Immovable property acquisition tax – to pay or not to pay?
The bill to abolish the immovable property acquisition tax is currently going through the legislative process. The Ministry of Finance had expected it to pass smoothly and become valid by the end of 2020. The related extraordinary measure of June 2020 was also drafted under this assumption, but in August, the bill was returned to the Chamber of Deputies by the Senate with amending proposals. Although these do not concern the abolition of the immovable property acquisition tax as such, they may result in an unplanned delay with some rather unintended consequences for taxpayers. What is the situation now as to the duty to file the tax return and pay the tax?
The bill is to have a retrospective effect, meaning that no immovable property acquisition tax would be paid on acquisitions where the ownership right was entered in the Real Estate Register in and after December 2019 (i.e. acquisitions of immovable property with the duty to file an immovable property acquisition tax return on or after 31 March 2020).
In practice, we are often asked whether one should pay the tax on recent acquisitions. So far, our answer has been “no”, taking as a basis the decision of the Minister of Finance dated 10 June 2020 and published in the Financial Bulletin 9/2020: For taxpayers with the duty to file a tax return and pay tax between 31 March 2020 and 30 November 2020 (i.e. where the ownerships right was entered in the Real Estate Register between 1 December 2019 and 31 August 2020), the decision waives the penalty for the late filing of the tax return and the interest on the late payment of tax as long as the tax return is filed and the tax paid by 31 December 2000. The ministry expects that by then the above mentioned bill abolishing the immovable property acquisition tax will have been passed, meaning that the taxpayers will not in fact have to file the tax return and pay the tax at all.
Thus, if a taxpayer acquired immovable property, and the ownership right was entered in the Real Estate Register from 1 December 2019 to 31 August 2020, they do not yet have to file a tax return or pay the tax; they may just wait and see whether the bill abolishing the immovable property acquisition tax is passed. If it is not, they should file and pay the tax by 31 December 2020. If the bill abolishing the tax is passed at a later date, and if its retrospective effect is preserved, this will result in a refundable tax overpayment.
Unfortunately, the mentioned Ministry of Finance measure does not apply to immovable property acquisitions where the ownership was entered in the Real Estate Register in or after September 2020. These taxpayers should file a tax return and pay the tax within the standard deadlines. Should the bill as currently proposed be passed at a later date, the taxpayers will be entitled to a refund of the resulting tax overpayment, based on individual applications to be filed with their respective tax administrator.