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04 January 2013
Determination of fair market value and parties' obligations
Entry into force and transitional provisions
Land transfer tax
The registration of a new owner in the land title register previously triggered a registration fee of 1.1% of the assessed value.
In September 2011 the Constitutional Court ruled that provisions for the Land Register registration fee using the historically assessed value of property as a tax base are unconstitutional. Consequently, a deadline of December 31 2012 was set in order to pass new legislation in line with the Constitution.
In light of the above-mentioned decision, Parliament recently passed a bill amending the provisions on the Land Register registration fee. According to these new provisions, as of January 1 2013, the fee for all types of property acquisition is generally calculated on the basis of the fair market value of the real estate (whereas the respective percentage of the registration fee of 1.1% remains unchanged). Hence, the historically assessed value of the property no longer serves as the general tax base for gratuitous acquisitions of real estate, in particular by way of donations. The amendments additionally affect building rights.
As the historically assessed value of the property is almost always substantially lower than the actual fair market value, the amendments have a considerable impact on ancillary costs of such acquisitions.
According to the bill, parties must:
Competent officials may request further documentation if deemed necessary. If the parties fail to comply with such a request, the official must evaluate the value of the property at his or her sole discretion with reference to the available information. Furthermore, in such cases, an administrative fine in the amount of 50% of the estimated value (limited to a maximum of €400) applies.
In case the parties provide incorrect or incomplete data in order to obtain a significantly reduced tax base bogusly or fall within a statutory privilege, a complaint must be filed with the public prosecutors department. In addition to a penalty, the Land Register registration fee doubles for convicted parties.
The bill introduces certain privileged transactions in which the Land Register registration fee will be calculated on basis of the three-fold historically assessed value (restricted to a maximum 30% of the fair market value):
The above-mentioned exceptions are applicable to transaction for consideration, as well as to gratuitous transactions. The registration fee for transaction for consideration will thus be significantly lower under the new regime than under the former regime.
Parties intending to benefit from the exceptions must indicate the privilege and its respective legal basis in their filing, along with evidence on the specific requirements (eg, civil status certificates or confirmations of principal residence).
As mentioned above, the changes entered into force on January 1 2013. The new provisions shall generally apply to transactions conducted after December 31 2012. However, the old regime shall continue to apply where:
The Constitutional Court recently rendered the land transfer tax unconstitutional for the same reasons as set out in its September 2011 judgment regarding the registration fee (for further details please see "Supreme Court questions basis for taxation of property transactions"). The court has set a deadline of May 31 2014 for changes to be effected. It remains to be seen how Parliament reacts.
In the majority of gratuitous acquisitions of real estate, the new provisions will significantly raise the overall financial strain for parties. Moreover, as parties will frequently be unable to evaluate the fair market value of the transferred real estate themselves, further ancillary costs (in particular, with regards to obtaining an expert opinion on the fair market value) may arise.
The amendments likewise complicate the practical side of the respective transfers; as the tax base for the calculation of the Land Register registration fee and the real estate transfer tax differs, a combined calculation (and self-assessment) will no longer be possible.
For further information on this topic please contact Martin Foerster at Graf & Pitkowitz Rechtsanwälte GmbH by telephone (+43 1 401 17 0), fax (+43 1 401 17 40) or email (email@example.com). The Graf & Pitkowitz Rechtsanwälte GmbH website can be accessed at www.gpp.at.
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