Transfer of immovable property

When selling or exchanging land, house or apartment, the question arises – whether income tax is payable on the gains received. If so, how and when to declare the gains and how the tax amount is calculated. You can find answers to these questions in the following guide.

Handbook

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Transfer of the place of residence

If a person transfers a dwelling, which he or she used until the transfer as his or her place of residence, the gains derived from the transfer are exempt from tax and income tax is not charged.

The tax exemption can be used for one sales transaction within two years. The two years between transactions are counted from the day following the date of entry of the sales transaction in the land register.
 
EXAMPLE 1
In January 2018, a person sold her apartment, which she had been using as her place of residence. The notarial purchase and sale contract was signed on 23 January 2018 and the entry in the land register was made on 26 January 2018.
The person sold her new place of residence in January 2020. The notarial purchase and sale contract was signed on 15 January 2020 and the entry in the land register was made on 18 January 2020.
The period between the sale of the first and second place of residence is shorter than two years, so the sale of the second residence must be declared in the income tax return of 2020. In this example, the two-year period starts on 27 January 2018.

If a loss arises from the sale of the second place of residence, such a transaction is not taken into account at taxation and does not have to be declared, but the documents of the transaction (concerning costs of acquisition and sale) must be kept for at least five years.

The concept of "residence" is important here. According to subsection 1 of § 14 of the General Part of the Civil Code Act, the residence of a person is the place where he or she permanently or primarily lives. The taxpayer’s place of residence is first defined by its connection with his or her personal and economic interests. Therefore, the determination of a place of residence in each case of tax exemption is a matter of proving facts. According to the guidelines of the Supreme Court, the actual residence of a person is the determining factor in the implementation of tax exemptions.

Since the transfer of residence is exempt from income tax, it does not matter how the dwelling was acquired - whether inherited, gifted, purchased, returned or privatised with the right of pre-emption.

If the transferred dwelling has been partly used for other purposes (e.g. rented out, used in business, etc.) until the transfer, the exemption is granted in proportion to the ratio of the surface area of the premises used as a residence and for other purposes.

EXAMPLE 2
Until transfer, a sole proprietor used 70% of her apartment with the total surface area of 100 m2 as a residence and 30% for entrepreneurship. Acquisition and improvement costs of the apartment have not been deducted from business income.
The sales price of the apartment is 100,000 euros. 30%, i.e. 30,000 euros, of it is the taxable part.
The acquisition cost is 70,000 euros, 30% of it, i.e. 21,000 euros, is taken into account. The expenses related to the transfer make up 10,000 euros, 30% of this amount, 3,000 euros, is taken into account. Gain is declared as follows: 30,000 – 21,000 – 3,000 = 6,000 euros.

Last updated: 22.08.2022

Tax-exempt or taxable transaction

This table provides a quick overview of real estate transactions that are exempt from tax when certain conditions are met. For more information about the transaction you are interested in, please view the handbook.

Object of the contract of purchase and sale
Basis of tax exemption 
in the income tax act
To the subject of ownership reform /
a privatiser with the right of pre-emption /
the owneR
To a successor
To a legatee
By gift or other transfer transaction
Property returned in the course of the ownership reform § 15 (4) 5) sale is exempt from tax the tax exemption is passed on the tax exemption is not passed on, gains are taxed the tax exemption is not passed on, gains are taxed
Immovable property obtained by restitution after being unlawfully expropriated and the essential part of which is a dwelling § 15 (5) 2) sale is exempt from tax


the tax exemption is passed on 

the tax exemption is not passed on, gains are taxed the tax exemption is not passed on, gains are taxed
Immovable property privatised with the right of pre-emption and the essential part of which is a dwelling

§ 15 (5) 3)

The dwelling together with land belonging to it has been privatised with the right of pre-emption and the size of the registered immovable property does not exceed 2 hectares.

sale is exempt from tax the tax exemption is not passed on, gains are taxed the tax exemption is not passed on, gains are taxed the tax exemption is not passed on, gains are taxed

Summer cottage or garden house

§ 15 (5) 4)

According to the register of construction works or the land register, the summer cottage or garden house has been in the person’s ownership for more than two years and the size of the registered immovable does not exceed 0.25 hectares.

sale is exempt from tax the tax exemption is not passed on, gains are taxed the tax exemption is not passed on, if conditions are met, then sale is exempt from tax the tax exemption is not passed on, if conditions are met, then sale is exempt from tax

Last updated: 24.08.2022

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