Everything You Need to Know About Golden Visa Hungary Real Estate Investment

Third-country citizens can reside in Hungary for a period of 20 years as a guest investor. This residence permit, also known as “residency by investment” or “golden visa” (although not used by law), is for people who bring economic benefits to the country. One of the ways to meet this condition is to buy residential real estate worth at least EUR 500,000.

Each country has its own regulations on buying and selling real estate. Therefore, the summary below will focus on the points to keep in mind when buying a house in Hungary as a guest investor, and provide information about the investment process in general.

Make an offer and make a deposit

After the negotiation is completed, the buyer will make an offer to buy the property at a specific price for the seller to approve. If the two parties agree on the price, the buyer can make a deposit or pay a part in advance to show the commitment to buy and sell. This often happens when the buyer is unable to pay the full value of the property immediately.

Deposit:

• The main purpose is to ensure the seller does not sell the property to someone else.
• The deposit is usually 10% of the purchase price, but it is not required.
• If the buyer cancels the transaction, they will lose their deposit.
• If the seller cancels the transaction, they must return double the deposit to the buyer.

Advance payment:

• It is not as collateral as a deposit.
• If the transaction fails, the seller must refund the advance payment to the buyer.
• The upfront amount is included in the final purchase price.
• Buyers can pay upfront at any time and there is no limit on the amount.

Sign the contract and complete the transaction

The signing of the purchase and sale contract is the final step to complete the transaction. This process requires the involvement of a lawyer (or notary) to ensure legality and fairness for both parties. The lawyer will play a neutral role, representing both the buyer and the seller, without favoritism.

Duties of a lawyer:

• Check real estate ownership documents: Ensure that information about the real estate (type, area, owner, related rights and obligations,…) is accurate and complete as announced by the seller.
• Real estate register lookup: Verify the legal owner of the property based on the information in the land office’s register.
• Check the legal status of real estate: Ensure that the real estate is free of disputes, litigation, and legal problems.

Notes for the guest investor program:

• Real estate must be residential property, not commercial or industrial property.
• Real estate must be free from disputes, litigation, and legal problems.

According to current law, the investor must own a completed residential property, not a project under construction. Hungarian immigration law is not yet clear on whether it will accept more real estate, but it is hoped that an upcoming government decree will clarify the issue.

Another important requirement is that investors must register a ban on the transfer and pledge of real estate within 5 years from the date of signing the purchase and sale contract. During this time, the investor must be the sole owner of the property, or jointly owned by a spouse and children under the age of 18.

The lawyer is responsible for checking the information of the signatories and advising them on their rights and obligations. The contract must clearly state the personal information of the parties (full name, date of birth, address, ID card number, tax code). If one party is a legal entity, the contract needs to contain more information about the company’s name, head office, business registration number, tax identification number, and representative’s name. In addition, the contract must also clearly state the address and cadastral number of the real estate.

The purchase price of real estate must be specified in the contract and can be checked for authenticity by the immigration agency. In addition, the real estate’s energy certificate is also a mandatory requirement when signing a contract. The contract should clearly state the date and place of signing.

Lawyers may only sign contracts that have been signed directly by the parties, unless the contracts are signed abroad and have been duly authenticated. The signing of an electronic contract is also accepted, in which case the lawyer will prepare and send an electronic identification record.

The process of submitting a dossier to the land registry:

• One-time payment: The lawyer submits the contract and the ownership registration license immediately after signing. The application must be submitted within 30 days.
• Multiple payments: Ownership will remain the same. The dossier submitted to the land registry only records that the sale took place and the ownership is maintained. When the seller receives enough money, they will provide a written consent to register the ownership. After this document is submitted, the new ownership is registered and the temporary sale record is deleted.

Apply for a license from a state agency

Foreign individuals who want to own real estate in Hungary need to obtain permission from the competent government agency depending on the location of the property. This permit is only required for investors who are not citizens of the European Union, the European Economic Area, or Switzerland.

Procedures for applying for a license:

• Submit the application in writing, in Hungarian, according to the form of the government agency.
• Attach:
  • A notarized copy of the passport.
  • Judicial record.
  • Title deed (or sale contract).
• The processing time for dossiers is 45 days.

The government agency will contact the local government and relevant agencies to check whether the purchase and sale of real estate affects the public interest.

Note: Foreign sellers do not need to obtain permission when selling real estate in Hungary.

Land registration procedures

After signing the purchase and sale contract, the lawyer will submit the dossier to the land registry to register the ownership for the buyer. This process requires legal representation.

Registration Period:

• Up to 60 days from the date of submission of a complete and valid application.
• If the dossier is incomplete or invalid, the land registry has up to 30 days to request supplementation or correction.

Note:

• The buyer only officially becomes the owner of the property after the ownership is registered at the land registry.
• The seller must agree to register the ownership to the buyer after receiving sufficient funds.
• The buyer’s ownership is effective from the date of filing the application.

Handover and entry stage

After completing the purchase and sale procedures, the parties will hand over the real estate. A handover record will be made, recording the seller’s handover of the property (including keys) to the buyer. At the same time, the readings of electricity, water, and gas meters will also be recorded in the minutes. This record needs to be signed by two witnesses to ensure legality.

Real estate-related expenses:

• The buyer will bear the costs incurred from the date of ownership of the property.
• Buyers have 15 days to change the name on electricity, water, and gas bills to their name.

Taxes related to the purchase and sale of real estate

VAT:

• Applicable to newly built real estate, the tax rate is reduced by 5% (can be applied until the end of 2026 if the construction permit is completed before the end of 2022).

Transfer Tax:

• Applied after purchasing real estate, the tax rate of 4% is calculated on the market value.
• If the purchase price exceeds HUF 1 billion, the excess will be subject to a tax rate of 2%, up to a maximum of HUF 200 million.

Personal income tax (when leasing):

• Individuals can deduct 10% of rental income as expenses (no documents required).
• Profits after deduction will be subject to 15% personal income tax.

Taxes on the sale of real estate:

• Tax exemption if sold after 5 years from the date of purchase.
• Foreign investors need to check whether they have to pay taxes in their country of residence or have a double taxation avoidance treaty with Hungary.

Construction Tax

The construction tax is a local tax, which is set by the city government and can vary depending on the location of the property. Some cities may not apply this tax or only apply to real estate used for business purposes.

How to calculate construction tax:

• Based on the usable area of the building (in square meters) or the adjusted turnover value of the building
• Most municipalities charge taxes based on the area used, the maximum tax rate is 1,100 HUF/m2 (about 3 EUR/m2).

Taxpayers:

• The owner of the property on the first day of the calendar year.

Tax payment deadline:

• Twice a year, divided into equal portions.