Real estate: taxes, capital gains, gifts
1. Income tax is paid when real estate is rented out at a rate of 20% of the agreed rent. Another issue is property tax paid by the owner of the real estate, regardless of whether the real estate is rented or not. In the case of property tax, the tax base is determined by the competent local administration, which determines amortization at the rate of 0.4% for the estimated life of the real estate.
2. VAT exists only for legal entities. Individuals are obliged, if they rent out real estate to another individual, to pay citizens’ income tax at the rate of 20% of the agreed rent, submit a tax return to the tax administration and pay the established tax in the prescribed manner on the last working day of the month for the preceding month.
In case of renting out real estate from a natural person to a legal entity, the obligation to calculate, submit a tax return and pay the tax is imposed on the legal entity.
In both cases, the amount of rent received by the lessor is included in his annual income and is subject to the annual personal income tax.
For an individual, the amount of rent represents income that is taxable under the Personal Income Tax Law. In particular, Article 6 of the said law defines income from renting out one’s own real estate as capital income.
The tax rate is 20%, subject to standard costs of 25%, which means that the contracted rent is considered a net amount that is converted into gross rent. The resulting gross rent is reduced by 25% of the standard costs and this constitutes the basic rate to which the 20% rate applies.
2.1 If the individual landlord has not registered his activity, he is obliged to report the rent received within 30 days from the date of receipt of income, regardless of whether he charged the rent in cash or to a current account.
In this case, the landlord shall file a tax return with the PP OPO within 30 days from the day the rent was collected.
An individual landlord pays tax at a rate of 20% based on gross income less rationed expenses of 25%.
Capital gains tax
What is capital gains? It is income from the sale of real estate. Consequently, capital gains are realized by the seller and he is liable to pay taxes under the Personal Income Tax Law. The tax return is filed within 10 days from the date of notarization of the real estate sale or exchange agreement.
Capital gains tax is 15%. However, there are grounds for exemption from this tax.
Sellers who have owned real estate for more than 10 years are exempt from capital gains tax.
Capital gains tax is not determined and is not taxed on transfers of property rights received by inheritance, first line of succession, transfer of property rights between spouses and blood relatives in the first line, and between spouses upon divorce.
Sellers who have owned real estate for less than 10 years, if after the sale within 90 days invest the money from the sale of real estate in the purchase of real estate, with the help of which they solve their housing issue or the housing issue of their family (spouse, children, adopted children) are exempt from capital gains tax. The legislator left the sellers the possibility to invest money in solving their housing issue or the housing issue of their family members for a long period of up to 12 months after the sale of real estate. In this case, the seller is entitled to a refund of the capital gains tax paid.
If the seller does not invest the entire amount, i.e. invests part of the amount from the sale of the property to buy a new property to solve the housing issue (himself or his family members), the capital gains tax will be calculated proportionally, i.e. on the remaining unused amount from the sale of the property, which is actually a capital gain for the seller. For example: a property was sold for €100,000 and then a property was bought for €80,000. A capital gains tax of 15% would be calculated on the difference of €20,000, which is €3,000.
To children and spouses – 0% and in other cases 2.5%