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Second home for sale: Everything you need to know!

Since April 1, 2012, the taxation of private real estate sales has changed a lot. This also applies to the sale of secondary residences, which have been subject to real estate income tax ever since. The following article will tell you how high the taxes actually are and what you should pay attention to when selling your second home!

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Since 01.04.2012, all profits from real estate sales, even outside the speculation period, have been subject to a fixed special tax rate of currently 30%, the so-called real estate income tax (= Immo-ESt). The previous speculation period of 10 years (sales within the period were subject to the full tax rate, sales outside the period were tax-free) was abolished. 

Which transactions are covered by the Immo-ESt and how is the profit determined?

Immo-ESt only includes transactions for consideration. If the property has been given away or inherited, there is no Immo-ESt because there is no sales revenue in the form of consideration and therefore no capital gain. The capital gain results from the difference between acquisition costs, production costs and repair costs on the one hand and the sales proceeds on the other. 

30% taxes or only 4.2% or 18% - what matters?

The actual amount of the Immo-ESt depends on whether the assets in question are old or new.

Old assets are land acquired prior to 31 March 2002 and therefore no longer subject to tax on 31 March 2012 (the ten-year speculation period had already expired).

In the case of old assets, the Immo-ESt amounts to only 4.2% of the sale proceeds (this is because 86% may be deducted as a lump sum acquisition cost - and 14% sale proceeds multiplied by 30% Immo-ESt amounts to exactly 4.2%). However, if the property was reclassified after the end of 1987, only 40% may be deducted as a lump sum acquisition cost, which means that 18% of the profit is taxable. If the property was acquired after 31 March 2002, it is included in new assets and the capital gain is taxable at 30%.

What exemptions from Immo-ESt are there?

Since every profitable real estate sale has been subject to Immo-ESt since 01.04.2012, the following tax exemptions have become significant in practice: Main residence and manufacturer exemption. 

Main domicile exemption means that profits from the sale of a home or condominium including land are tax-free if they have served the seller as the main domicile (§30 Abs. 2 EStG ). The exemption includes buildings, land and land up to 1,000 m². 

The term main residence is not defined in § 30 EStG 1988. According to § 26 Abs. 1 BAO someone has a residence where he owns an apartment under circumstances which suggest that he will keep and use the apartment. If the taxpayer has several residences, the main residence is that of these residences with which the closer personal and economic relations exist (centre of the life interests); a second residence therefore does not fall under the exemption provision of § 30 Para. 2 No. 1 EStG 1988.

It can also be examined whether the manufacturer's exemption applies when the second residence is sold, but in contrast to the main residence exemption, only the building is exempted here, not also the land.

The exemption for manufacturers covers houses which the seller himself has built; the main purpose of this exemption is to "untax" the taxpayer's own labour. The exemption only applies to the installer or manufacturer himself and is not transferable (e.g. gift or inheritance) even in the case of unpaid acquisition.

What does self-made mean?

This means that you must have been the owner of the building and have borne a certain financial risk for the construction of the building. A building that is bought turnkey at a fixed price is not considered self-built (e.g. turnkey prefabricated houses). If, however, fixed prices are agreed with individual contractors, this is not harmful. In order to fulfill however the owner concept of the § 30 exp. 2 Z 2 EStG, it must be incumbent on the salesman as owners to plan and arrange the house which can be erected. Even manufactured/erected means also that the building measures are regarded also really as building of houses and not for instance as house reorganization. Only the first construction of a building is always tax-privileged. If a usable house is bought and converted, this is not an initial construction of a building. If a not yet usable shell is bought and finished, one speaks already of a self-produced building. However, the prerequisite is that the completion costs are higher than the purchase price of the shell.

Manufacturer exemption also presupposes that the building erected has not been used within the last ten years to generate income - not even in the short term - i.e. that the building has not been used for the purpose of generating income: Even a short-term rental of the secondary residence (e.g. as a holiday home) excludes the manufacturer's exemption.

How is the Immo-ESt paid to the tax office?

The calculation of the tax burden and the payment of the Immo-ESt in the case of private sales, as in the case of real estate transfer tax, is in principle carried out by the notary or lawyer entrusted with the sale. This is final taxation, so that the income from the sale no longer has to be included in the tax return. 

If the tax is not paid by the party representative, the seller himself is obliged to make a special advance payment of 30% of the respective tax base to the tax office. The advance payment is due on the 15th day of the second month following the receipt of the sale proceeds.

Can it be cheaper to submit a tax return voluntarily?

Voluntary inclusion in the tax return while retaining the special tax rate of 30% (so-called assessment option) can be advantageous if, for example, a loss arises from another sale of real estate and this loss is to be offset against the capital gain via the tax return or an incorrect calculation is to be corrected (e.g. repair costs have not yet been taken into account). 

Apart from the assessment option, where the special tax rate is retained, an assessment at the regular tax rate (so-called standard taxation option) is also possible and useful if the tax rate is less than 30%.

What taxes could the seller still have to pay?

A further tax that is payable in addition to the Immo-ESt is the real estate transfer tax. However, this is usually borne by the purchaser of the property, but it should not be forgotten that all persons involved in the acquisition are liable for tax, including the seller. It should also be checked whether any input tax corrections need to be made or whether it may be advantageous to sell the property with value-added tax (e.g. in the case of retirement apartments).

It turns out: When selling a property there is a lot to consider!
The experts at NWT will be happy to assist you in ensuring that your tax affairs are handled correctly. 

 

 

 

 

 

Mag. Cornelius Necas © VOGUS

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