Hungary's Parliament late on Monday approved legislation allowing real estate investment trust (REIT) to be incorporated in Hungary.
Regulated property investment companies, as they are called by their Hungarian acronym "szit" in the legislation, will be exempt from corporate profit tax and local business tax, but they will have to pay 100% of their realized profit from property development and management activities to shareholders as dividend, which will be taxed.
All of the profits of the szit's project companies will belong to their owner.
Companies eligible to adopt the form must be public companies limited by shares and rent or manage their own property in Hungary. They must have startup capital of at least HUF 10 billion. Property owned by the companies must account for at least 70% of total assets.
The legislation defines what other types of assets may be included in the portfolio.
Insurers' and lenders' ownership stakes and voting rights in szits are limited to 10%. At least 5% of their shares must be in free-float.
The legislation comes into force eight days from the time of its publication in the official gazette Magyar Közlöny.