
How to save on real estate transfer tax
When is real estate transfer tax payable?
Real estate transfer tax is a one-time payment made to the local authorities when purchasing a house. The tax rate varies depending on the state. If you do not pay this tax, you cannot be entered in the land register as the owner. There are only a few exceptions where buyers are exempt from this tax under the Real Estate Transfer Tax Act, for example, if the property is purchased from a first-degree relative or if it is an undeveloped plot of land with a value of less than €2,500. The transfer of ownership can also take place without real estate transfer tax in the case of inheritance. In all other cases, buyers must pay.
Save tax on new builds
Those who build their own home and do not purchase an existing property have the best opportunities to save money. This is because the land and the property can be purchased separately. In principle, it is possible that only the land purchase agreement will be subject to real estate transfer tax. In some cases, however, the tax authorities have also subjected the construction contract to real estate transfer tax. Ultimately, this is a decision that must be made on a case-by-case basis. A time gap (at least six months) between the individual contracts and two different contractual partners can be beneficial. If the real estate agent and the building contractor belong to the same group of companies, the tax office may not assume that there are two different contracts and will levy real estate transfer tax on both the land and the building.
Mobile components are not taxable
If you buy a house as a complete package with a fitted kitchen, garden shed, and whirlpool, you will certainly be delighted with the excellent facilities. However, you can also save on real estate transfer tax here if the costs are listed separately by the notary in the purchase agreement. This is because only what is actually immovable counts as real estate. Accordingly, you only have to pay real estate transfer tax on these items. There are two things to keep in mind if you want the tax office to exempt these components from real estate transfer tax:
1. Be realistic when estimating the value of the inventory. If movable items make up a large part of the property value, the tax office may not recognize the division of the purchase price.
2. The lending limit of your financing bank may also be an obstacle. For the bank, the property represents collateral for the financing. If a large part of the current value consists of inventory that loses value over time, you could jeopardize your financing.
Practical example: In a notarized purchase agreement for a single-family home with a purchase price of EUR 290,000, a notary wrote the following regarding the distribution of the purchase price: "EUR 12,500 of the purchase price is attributable to the acquired inventory (remaining furniture in the property, lamps, garden shed, stove, refrigerator, and other garden equipment)."
Home buyers save money with the maintenance reserve
the same may apply to the maintenance reserve. Anyone who buys a condominium in a multi-family house takes over the existing maintenance reserve, which is held in trust by the property management company. These reserves are used for repairs to the property. They are therefore not part of the property value, which means that no real estate transfer tax is payable on them if they are listed as an extra item in the purchase agreement, as is the case with movable property.
Tax deductions for self-employed and freelance workers
If you also use your residential property as a place of work, you can deduct part of the real estate transfer tax from your taxes as a business expense. However, your private living area and place of work must be clearly separated. The purchase agreement should therefore specify which part of the price is for private use and which part is for commercial use. Even if you rent out your property, you can deduct the real estate transfer tax as acquisition costs over the useful life of the building. This can give rise to complex tax issues, in which case it is advisable to seek the advice of a tax advisor.
Are you looking to buy a property? Use our property search. We will find the right property for you!
Legal notice: This article does not constitute tax or legal advice in individual cases. Please consult a lawyer and/or tax advisor to clarify the facts of your specific case.
Photo © cherayut000