16% flat rate tax to boost Budapest office market

19 Nov, 2010, Hungary

Introduction of the 16% flat rate income tax next year may provide a much needed boost to
the Budapest office market, according to international real estate consultant Cushman &
Wakefield.

In particular, international companies considering locating or expanding their back office or shared service centre in Budapest will find the city offers an improving employment cost advantage. Given prevailing salary levels for those working in such facilities, most workers should see an immediate and noticeable improvement in their 'take-home' pay, even though social security costs remain high. Whilst the tax changes are unlikely to allow employers to reduce their total salary bill overnight, the changes are expected to limit future salary increases. This will be an important advantage when considering other competing locations such as Prague and Warsaw.

To date, Budapest has managed to attract some of the world?s largest users of back office facilities in Europe, with multinationals including BP, Exxon Mobile and Diageo represented. According to Cushman & Wakefield, the sector has been responsible for leasing close to 140,000 sq m of new office accommodation since 2007 in some years representing up to 34% of the market.

Commenting on the changes, Charles Taylor, Managing Director of Cushman & Wakefield said: "These proposals simply add to the positive drivers of this office market, namely low rents, good availability of quality office accommodation and access to a well educated and relatively low-cost workforce. We would be surprised if these measures did not lead to new tenant demand".

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