Property rental taxation (TEÁOR 68.20): personal income tax, social contribution and VAT

Property rental taxation under TEÁOR 68.20 is one of the more favorable activity classes in the Hungarian tax code: a flat 15% personal income tax, a full exemption from social contribution tax, and VAT-exempt status by default. Landlords can elect a taxable VAT treatment in specific circumstances, but the election comes with a five-year lock-in and does not apply to residential property.

The three rates at a glance

• 15% personal income tax (SZJA) — applied uniformly to rental income treated as an independent activity.
• 0% social contribution tax (szocho) — rental income carries no social contribution burden for individual landlords.
• VAT-exempt by default — 27% VAT can be elected for non-residential property, but residential rentals are permanently excluded from that option.

What counts as TEÁOR 68.20

The classification covers renting and operating owned or leased property — residential buildings, non-residential buildings, and land — whether the landlord holds a tax identification number or not. It excludes short-term commercial accommodation services; that falls under a separate hospitality code.

Calculating taxable income

Landlords choose between two mutually exclusive methods for arriving at taxable income:

• 10% flat cost allowance — 90% of gross rental revenue is taxable; the remaining 10% is treated as expense without needing receipts.
• Itemized expense deduction — actual documented costs (repairs, renovation, depreciation) are subtracted from revenue instead.

The VAT election, and why most landlords skip it

The law expressly prohibits electing taxable VAT treatment for residential property rentals.

Non-residential landlords can opt into 27% VAT to recover input VAT on renovation or maintenance costs, but the election binds the taxpayer for five full calendar years from the year it is announced — a long commitment for what is often a single-property side activity.

Registration and reporting

• A written rental contract should document lease terms and cost allocation.
• A tax identification number is only required if the landlord issues invoices for taxable services or opts into VAT.
• Quarterly personal income tax prepayment is due by the 12th of the month following each quarter.
• Annual reporting happens on Form 25SZJA, covering total rental income and prepayments made during the year.

The rules above are current for the 2026 tax year in Hungary; azta keeps the underlying statute references up to date and cites the exact paragraph behind every answer — useful when a client's situation sits right on one of these boundary cases, like a landlord who also offers parking as a taxable extra.