Short-term retnal tax and administration in Budapest

Hungary: Doing short-time rental in the right way - 2024 update

Date of publication: 07-08-2023 | Author: Lantos, Attila | Tags: Airbnb, booking.com, short-term rental

Aribnb and booking.com have become more and more popular in Hungary in the recent years. Many people, especially in the downtown of Budapest, offer their homes for short-term rental. OK, OK, that is fine but what if you want to do it in the “clean” way? What licenses do you need? What is the best taxation system? What are the advantages and disadvantages? How can you operate?

All in all, the question is: how can you that in the right and legal way? This article is a comprehensive, although, understandable material about the topic.

Short-term rental from a legal perspective

According to Hungarian legislation, Airbnb and booking.com are considered as short-term rental, which is classified as tourist and/or hotel activity. So now have entered to the same market as Hilton? From a legal point of view: yes. Short-term rental should be examined as a complex system which has a clear structure. It is like a puzzle where all the pieces should be in place in order to get a clear picture. There are two main legislation processes which should be distinguished in connection with short-term rental in Hungary:

1. Licensing

2. Opareaton

Licensing

If you want to short-term rental in Hungary with a proper conduct, the first thing you will need is a license from local government. The licensing process mainly depends on 3 factors:

Let us address the last topic since you will have no effect on the first two ones. Your legal form may be as follows.

Private persons and private enterprises are considered as natural persons while companies as legal persons. As a rule of thumb, it may be stated that avoiding operating short-term rental flats as a company as long as possible is the best strategy. Why is that so? Airbnb flats run by natural persons fall into a group may be translated from Hungarian as private mini hotes. This legal category applies up to 8 rooms and 16 beds per property.

Instead of licensing, private mini hotels can go for a simplified registration procedure. What is the difference? Legally, in a licensing procedure the government may say "no" while in a registration procedure, if all the documentation is in oder, an approval must be given. If you want to go through the default licensing process, the function of your property should be changed during that procedure and this will require a landscape approval from the local government. Also, the function change wiil bring up the notorious missing parking plots problem.

What is the parking plot problem? Every short-term rental flat should have the same number of nearby parking plots available for the guests as the number of rooms offered for rent. If you do not comply, a so-called parking place fee should be paid for the local government on each of the missing plots. What do you get in return? Basically nothing. So, as you see, there are absolutely more cons for running flats on Airbnb or booking.com as a company than pros. How is it possible that some management commpanies still do that? Actually, the don't. The legal "trick" is that they operate the license of the owner but the license is obtained under the name of the owner.

Operation

The operation of a short-term rental flat is actually a daily routine of:

The picture below demonstrates the constant tasks flowing around your short-term rental property.

The sturcture of shor-term rental legislation in Hungary

You may find the exact references and links of the regulations affecting the short-term rental in Hungary. Please note that the referred legislations are in Hungarian, still, it is a useful source of knowledge.

CORRESPONDING LEGISLATION

- Law on Commerce
- Government edict on shor-term rental
- VAT law
- Personal income tax law
- Law on Private Enterprise

Obtaining the license from the local government

The following part will dig deeper in the topic of obtaining a short-term licence as a private mini hotel i.e. as a result of a simplified registration process. The article will focus on Budapest since most of my clients are operating in the capital.

STEP 1: Checking the SZMSZ and existing licenses

Your first step should be contacting the common representative of the condominium and ask for the organizational document the so-called SZMSZ. If SZMSZ denieds short-term rental in the building, getting a license will be quite difficult if not impossible.

Check if there is any ongoing license issued to your flat. Please note, that if the flat has already has a previous short-term rental license issued by the local government that has not been terminated by the former operator, obtaining your license could be quite tricky. Why? First of all, you will have to terminate the ongoing license. If the former operator is missing or does not want to terminate the license, you – as the owner – has to withdraw it. To do this, you will need a declaration about the termination of the license signed by the owner/legal user and two witnesses. The local government, than, will send out an official letter for the former operator. If there is no reply in 15 days, the local government will issue an edict about the temporary termination of the license. It will be legally applicable after additional 15 days.

What does it mean? It means that the termination of the former license may take as much time as 2 moths! That is why this step is crucial. However, you may meet this problem only, if somebody else is the legal owner of the flat you would like to operate under Airbnb.

STEP 2: Ügyfélkapu, NTAK registration and VAT Tax number

What is Ügyfélkapu? It is the ultimate electronic government gate which identifies you in front of the authoriteis. It is a must so if you do not have it, you will have to create one asap. How can you get one? You will have to visit one of the government windows (Kormányablak), which are in fact government customer services, or the Hungarian Embassy in your country. Ügyfélkapu is free to open and maintain, all you need to establish one is a valid passport or ID card (if you are an EU citizen) and an email address.

WHAT DOES ÜGYFÉLKAPU DO?

Ügyfékapu is an auth service backed up by the government. It is not a separate service anymore but serves as entry point for various governmnet portals. Ügyfélkapu identifies you and provides a digital signature for your electronic documents. It also allows you to manage your business from anywhere in the world.

