What constitutes private accommodation? 

Whether you let your holiday home or apartment as a private individual or as a self-employed person, as long as it has no more than 8 rooms and 16 beds it is considered private accommodation.

Paying tax as a private individual with a tax number is generally recommended for short-term lets of accommodation providers on an ad hoc basis to supplement income, while for regular and commercial letting, taxation as a self-employed person may be preferable.

If self-employed, accommodation providers can choose between two taxation methods: flat-rate tax up to a certain threshold, or taxation according to entrepreneurial personal income tax.

What does not qualify as private accommodation?

If the activities of the operating company include the provision of accommodation services, which it does not carry out as a private individual or as a self-employed person, and the accommodation has no more than 25 rooms and 100 beds, it is considered to be other accommodation.

Other accommodation operators may be companies specifically set up for this activity, or companies operating such accommodation as part of their business, and they may be subject to the normal corporate tax options – but the tax treatment of private accommodation operators is less well understood.

Taxation options of accommodation providers as private individuals 

As private individuals, accommodation providers can choose between two taxation methods. The first is flat-rate taxation, while the second is taxation under the rules for independent activity. The latter can be done either with itemised cost accounting or by applying a 10% cost ratio. Here, the general rate of 15% under the Personal Income Tax Act is applied, and in certain cases a social contribution tax liability of 13% too.

Accommodation providers taxed as private individuals can opt for flat-rate taxation if they conduct such activities in no more than three dwellings or holiday homes per tax year, and do not rent out the dwelling or holiday home to the same person for more than 90 days in the fiscal year. The flat-rate tax is HUF 38,400 per room, payable in equal instalments by the 12^th day of the month following the quarter. In the case of the flat-rate tax, the full amount must be paid even if the flat-rate taxpayer starts their activity during the year, or only receives guests intermittently, e.g. during the summer season.

One might rightly ask what constitutes a room in this case. A room is a unit which can be sold separately, has individual access, consists of one or more premises and is suitable for accommodating one or more guests at the same time. So an apartment that has two bedrooms, but is not suitable for letting the two bedrooms separately, is considered a single room in a single accommodation unit.

Other payment obligations

In addition to the above “annual taxes”, accommodation providers are obliged to pay the NAV a 4% tourism development contribution on the value of their services, which since April last year is no longer subject to the coronavirus-related moratorium. The contribution must be declared and paid by those who provide commercial accommodation services and catering services for food and non-alcoholic beverages prepared on the premises.

Of course, you also have to pay value added tax to the NAV. Long-term property letting is essentially a tax-exempt supply for VAT purposes, but payment of VAT is mandatory for commercial accommodation services. Provided they do not exceed the current threshold of HUF 12 million, accommodation providers may opt for VAT-tax exemption (this threshold is expected to increase in the future).

In addition to the above, the local government for where the accommodation is located may also levy tourist tax, building tax, municipal tax or even parking fees. In all cases, it is worth checking the website of the given local government, where these issues are regulated in published local decrees.

Other registration obligations 

To start a private accommodation service, the activity of self-employed persons or private individuals with a tax number must be declared using the ÖVTJ code 552014 on form 24T101. Don’t forget to indicate on the form the option for exemption from VAT, if applicable, or the option for the flat-rate tax, if applicable.

It is important to note that accommodation services can only be provided if you have a certificate of accommodation registration, accommodation classification, and an NTAK registration number issued by the competent notary.

From 2019 onwards, accommodation providers have to register all domestic accommodation with the National Tourist Data Centre (NTAK). NTAK reporting is one of the legal requirements for providing accommodation services. NTAK registration can be performed once you have your tax number, you’ve chosen your accommodation management software and you have NAV government portal access. The Hungarian Tourism Agency provides a free accommodation management platform, Vendégem, for operators of private accommodation.

As of 2021, accommodation services can only be provided in classified accommodation establishments. This mandatory classification must be sought before officially notifying the accommodation service activity to the notary. The classification is carried out by the Hungarian Tourism Quality Certification Board based on a public set of requirements, as part of an on-site inspection. The first classification is free of charge, but thereafter a review is mandatory every three years. After successful classification, accommodation providers can register their accommodation service with the competent notary, who issues a certificate of registration.

More detailed information on this can be found in the information booklets on the websites of the Hungarian Tourism Agency and the National Tax and Customs Administration.

The tax advisers at WTS Klient Hungary have decades of experience in the field of taxation related to rental properties, and keep up to date with the latest changes in the relevant legislation. In this article we endeavoured to provide useful information mainly for private individuals, but we are also happy to provide long-term tax advice on real estate matters for corporate clients too.

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Personal income tax payable on accommodation services in Hungary

In terms of taxing the income from accommodation services, an individual who does not wish to be taxed as a self-employed person can determine their tax liability in one of two ways: according to the rules for independent activity (calculating income using itemised cost accounting or the 10% cost method) or by opting for the itemised flat-rate tax.

An individual offering a private accommodation service may opt for itemised flat-rate taxation for the entire fiscal year if such activity is conducted in up to three apartments or holiday homes – other than those used for accommodation services – which they own or have a usufruct right for. If the accommodation service is provided to the same person and the number of days in the fiscal year exceeds 90 days, the itemised flat-rate tax may not be applied. The annual amount of the itemised flat-rate tax is HUF 38,400 per room, which is payable even if the individual opting for the itemised flat-rate tax does not offer the private accommodation service for the whole year, but only welcomes guests for a few months.

