REAL ESTATE FUND INVESTMENT
- On average, these funds yield between 6-10% yearly return.
- To renew your residency after 10-years, the investment of 250,000 EUR in the fund needs to be active.
- The investment in the real estate fund can be withdrawn after a period of 5 years.
- Global Citizen will advise on which fund to invest into and consult the client on the best available structure to carry out the investment.
DIVERSIFICATION:
Real estate funds invest in a range of properties, spreading risk across different asset types and locations. This diversification helps to stabilize returns and mitigate potential losses.
ACCESS TO HIGH-QUALITY ASSETS:
Funds can invest in large-scale, high-quality properties that individual investors might not afford, such as commercial buildings, shopping centers, and large residential complexes.
MARKET EXPERTISE:
Fund managers leverage their market expertise and insights to identify lucrative investment opportunities and navigate market cycles effectively.
TAX EFFICIENCY:
Many real estate funds offer tax advantages, such as deferred taxes on capital gains and favorable treatment of income, enhancing overall returns.
LIQUIDITY:
Unlike direct property investments, real estate funds often provide better liquidity, allowing investors to buy or sell shares more easily.
INFLATION HEDGE:
Real estate typically appreciates over time and rental income often rises with inflation, providing a natural hedge against inflation.
SCALABILITY:
Real estate funds enable investors to start with smaller capital investments while gradually increasing their exposure to the real estate market.
TAXATION IN HUNGARY
HUNGARY HAS THE LOWEST INCOME TAX RATE IN THE EU - 15%
Hungarian Personal Income Tax (PIT) applies to the following:
1) Domestic-source income.
2) Foreign-source income received by individuals resident in Hungary.
Income earned from employment performed in Hungary is considered domestic-source income, regardless of whether it is paid from abroad.
For income paid from abroad, income tax may be applicable whether or not the funds are transferred electronically (e.g., via bank-to-bank transfer) or brought into the country in cash.
REAL ESTATE TRANSFER TAX
Real estate transfer tax rate is 4% or 2%, depending on the value of real estate. In case the value of real estate is maximum HUF 1 billion, then the tax rate is 4%. In relation to the proportion of the value that exceeds HUF 1 billion, the applicable rate is 2%.
Other main taxes in Hungary are as follows:
• Maximum 2% local business tax
0.3% innovation contribution liability
• 27% as general VAT rate
• 18% reduced VAT rate applies to certain products, for example bread and certain types of dairy products
• 5% reduced VAT rate applies to certain products and services, for example journals, books, internet services, medicines, chicken, pork, fish, central heating, accommodation services.
TAX ON DIVIDENDS
Dividend income is subject to a 15% Personal Income Tax (PIT). Dividend income must be reported in the annual tax return, with taxes on foreign-sourced dividends paid upon filing.
Tax liability on dividend income can be mitigated through a credit for foreign withholding taxes (WHTs) on dividends from countries with double tax treaties (DTTs), up to the rate specified in the treaty.
INVESTOR-FRIENDLY LEGAL ENVIRONMENT
As a member of the European Union, Hungary has aligned its legal framework with European laws and regulations. New business entities can be established in various forms, with the limited liability company (Kft.) being the most prevalent.
The registration of a Hungarian company can be completed swiftly, typically within 1-2 days, and the associated costs are comparatively low within the European Union.
There is no withholding tax on outbound payments (including dividends, interest, royalties, and management fees) to foreign entities under Hungarian law.
Dividends received are generally exempt from corporate income tax unless received from a Controlled Foreign Corporation (CFC).
Additionally, Hungary’s participation exemption regime for capital gains makes it an attractive location for multinational companies.