HUNGARY Law and Practice Contributed by: Attila Ungár and Júlia Várkonyi, Lakatos, Köves & Partners
business premises are generally subject to local real estate taxes. Historical buildings could also be exempt from local real estate tax if they are being renovated – ie, general works and repairs are being per - formed on the entire historical monument or on its façade and several major structures in order to completely restore the original condition of the building in terms of aesthetic appearance (and at least the original technical fixtures). Tax exemp - tion could be applied for three consecutive years following the date of the building permit or cul - tural heritage protection 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 corporate entities. If tax exemption does not apply, 15% withholding tax is payable by foreign private individuals on their income from Hungarian real estate. Foreign investors’ profit (adjusted in accordance with the provisions of the corporate income tax act) from the rental of domestic real estate is subject to 9% corporate income tax. Their rev - enue 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 corpo - rate income tax on their income from the transfer or withdrawal of a participation in a Hungarian real estate holding company (unless the applica - ble double tax treaty prohibits the application of such tax by Hungary). A real estate holding com - pany is, generally, a company whose total assets in its balance sheet are comprised of real estate by more than 75% (including the real estate held by related companies and their Hungarian per - manent establishments). 8.5 Tax Benefits The depreciation of assets is generally available for corporate income tax purposes. However, no depreciation 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 hazard - ous waste) or forests, or of the assets that were not activated. Special tax allowances are available from corpo - rate income tax with regard to the maintenance and renovations of historical buildings, subject to the following further conditions. • Costs and expenses of the maintenance of historical buildings in the tax year are deduct - ible 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 allowance shall not exceed the HUF equivalent of EUR50 million. • Twice the amount of the costs of the acquired tangible assets relating to the historical build - ings and the costs of investment and renova - tion is deductible from the taxable base of
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