Diving into Builder Contracts: Land, Home, Special Features: Navigating Real Estate Transfer Tax
Real Estate, Dwelling, Unique Conditions: Assets Liable for Land Tax Assessment
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Buying a property with the help of a builder can be a convenient option for buyers. However, it's crucial to be aware that the real estate transfer tax may be higher due to the complexities involved in the transaction.
The real estate transfer tax is typically calculated as a percentage of the purchase price or fair market value, ranging from 5.0% to 6.5% in most federal states. For instance, in Bavaria, the tax burden is much lower at 3.5%, whereas in Schleswig-Holstein, Brandenburg, Saarland, Thuringia, and North Rhine-Westphalia, the rate is 6.5%. Despite these variations, only one purchase price is generally taken into account—the combined price of the land and the house. It's important to note that the sale is tax-free among close relatives in a direct line.
Here's where things get tricky. When purchasing a land and the house to be built on it through a builder, the real estate transfer tax isn't limited to just the land and base house costs. It also extends to any special features requested after signing the contract, even if these requests aren't contractually agreed upon. This could include added expenses for premium flooring, for instance.
However, with careful planning, these costs can often be avoided or minimized. The German Federal Association of Taxpayers recommends that buyers consider having non-essential construction measures carried out later, post-occupation of the property, to evade additional real estate transfer tax costs. This would involve engaging external contractors for additional services, so that these costs are not subjected to the transfer tax again.
Smart Planning for Lower Costs:The Federal Fiscal Court has issued a ruling (Az.: II R 18/22) that outlines a smart sequence for ensuring the property purchase process goes as smoothly as possible. If non-essential construction measures can be delayed and carried out by external contractors, it's possible to bypass these tax-related additional costs.
| Component | Transfer Tax Applicable | Notes ||--------------------------|-------------------------|---------------------------------------------------|| Land | Yes | Included in property sale || House (standard build) | Yes | Included in property sale || Upgrades/Special requests| Yes, if contract price | Be mindful of additional expenses; consider delays for non-essential work || Separate contracts | – Subject to local law | Consult a tax expert for specific cases |
Remember, it's always advisable to consult a tax expert or real estate professional when navigating the intricacies of property transactions, especially when special requests are involved.
Source: ntv.de, awi/dpa
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Community policy should consider implementing measures to help individuals manage the increased costs associated with real estate transfer tax when purchasing properties through builders. Vocational training programs could be developed to educate builders and buyers on strategies for reducing transfer tax, such as timing non-essential construction work to avoid additional costs, as advocated by the German Federal Association of Taxpayers. Investing in these programs could help stimulate the real estate industry by reducing costs for buyers and increasing business opportunities for builders and contractors in the vocational training sector. Additionally, encouraging real-estate financing options that account for these tax savings could spur further investment in the real-estate market and support the growth of the vocational training industry.
