Short-term rental hotel activity, mainly through Airbnb and Booking.com, has became more and more popular in Hungary, especially in Budapest. 5th, 6th, 7th (these three referred to as “downtown”) and 8th districts are affected, since most of the tourist tend to visit there areas.
In the 21st century and with internet, using Aribnb, Trivago and Booking, anyone may turn his apartment into a small and profitable hotel.
From financial perspective, 7th district (Erzsébetváros) can offer the most possible gains if one is considering renting out his apartment via Airbnb or Booking.com.
Mess in regulation of Airbnb and Booking.com in Hungary
Is it legal to do Airbnb in Budapest? The answer is: yes, however the whole thing is a bit complicated.
In Hungary, short-term renting is regulated at two different levels:
- Central level: by the government
- Local level: by local governments (municipals)
Licensing belongs to the local governments. The whole system is creating a mess in administration, since obtaining a permit is different process in each cities and, in Budapest, in each district: forms are different, required attachments are different, parking regulations are different etc.
How you can get an Aribnb or Bookin.com permit in Budapest?
You may register as:
- Private person
- Private (Sole) enterprise
- Company (Bt, Kft.)
You may do you activity:
- For your sake
- In the name of someone else (i.e. managing other person’s flat)
Private persons and private entrepreneurs may register as private hotels. I.e. they do not need to reclassify their properties. Companies may get the permits as other hotels. This requires the preliminary reclassification of the property by the local government.
Reclassification of the property
What is reclassification of the property for Airbnb or Booking.com.? Reclassification basically means the change of the official goal of usage of the property in the government records e.g. from “flat” to “other hotel”. It is necessary if one would like to rent out his apartment as a company. It is a long and problematic procedure. Reclassification also brings up the problem of parking places: whether the property has enough free parking spots nearby. If not, the owner must pay a one-time contribution for the local government which can be as high as 2 million Hungarian forints (in the 7th and 8th districts) or even 5 million Hungarian forints (6th district). Avoid this process if possible.
Taxation of Airbnb or Booking.com activity in Hungary
Taxation of short-term rental in Hungary is also a two level system:
- Central taxes
- Local tourist tax and local fees
Central taxation consists of:
- Corporate income tax (9%) – If the property is rented as a company
- Personal income tax, proportional (15%+14%) – for private enterprises
- KATA – 50.000.-HUF/month – if activity carried out either as a private enterprise or a Bt. (business association, a form of company) under KATA taxation system
- Personal income tax, fixed amount (38.400.-HUF/room/year) – can be chosen, if one rents out his flat as private person
Local tax consists of:
- Local tourist tax – 4% in the V., VI., VII. and VIII. districts
- Parking contribution – only if property is reclassified and more than one room is rented out as a hotel
Legislation changes in 2019 and 2020 in connection with Aribnb and Booking.com
The central government recognized the mess in Airbnb and Booking.com market which escalated especially in Budapest. There was a new legislation made that from 1st July 2019, National Tourist Service (NTAK: https://info.ntak.hu/en/index.html) will take over the roles of licensing (short-term rental permits) and data exchange between the hotels and the state.
What does it mean? Practically, the system will be centralized. Permits will be obtained from the sate and not from the local governments. Guest book will be maintained electronically. Taxation data will be reported to the central government directly through a certified software. The state also offers a free software for this called My Guestroom. It is free up to 8 beds and 16 persons as a capacity. That is the legal limit for private hotel.
Big hotels are obliged to start the registration from 1st July 2019. Other and private hotels should register during December 2019. The new system is legally effective from 1st January 2020. Data exchange will be mandatory from next year.
Is that a good or a bad change?
We believe that centralization will ease the whole process. It means more administration on one hand but a clearer picture on the other. Licensing will be standardized in every district.
What additional things will be necessary for the registration of Airbnb and Booking.com activity?
- Opening Ügyfélkapu (personal electronic gate)
- Tax number (private and enterprise also)
- Obtaining a software. Either the free state version or any other state approved privately developed software. We suggest Hotrest (www.hotrest.hu) as an alternative. It has English surface and it is also capable of making invoices accepted by Hungarian regulation.
Cash register and short-term rental
Is it mandatory to use a cash register for short-term rental activity?
It is certainly a major issue whether you should use a cash machine for your short-term rental activity or not. The answer, however, is not simple.
Let’s face it: in practice, it is almost impossible to operate a cash register since the guests usually find the properties by their own. So there is no operator who can provide the receipt.
The legislation unfortunately requires the taxpayers to use the cash machine during the short-term rental activity (activity code range TEÁOR 55.1-55.3) if the payment is made by a non-enterprise person (i.e. a private person), done in cash or by using bank cards or vouchers.
You may also choose an option that you issue an invoice independent of the person of the guest. This option lets you to avoid the use of a cash register. But is has a serious downside also: you must report each of these invoices every month to the tax office. That is a big administrative stress.
How to bypass the use of a cash register?
So how can you avoid it in a legal way? If the payment is not done in cash or by card or voucher but e.g. via bank transfer, you do not have to issue a receipt by using a cash machine. In this case you should issue an invoice.
How to do that in practice? Let’s assume you operate a flat with short-term rental conditions and you get your payments via booking.com airbnb etc. Guest are paying with card, however, you are paid by wire transfer. You may say that these payments are not subject of a cash register and you issue wire transfer invoices. Therefore, no need to use cash-machine and report to tax office at all.
In this case, never accept direct cash or bank card payments from the guests and/or direct pre-payments (advance payments).
How can we help you in the process of obtaining short-term rental in Hungary?
We can obtain the license in your name, find the best taxation and legal format, help in develop the contracts, provide legal (lawyer) assistance. Accompany you during the process.
You may receive a quotation by filling the on-line form below.
If you have further questions or would like to request and inquiry, please feel free to contact us.
Tel: +36 20 548 4103