exempt from local real estate tax if they are being renovated – ie, if gen - eral works and repairs are being performed on the entire historical monument or on its façade and sev - eral major structures in order to completely restore the original condition of the building in terms of aes - thetic appearance (and at least the original technical fixtures). Tax exemption could be applied for three consecutive years following the date of the permit becoming final. The renovation must be completed within three years – otherwise, the local real estate tax and related interest for the past period shall be due (such amount is secured by a mortgage on the property). The tax exemption must be requested from the tax authority. In all cases, the respective local municipality’s decree should be reviewed for tax exemption and tax rates. Certain municipalities do not levy real estate taxes. 8.4 Income Tax Withholding for Foreign Investors No withholding tax is currently applicable in Hungary on dividends, interest or royalties paid to foreign cor - porate entities. If a tax exemption does not apply, 15% withholding tax is payable by foreign private individu - als on their income from Hungarian real estate. Foreign investors’ profit (adjusted in accordance with the provisions of Act LXXXI of 1996 on Corporate Tax and Dividend Tax) from the rental of domestic real estate is subject to 9% corporate income tax. Their revenue from the same activity is subject to 2% local business tax. In addition, the rules of global minimum tax apply for multinational enterprises with revenue above EUR750 million. Foreign investors can also be subject to corporate income tax on their income from the transfer or with - drawal of a participation in a Hungarian real estate holding company (unless the applicable double tax treaty prohibits the application of such tax by Hun - gary). A real estate holding company is, generally, a company whose total assets in its balance sheet are composed of real estate by more than 75% (including the real estate held by related companies and their Hungarian permanent establishments).
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