Navigating Building Contracts: Land, House, Special Requests - When Real Estate Transfer Tax Bites
Real Estate Assets with Specific Conditions: Understanding What Is Taxable for Land Tax
Connecting with contractors for property construction can seem hassle-free. However, it's crucial to understand that real estate transfer tax (RETT) implications may be more extensive when compared to traditional home buying.
Real Estate Transfer Tax (RETT) and You
- Typical Real Estate Sales: RETT is often due on the sale price in most states, with rates ranging from 5% to 6.5%. For example, Bavaria has a lower burden at 3.5%, while North Rhine-Westphalia and Schleswig-Holstein demand 6.5%.
- Buying Land and a Building Through a Contractor: In this case, RETT is owed on both the purchase price of the land and the new house—it's not just about the land.
Special Considerations
- Additional Wishes: If you request alterations to the building after the contract is signed that increase costs, and these aren't contractually obligated, further RETT claims may arise.
Sneaky Ways to Escaping Extra Costs
By employing some shrewd maneuvers, extra costs can often be sidestepped:
- According to the Federal Tax Court, extra costs linked to the land purchase are subject to RETT.
- To dodge the RETT for these extra costs, think about getting some construction tasks completed post-occupancy, provided these aren't essential for the building's progression and do not affect the occupancy date. You can then engage external craftsmen for these services to avoid additional RETT.
Source: ntv.de, awi/dpa
- Navigating Real Estate Loans
- Real Estate Investments
- Apartment Rentals
- Taxpayer Association Matters
In the context of real estate transfers, it's essential for a community to incorporate a policy that addresses the Real Estate Transfer Tax (RETT) implications, especially when buying land and a building through a contractor, as RETT is owed on both the purchase price of the land and the new house. Furthermore, investing in vocational training for contractors could potentially lead to cost savings, as their expertise might enable them to complete additional construction tasks post-occupancy, thus avoiding further RETT claims.
