Transfer tax rates for residential property, real estate and securities will change — the Tax Administration will refund any excess amounts to taxpayersTax Administration Bulletin, 10/23/2023
The government proposal’s objective is to change transfer taxes on real estate from 4% to 3%. For shares in residential housing companies and in real estate holding companies, the change is from today’s 2.0% to 1.5%. For purchases of other types of securities, transfer tax would change from today’s 1.6% to 1.5%. If the Parliament adopts the proposal, the new tax rates will apply from 12 October on.
Matti Merisalo, Director of legal affairs at the Tax Administration, points out that the taxpayers who make purchases and pay transfer tax according to the higher rates on homes, corporate stocks and other securities during the final months of 2023 will receive refunds. The Tax Administration plans to refund the difference between old and new tax rates, adding interest to the refundable amount.
− This means that on the condition that the purchase is finalised on 12 October or later, the buyers of homes, real estate and securities will benefit from the new, lower transfer taxes. The date when the contract is signed determines the applicable tax rate, notes Matti Merisalo.
− When 2023 is still ongoing, buyers need to submit transfer tax returns and pay the transfer tax in accordance with the old rates. After they have done so and 2024 has begun, the Tax Administration we will refund any excess payments to them. There is no need for a request or application for the refund. On the other hand, if the due dates fall in 2024 for the transfer tax return and payments – not in 2023 – we recommend that the buyers plan their transfer taxation for 2024 instead. As soon as 2024 has started, the rates for filing and paying the transfer taxes are more beneficial.
Often, contracts of purchase are signed for apartments in housing companies with the assistance of a real estate agent. Transfer tax returns and payments of the tax are usually taken care of at the meeting where the buyer and the seller sign the contract. However, if no real estate agent is used, the transfer tax on these transactions must be filed and paid in 2 months from the date of the contract. When a contract of purchase is made for a newly constructed apartment, the deadline for filing and paying is 2 months from the date when ownership rights are transferred to the buyer. For purchasing a house deemed to be a unit of real estate, the deadline for filing and paying transfer tax is by the time when the buyer submits an application for registration of title to the public authority in charge of registrations of immovable property. The application must be submitted within 6 months of signing the contract. After signing a contract for purchasing corporate stocks, shares and other securities, buyers must submit the transfer tax return and pay the tax in 2 months.
Example 1: A housing company share in a newly constructed building was sold on 11 October 2023. The rights of ownership and possession are transferred on 15 January 2024. As the deed of sale was signed before the government proposal was issued on 12 October 2023, the transfer is subject to the 2% transfer tax rate. The buyer does not benefit from the new, decreased tax rate.
Example 2: A preliminary contract for the sale of shares was signed on 15 September 2023. The final, binding deed of sale is signed on 15 November 2023. As the actual deed of sale is signed after the government proposal was issued, the transfer is subject to the new 1.5% transfer tax rate.
Example 3: The deed of sale concerning housing company shares in a newly constructed building is signed on 31 December 2023. The apartment is completed on 15 April 2024 and used for permanent living from that date. If the buyer is a first-time homebuyer and all the other requirements are met, the transfer is exempt from transfer tax.
Example 4: Property (land) is sold on 31 December 2023. The buyer builds a detached house on the property. The house is completed on 15 November 2024 and used for permanent living from that date. The buyer applies for the registration of their title to the property in January 2024. Before the title is registered, tax is paid on the transfer according to the new 3% transfer tax rate. As long as the other requirements are met, the buyer qualifies for the first-time homebuyers’ transfer tax exemption. After the house is completed and taken into use for permanent living, the buyer can request the transfer tax they paid to be refunded.
First-time homebuyers have 2 months left before exemption ceases
The government proposal also envisages withdrawal of the exemptions accorded to first-time buyers of residential property. The new tax rules will come into force on 1 January 2024. This means that during 2023, all first-time homebuyers’ purchases continue to be exemptible. Again, the important factor is the date when the contract is signed, notes Matti Merisalo.
– Exemptions from transfer tax apply if you are a first-time homebuyer and the contract of purchase is signed on or before 31 December 2023. Whereas the changed rules concerning other transfer taxes are subjected to a retroactive adjustment during the final months of 2023, the first-time homebuyer’s exemptions are not. For the remainder of 2023, the exemptions will continue to be granted as usual — meaning that buyers of a house or apartment still have approximately two months of time before the exemption is withdrawn.
Planning to buy a home before 2023 is ending? Do this:
- If by 31 December 2023, you buy shares in an existing – not a newly constructed – housing company and you use the services of a real estate agent when dealing with the seller, you will have to pay the transfer tax at the time when the purchase contract is finalised. The Tax Administration will apply the new, lower rate to the contract afterwards. As you have paid transfer tax excessively, the Tax Administration will refund the difference between the old and the new rate to you. Refunding will take place during 2024, and there is no need for you to submit a request or application. Make sure that the Tax Administration has your bank account number. You can log in to MyTax to check this.
- If you buy shares in a housing company and there is no real estate agent assisting you, you need to submit a transfer tax return, and then pay the tax in 2 months from the date when you and the seller signed the contract. Accordingly, if contract date is 1 November 2023 or later, the deadlines for both submitting the return and paying the tax will fall in 2024. This means that it is recommendable to wait until 2024 before you submit the return and pay the tax, because the rates of transfer tax will be lower. And, in the case of earlier closures, if the contract is signed before 1 November 2023, the Tax Administration will apply the lower rates on a retroactive basis. In other words, the Tax Administration will refund the difference between the old and the new rate to you. Refunding will take place during 2024, and there is no need for you to submit a request or application. Make sure that the Tax Administration has your bank account number. You can log in to MyTax to check this.
- If you buy a newly constructed home in the form of shares in a new housing company, submit the return and pay the tax within 2 months of the transfer of ownership. Accordingly, if the contract date is 1 November 2023 or later, the deadlines for both submitting the return and paying the tax will fall in 2024. This means that it is recommendable that you wait until 2024 before you submit the return and pay the tax, because the rates of transfer tax will be lower. And, if ownership gets transferred to you before 1 November 2023, the Tax Administration will apply the lower rates on a retroactive basis. Refunding will take place during 2024, and there is no need for you to submit a request or application. Make sure that the Tax Administration has your bank account number. You can log in to MyTax to check this.
- If you buy a house, deemed to be real estate, submit the transfer tax return and pay the tax before you submit an application for registration of title – the final deadline for title registration is 6 months from the date of signing the contract. If you apply for registration on 1 January 2024 or later, you can apply the beneficial 2024 rates on your submittal of the return and payment of the tax.
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