Getting a VAT tax number is crucial. There are 2 types of tax numbers in Hungary: the personal tax number (10 digits) and the VAT tax number (mask: 12345678-1-12). In order to get a VAT tax number, you will need a personal one. The personal tax number may be initiated at one of the cusotmer services of the Tax Office (NAV). VAT tax number may be obtained electronically by using form T101. Setting up a VAT tax number in a proper way may reuquire experience so ask for help before initiating the procedure.

STRUCTURE OF THE VAT TAX NUMBER

A typical VAT tax number looks like this: 68533582-1-42. The first 8 digit is the source ID code. The number between the "-" indicates the VAT status. 1 = VAT free, 2 = Default ("normal") taxation, 4 and 5 = VAT group. The last 2 digits represent the Tax Office code under the taxpayer belogns.

NTAK registration is mandatory for short-term rental. It may be done online by using Ügyfélkapu and your VAT tax number.

STEP 3: STAR RATING, SELF-ASSESMENT AND PERSONAL INSPECTION

Once you have your NTAK registration, the next step you want to take is getting the star rating which is also mandatory for new Airbnb flats. This procedure starts with a self-assesment which is done online and you will have to answer more than 130 questions about your property. This may be challenging but not impossible. Once the self-assesment is done, the government will contact you in a couple of days to discuss a proper day and time when the personal inspection can take place. According to the law, the personal inspection should be performed by the government within 15 calendar days. Your flat should be in a perfect condition during the registration with all the equipments at the scene. The government will see your property with the eyes of a guest and form an opinion accordingly.

WHAT IS A REALISTIC STAR RATING?

Private mini hotels are contesting the big hotels during the assesment. Therefore, a maximum 3-star rating is realistic which is cosidered as a premium category private mini-hotel.

STEP 4: COLLECTING NECESSARY DOCUMENTS

Once you are ready with the previous steps, you need to collect all the obtained documnents.

STEP 5: SUBMITTING THE REGISTRATION REQUEST

After you collected all the necessary documetns, you need to send them to the local government by using the e-Paper service.

WHAT IS THE E-PAPER SERVICE?

e-Paper service is the official government messaging system in which you may write free form text and attach documents up to 25MB/message. You do not need a separate registration to use this service since it is accessible wiht Ügyfélkapu.

STEP 6: REGISTERING UNDER LOCAL TAXES

This is the final step and then you are free and legal to do Airbnb! Local tax registration is done via Ügyfélkapu by using e-onkormanyzat service.

Taxation of short-term rental activity in Hungary

You will face two major taxes during Airbnb:

Central taxes of Airbnb

Central taxes include:

Income and dividend tax depends on the legal format of your enterprise. Corporations pay 9% corporate income tax on their profit. Dividend payed out is taxed by 15% personal income tax and by 13% social contribution tax. However, the latter one is limited in 24 * minimum wage * 13% /year Private individuals pay either 15% personal income tax or a fixed amount of 38.400.-HUF/room/year. However, in the latter case, there are restrictions also. The most important are:

VAT is 5% but you may fall under the VAT free system up to 12 million HUF of proportional yearly income upon your choice. The taxation in Hungary is very complicated and this article is too short to explain everything in details. However, we wrote a very useful free eBook about doing business in Hungary and taxation which may be downloaded.

VAT is 5% but you may fall under the VAT free system up to 12 million HUF of proportional yearly income upon your choice. The taxation in Hungary is very complicated and this article is too short to explain everything in details. However, we wrote a very useful free eBook about doing business in Hungary and taxation which may be downloaded.

Local taxes

The two local taxes that you will have to pay are:

Tourist tax is either a fixed fee based on the number of persons and nights spent in your Airbnb “hotel” or a certain percentage that taxes the actual income. The method introduced depends on the local government. Budapest districts apply 4% tourist tax. If you do Aribnb, local tourist tax report must be filed every month based on the records of your guestbooks. Property tax is a fixed fee calculated by the local government based on the classification and area of your flat. It must be paid by the owners/registered tenants. If you do not own the flat, this tax does not affect you.

Tourism development contribution tax's rate is 4% and should be be even if you are not under the default VAT system.

Summary

Item Description
Possible legal forms for short-term rental Natural person, private enterprise, company
Do you need a licence? Yes
Logical steps of licensing 1. Common representative: check SZMSZ and existing license, 2. Create Ügyfélkapu access, obtain tax number, NTAK registration, 3. Self-assesment, star rating, inspection, 4. Collect documents, 5. Registration request, 6. Local tax registration
Maximum income Not limited
Administration Electronic guest book, invoicing software, tax forms
Method of registration Via Ügyfélkapu by using e-Paper service
Income tax Personal income tax 15%, Fixed amount 38.400 HUF/year, 9% corporate income tax
Subject to VAT? Yes. VAT is 5% or VAT free system up to 12 million HUF/year
Local taxes Property tax, tourist tax (in Budapest: 4%)
Other taxes 4% Tourist development contribution tax

How may we help you?

We can save you a lot of effort, struggle, failure, time and money. How? Either you may authorize us to act in your name and obtain the license or we accompany you during the procedure or we help with useful online consultancy.

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