With the 1st Stability Law in 2012, the legislature completely overhauled the real estate taxation of natural persons in both private and business spheres. This is sometimes referred to as the biggest step in the reform process ("caesura") since implementation of the Income Tax Act in 1988.
Since 1 April 2012, all sales of real estate, regardless of the holding period (no speculative period), are taxed. As a guideline for both private and business purposes, the capital gain or surplus from real estate sales is taxed at a special tax rate (flat tax) of 30%. There are however many deviations from this principle. For properties where the ten- or fifteen-year speculative period expired on March 31, 2012 under the old legal system (old assets), a tax advantage applies. Finally, a flat-rate tax of the proceeds from the sale (sale price) of old assets is fixed at 4.2% or 18% (if the land was reclassified as building land after 31 December 1987). There are also other extensive special and exceptional provisions. In the private sector, it is important to declare the main domicile exemption and builder’s exemption.
In practice, difficulties arise with differentiating the seller from a commercial property trader. If several apartments have been sold, the financial administration could assume that this has been done on a commercial basis. Classification as a commercial property trader leads to the disadvantage that the 30% special tax rate no longer applies and taxation is at the progressive rate. Criteria for classifying a seller as a commercial property trader can only be derived from case law, literature and income tax guidelines, whereby the individual case must always be considered.
The possibility of using exemptions, reductions or optimisation considerations both in the operational and external sector is one of our core competences. At WTS we assess and create concepts for property acquisitions and sales. Furthermore, we help lawyers and notaries calculate real estate income tax and clarify any questions. Our real estate experts have published a wealth of relevant publications and commentaries on the subject of real estate income tax and have an excellent reputation among professional colleagues.