How much is the tax on rental income?
According to Act CXVII of 1995 on Personal Income Tax, there are three ways of calculating and paying income tax on rental (for private persons).
The first method, called Source Tax, is simply deducting 25% of the rental income, submitting a tax return, and making the payment every quarter.
The second method, called Combined Income Tax, deducts 10% as expenses and the remaining 90% is taxed at 17%. In the rare case that annual income exceeds 5 million HUF (18,500 EUR), the tax bracket is 34%.
The third method, called Thorough Expense Reporting, allows the investor to deduct all relevant expenses, after which the remainder is taxed at 17%. So unless the rental income exceeds 1540 EUR/month, the tax is 17%.
Property management fee, tenant finding fee, costs of furnishing and renovation, as well as the utility bills and the interest paid on a bank loan can all be offset against the rental income.
In case a company owns the property, the corporate tax on profits is 19%.
