Best time to sell Budapest apt: Local and UK CGT, adopting the euro, market etc?

C

Cockatooz

Guest
Hi

When would or should be the best time to sell an apartment in Budapest in terms of

1. local CGT payable
2. UK CGT payable
3. resale market interest
4. adopting the euro

Appreciate right now probably not the best time due to the credit crunch but if am thinking of perhaps selling next year, 2010, by which time would have had ownership for two years

Thanks
 
Re: Budapest Resales

After five years of ownership, no local CGT is applicable. Euro-accession date is likely to be 2012.
 
Re: Budapest Resales

And if I were to sell before 5 years, what local CGT and other local taxes, estate agent fees etc will I incur please?
 
Re: Budapest Resales

25% if sold within 2 years, then a sliding scale until there is nothing payable after 5 years.

Local estate agent fees range from around 2.5%-5% + VAT. Because fees are high, quality apartments are often advertised without an agent on the local market, e.g. on ingatlan.com
 
Re: Budapest Resales

Cockatooz said:
Hi

When would or should be the best time to sell an apartment in Budapest in terms of

1. local CGT payable
2. UK CGT payable
3. resale market interest
4. adopting the euro

Appreciate right now probably not the best time due to the credit crunch but if am thinking of perhaps selling next year, 2010, by which time would have had ownership for two years

Thanks
Click to expand...
I'm not sure you can separate questions 1 & 2. There is a double taxation agreement between the UK & Hungary (see )

According to this site (http://www.gatewayproperties.co.uk/node/ss) the Hungarian capital gain is calculated as Budapest stated.

UK capital gains is now calculated as detailed in which is a major change over previous years. Taper relief & indexation have been abolished.

UK CGT is taxed in 2008-2009 at 18% over a capital gain (after expenses) minus a personal exemption (GBP9,600 per person) on all gains.

However, due to the double taxation treaty, you are liable for CGT in both countries, but you can claim relief on an equivalent tax paid in the other country.

If you pay slightly lower Hungarian capital gains, you'll pay more UK capital gains tax instead, and vice versa, so you effectively end up paying the higher of the two.

At some point one will overtake the other (In the early years Hungarian capital gains tax will be higher at 25% flat rate, in later years Hungarian capital gains tax will be lower at 0%)

So you're gonna have to build your own spreadsheet to work out the full answer, as it depends too much on your other taxes and personal situation.

I suspect they will cross around year 3, after which the UK one will be the bigger (and thus effectively the one you'll pay), whereas before this time the Hungarian one will probably be the bigger.

e.g. looking at this very simplistically, assuming you own the property as an individual and are UK resident, if you made 100K gain from a sale (after expenses):

after year 1: hungarian tax will dominate and any UK CGT will be totally offset by the 25% Hungarian CGT. So you'll pay ~25% total CGT.

after year 3, you'd be liable for 15% of 100K = 15K Hungarian CGT. The UK CGT would be (100K-9K6) *18% = 16K2. So you pay around 16k2-15K = 1K2 UK CGT & 15K Hungarian CGT or ~16K2 total CGT.

after year 5, Hungarian CGT will be 0 and you'd pay (100K-9k6)*18% of UK CGT assuming no changes to rates and allowances = 16k2 of UK CGT

Of course the devil is in the detail in defining exactly what is a capital gain (and what expenses and charges can be deducted) and what if any higher selling price you'd make by hanging on.

Disclaimer: Be aware that the rules and allowances change every year, and there's so many gotchas in this calculation, so you really need professional tax advice before you sell if this is a significant driver for your decision of when to sell.
 
Re: Best time to sell Budapest apt ito: Local and UK CGT, adopting the euro, market e

Cockatooz said:
4. adopting the euro
Click to expand...

You may not be aware of this but AAM is an Irish Consumer Finance Forum.

You may get advice on UK tax law here but I suggest there are better sources. The UK is a popular overseas investment location for Irish Investors.

Out of interest does your question No 4 refer to the UK or Hungary adopting the Euro?

aj
moderator
 
Thanks Budapest, Martin and Ajpale for your valuable input, I will indeed work it out carefully in a spreadsheet before taking the leap!

Ajpale, I was referring to Hungary's adoption of the euro! There is still much controversy on euro adoption in UK now and probably for some time still in my humble opinion
 
The adoption of the euro is the key thing here, in the past - when other countries have adopted there has been significant increases of prices the obvious example being Ireland. After Euro adoption house prices were for all intents and purposes 20% higher.

Of course just because this has been the history of Euro adoption it doesnt necessarily mean it will happen in Hungary.

For those with more knowledge on the Irish experience feel free to explain exactly what happened - since I am not Irish. From a detailed conversation on the subject (not just Ireland) perhaps we can establish whether it is likely in Hungary also.
 
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