Real estate sales tax is subject to real estate sales tax at a tax rate of 3%, which is prescribed by the provisions of the Real Estate Sales Tax Act. The said Act entered into force and applies from 1 January 2019. Real estate transfer tax is paid on each real estate transaction or on each acquisition of ownership.
In addition to certain real estate transactions in which taxpayers in the value-added tax system appear as suppliers, value-added tax (VAT) is paid at a tax rate of 25% through the price of real estate achieved on the market. The provisions of the Act clearly stipulate that real estate transactions are not subject to real estate transfer tax if value-added tax is paid on real estate transactions (hereinafter VAT).
Thus, in the taxation of real estate transactions, there is never double taxation, but either VAT (through the market price of real estate) or real estate transfer tax is paid. Which transactions are subject to VAT are prescribed by a special regulation - the Law on Value Added Tax.
The subject of real estate sales tax is real estate transactions. For the purposes of the Act, any acquisition of real estate ownership is considered a transaction.
Acquisition of real estate is considered: purchase, sale, exchange, inheritance, donation, entry and exclusion of real estate from the company, acquisition by consistency, acquisition of real estate in liquidation or bankruptcy, acquisition based on a court or other body, acquisition based on law, and other acquisition methods real estate from other persons.
The real estate transfer taxpayer is the acquirer of the real estate.
The law also lists tax exemptions, so we have general exemptions, exemptions for entering real estate into a company, and exemptions for inheritance, gifts, and other acquisitions without compensation.
The moment of occurrence of the tax liability is at the moment of concluding the contract, i.e. other legal transaction, by which the real estate is acquired.
The tax liability is prescribed by law, and it is prescribed that real estate transactions will be considered as reported delivery of documents from notaries, courts, and other bodies that make decisions on the disposal of real estate, which is obliged to submit these documents to the Tax Administration.
The deadline for payment of the determined amount of real estate transfer tax is 15 days from the day of delivery of the decision on determining real estate transfer tax.
Taxation of real estate deliveries with VAT is prescribed by the provisions of the VAT Act, which has been applied in this form since 1 January 2015. According to the above provisions, mandatory VAT taxation of supplies made by entrepreneurs in the VAT system is prescribed if they deliver (certain buildings ): the building or parts of buildings, including the land on which they are located before the first settlement, i.e. if no more than two years have passed since their use and if the building land is delivered.
Applying the provisions of the VAT Act and the Real Estate Sales Tax Act, it follows that the real estate transfer tax is paid if the delivery of the real estate is not subject to the obligation to pay VAT. Real estate is taxed as a single unit or with VAT through the price of real estate or real estate transfer tax according to the decision issued by the Tax Administration.
If the real estate is delivered by a person who is not registered in the register of VAT payers, real estate transfer tax is paid regardless of the status of the acquirer of that real estate.
In order for a property to be subject to mandatory VAT payment, two conditions must be cumulatively met:
1. real estate supplier is an entrepreneur in the VAT system
2. it is a delivery of real estate: a building or part of a building (including the land on which they are located) before the first settlement, i.e. if no more than two years have passed since the use or if it is a delivery of construction land.
Every other delivery of real estate made by an entrepreneur in the VAT system, as a rule, is taxed with real estate transfer tax, with possible exceptions prescribed by the VAT Act. A possible exception is the right to choose (opt) between the payment of real estate transfer tax and VAT.
The possibility of opting for VAT calculation is possible only in the case when the real estate supplier is a taxpayer in the VAT system, it is not a property for which there is an obligation to calculate VAT, but any other property and the acquirer is again a person in VAT system.