Expert opinions and real estate transfers in 2014

The beginning of the year brought a number of changes relating to new real estate legislation. Changes have quietly emerged in the taxation of real estate transfers (now real estate acquisition) as well as a new valuation decree and methods of tax assessment.

Who pays the tax?

The practice so far has been that the real estate transfer tax is paid by the seller, usually on the purchase price received. Under the new rules, the real estate acquisition tax (formerly real estate transfer tax) may also be paid by the acquirer in real estate transfers if agreed so with the transferor or in transactions which do not constitute a purchase or barter.

Valuers vs tax authorities

The system in which the tax base is either the agreed (purchase) price or 75% of the comparative tax value is still valid. Each taxpayer has the option of having the value of selected types of real estate determined in two different ways. Besides the originally valid (administrative) value under the valuation decree, a new value called guideline value applies to simpler types of real estate (land, family houses, holiday homes, garages, accessory structures). The valuation methods for such real estate are interconnected, but are not identical both in terms of the methods applied to determine the comparative tax value and in terms of the person determining the value. The administrative price is determined for the taxpayer by an expert or a valuation institute (as was the previous practice), while the guideline value is determined directly by an tax authority officer after the filing of a tax return, which includes a rather detailed specification of the real property, and after the payment of a tax advance. Only the practice in the following months and years will show how the valuation by officers will work and what valuation results will be generated compared to the results obtained by valuers. Nevertheless, from the perspective of a potential “client” of the tax authority, the slight conflict of interests between a person collecting taxes and a person determining the tax base is worth considering.

Tax reduced by 25%?

It may seem that the tax base and hence the tax burden will be reduced by 25%. But it only seems that way. The tax is still levied either on the agreed (purchase) price or the comparative tax value, whichever is higher. It is now impossible to predict the price level set by the tax authority for the calculation of the guideline value. However, we as valuers know that the new valuation decree has come closer to the market values of real estate, i.e. the agreed prices, and, in addition, the costs associated with preparation of an expert opinion are now deductible from the tax base.