Tax on the acquisition of real estate regarding new apartment units not located in residential buildings

According to a currently published opinion issued by the General Financial Directorate, the transfer of ownership of an apartment unit can be exempt from real estate acquisition tax for the first transfer of new apartment units only if the apartment unit is located in a residential building. This means it cannot be applied if the unit is located e.g. in a family house or multipurpose building.

This opinion is based on a strict interpretation of Section 7(1)(c) of the legislative measure on real estate acquisition tax which allows the respective exemption regarding the first transfer of ownership regarding new units only for units located in a residential building or during the transfer of ownership of a family house (e.g. not the apartment units in the house).

Even though it was probably not the lawmakers' intention to exclude apartment units located in family houses or other buildings from the above mentioned exemption, which the explanatory memorandum confirms, the current wording of the act suggests this conclusion. The impossibility of the exemption is valid, in this case, from 1 January 2014, i.e. from the date the legislative measure became effective, and it was not influenced by the amendment effective from 1 November 2016. The amendment introduced certain changes to the exemption of new buildings, but apartment units not located in residential buildings were not explicitly included in the exemption. However, there is a draft of an amendment in the Chamber of Deputies which should allow exemption of the transfer of apartment units in family houses.

The General Financial Directorate admits that, in real life, the financial administration accepted exemptions related to the transfer of a new apartment unit in a family house or other building in the past, but such an approach was not correct. This is why the General Financial Directorate published an announcement which calls attention to the issue; the GFD also appeals to tax payers who applied the exemptions in conflict with the current wording of the legislative measure for submitting tax returns and paying the additional tax. Simultaneously, information related to the issue has been published saying that there is a possibility of requesting a deferment of the tax payment and waiving accession of the tax because, according to the respective law, late payment interest accrues.

We assume that the financial administration may focus on cases like this, and if the tax payers do not submit their tax returns, the financial administration will assess the tax and interest. If you believe the above-mentioned issue is relevant for you, you can contact us for further information and resolving any issues.