Tax obligations on the sale of real estate

INCOME TAX ON THE SALE OF REAL ESTATE

When selling a property that you have acquired through a transfer of ownership, if you have been the owner of the property for less than five years, you are obliged to pay. income tax (the period begins to be calculated from the contribution to the real estate cadastre).

From which income tax is paid when selling real estate

You will pay a tax of 19% or 25% (depending on the amount of the tax base for natural persons - non-entrepreneurs) on the difference between the sale price and the price at which you acquired the property, provided, of course, that a positive difference arises (loss is not taken into account ). However, you can reduce this difference by demonstrably incurred expenses (eg expenses related to reconstruction, remuneration of an expert, lawyer, commission of a real estate agency, etc.).

Example:

On July 4, 2015, you bought an apartment for 100 thousand. €. You reconstructed it for 5 thousand. € and after 3 years you will sell it for 120 thousand. €. Will you pay the tax?

Answer:

Yes. You pay the tax in the amount of € 2,850, which corresponds to 19% of the amount of € 15,000 (120,000 - 100,000 - 5,000). Income from the sale must be stated in the next tax return.

 
TAXATION ON THE SALE OF REAL ESTATE ACQUIRED BY THE INHERITANCE

If you acquired the property by inheritance from a trustee who was on direct relatives or from a spouse, the income from the sale will be exempt from tax if at least five years have elapsed from the date of acquisition of the property in question by the trustee (poor). Inheritance in the direct line is when the guarantor is a relative in the direct line (eg father, mother, grandmother, son, grandson). This method of acquiring real estate is exceptional in that not only your property, but also the property of the guarantor is included in the period of ownership.

Example:

The son inherited the family house from his father. His father owned it for almost 10 years before his death. If the son sold the property, he would be exempt from tax, since he inherited the property from his father (who was in his direct family), and thus the ownership period of his father is included in the ownership period of the seller's son. But if the son inherited the house from his uncle, he would no longer be exempt from paying the tax, because his uncle was not in his direct family.
 

Filing a tax return and paying tax

A taxpayer who is obliged to declare income from the sale of real estate and file a tax return is obliged to do so by 31 March of the following year. He must also pay the calculated tax within the same period. The tax return will then state all income, including income from dependent activity, ie income from employment.

 
Local jurisdiction

Local jurisdiction means to which tax administrator the taxpayer is obliged to file a tax return and pay the tax. The tax administrator is the tax office for income tax. In the case of natural persons, the local jurisdiction is given by the place of their permanent residence and in the case of legal persons by the registered office.

 
Sanctions and fines

Sanctions and fines are regulated by § 155 et seq. Act no. 563/2009 Coll. (tax code). According to this Act, the tax administrator imposes fines for filing a tax return after the deadline or for failing to file a tax return at the request of the tax administrator. The law also imposes on the tax administrator the possibility to levy the so-called penalty interest. Penalty interest or interest on arrears is levied on tax declared but not paid within the tax deadline or unpaid in the correct amount. This penalty shall be calculated as four times the basic interest rate of the European Central Bank (but this must be at least 15%), for a maximum of four years of delay in payment.

Extinction of the right to levy tax

It also regulates the tax code. It applies to the case where the taxpayer does not file an income tax return at all. The tax administrator may not levy tax after five years from the end of the year in which the obligation to file a tax return arose. However, if the tax administrator takes any action to levy the tax during these five years (usually a call), the period is repeated - but the maximum period is ten years.

Limitation of the right to recover arrears

The tax code informs us about the statute of limitations for the right to recover arrears. It applies to such cases where we file a tax return but do not pay the tax. If six years have elapsed since the end of the year in which the tax arrears arose, such arrears are time-barred, but we must raise the objection of limitation. During this period, the tax administrator may take an action aimed at recovery. The period is then extended by another six years, up to a maximum of twenty years.

 

Source: Real Estate Union brochure: "Sale, purchase, rental of real estate", www.realitnaunia.sk