In some cases, in addition to paying personal income tax, there is also the 13% social contribution tax to pay.

Local taxes

Local governments may impose a tourism tax, building tax and property taxes (e.g. municipal and local business tax) on accommodation facilities registered in the given municipality. The tourism tax can be set at a flat rate (per person per night) or at a percentage rate. This is collected and declared by the accommodation provider.

What about VAT?

As confirmed earlier by the NAV, an individual who rents out one or more rooms or an entire property as accommodation through an online booking system such as Airbnb or similar qualifies as a taxable person under the VAT Act because of the business nature of the service, they must request a tax number and are also subject to the obligation to issue invoices for the commercial accommodation services they provide.

For the purposes of the Act on VAT, commercial accommodation services qualify as property letting. As a general rule, property letting is exempt from VAT, but this exemption does not apply to the use of property for tourism and tourist purposes, i.e. for commercial accommodation services. It follows that commercial accommodation services are a taxable activity in the VAT system. However, those renting out accommodation can opt for VAT-exempt status (in which case the annual threshold of HUF 12 million must not be exceeded). Those using a foreign online platform (such as Airbnb) must also have a VAT ID number and submit the relevant tax returns and recapitulative statements. 

Don’t forget the tourism development contribution!

The emergency moratorium to support the tourism and hospitality sector expired on 31 March this year; consequently, operators are once again obliged to pay a tourism development contribution of 4% of the value of their services.

From 1 April 2023, in addition to commercial accommodation services provided for consideration, contributions must also be assessed, declared and paid on the supply of food and non-alcoholic drinks prepared on the premises of a restaurant.

It’s good to know that the NAV continuously monitors the turnover data of accommodation providers, catering businesses and tourist attraction operators transmitted to the Hungarian Tourist Information Centre (NTAC) in order to protect the budget and honest taxpayers and for the purposes of whitening the tourism and hospitality sector. In its risk analysis work, the Hungarian tax authority compares the NTAC data with the data in the returns, and takes action if it finds any discrepancy. In practice, this can mean a targeted tax inspection in the worst-case scenario, where problems can result in default penalties for non-compliance and tax penalties, but if more fortunate, taxpayers can find themselves subject to a compliance inspection or a cooperative procedure. In the latter case, it is possible to correct the errors without incurring serious tax penalties.

Use of foreign property as private accommodation

There may also be cases where the property in the name of the individual is located abroad. If you wish to use this as accommodation, you should check the relevant Hungarian legislation and the international convention on the avoidance of double taxation between Hungary and the country concerned (if there is any) whether the income is subject to Hungarian tax based on the residence of the private individual or is taxed in the country of the source of the income (location of property). Generally speaking, if there is a treaty, income from real estate property can be taxed in the country where the property is located, but in addition to income tax, you should also look carefully at other tax rules in that country.

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Tax administration relief 

Based on the Hungarian government decree, the tax authority may, on one occasion, give a taxpayer up to 6 months of an interest-free payment deferral or up to 12 months of interest-free payments in instalments based on a submitted application, if it is likely that the payment difficulties can be attributed to the state of emergency. The application and the justification for the payment difficulties must be submitted by 31 December 2021, and the relief may be requested for tax registered at the tax authority of up to no more than HUF 5 million (roughly EUR 14,250).

If paying the tax debt would make it impossible for the applicant to continue its business activity for reasons attributable to the state of emergency, the tax authority may reduce the tax debt once by up to 20%, but by no more than HUF 5 million (roughly EUR 14,250). Such applications must be submitted by 31 December 2021, and a tax reduction may be requested for one tax type only.

If a tax debt is reduced, no payment relief may be authorised for the remaining amount. A tax debt reduction may not be authorised if the tax authority has granted payment relief to the taxpayer.

Social contribution tax exemption 

Under the government decree, no social contribution tax needs to be paid for the entertainment and business gift benefits defined in the Act on Personal Income Tax if the benefit was given between 10 June 2021 and 31 December 2021.

Another important change alongside the social contribution tax exemption for entertainment and business gifts is that in the case of jobs established between 10 June 2021 and 31 December 2021, anyone who according to the NAV was in employment, a partnership or was a sole trader and insured under the Act on Social Security for no more than 92 days of the 183 days prior to the start of the preferential employment will be considered to be joining the labour market.

SZÉP card and tourism development contribution

In addition to the above, the government decree once again extends the social contribution tax exemption in Hungary on amounts that can be granted – as fringe benefits – under the Széchenyi Rest Card for 2021 benefits, and retains the amount of the allowance raised last spring and already extended on one occasion. For employers not qualifying as budgetary organisations, this means a limit of HUF 800,000 (roughly EUR 2,280), from which HUF 400,000 (roughly EUR 1,140) can be transferred to the accommodation sub-account, HUF 265,000 (roughly EUR 755) to the catering sub-account, and HUF 135,000 (roughly EUR 385) to the leisure sub-account.

No tourism development contribution needs to be assessed, declared or paid from 1 January 2021 until 31 December 2021 either.

Should you have any questions about the fringe benefits paid to SZÉP cards, the social contribution tax exemption for entertainment costs and business gifts or about any other part of the government decree, please do not hesitate to contact our tax experts.

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