Tax rules – sale of other housing
The sale of residential property that you don't use as your own home will always be taxable. Similarly, any loss will be deductible.
What is considered to be ‘realisation’?
The rules concerning tax liability regarding gains and deduction entitlement for losses apply upon the sale or other realisation of property. The rules concerning ‘sales’ explained on this page therefore also apply to other forms of realisation.
A property is deemed to have been realised upon the cessation of ownership or the transfer of ownership to another party through, for example
- voluntary sale, including sale at a reduced price where the payment is not symbolic,
- compulsory sale, e.g.: expropriation, sale of a farm to another family member or sale at a compulsory auction,
- exchange of real property, or
- complete destruction, e.g. by fire.
However, some forms of property transfer aren't considered to be realisation, e.g.
- transfer as a gift or advance on inheritance,
- transfer through inheritance in the event of death,
- division of a decedent estate,
- transfer between spouses, or
- division of joint property between spouses.
Contact us if you are unsure.
Sale of other housing when:
If you're selling a share in a housing company (housing associations and limited liability housing companies) that isn't being used as your own home, any gain made on the sale will be tax liable and any loss will be deductible.
The gain/loss calculation must take account of the housing unit's share of joint debt, etc.
If the conditions for tax exemption under the rules concerning the sale (realisation) of an ordinary farm aren't met, any gains made on the farmhouse and its naturally associated plot (the plot that is linked to the farmhouse) may still be tax-free under the rules concerning the realisation of residential property or holiday homes.
If the conditions for deducting losses under the rules regarding the realisation of farms are met, the proportion of the loss that is linked to the farmhouse will also be deductible. This applies even if the owner occupied the farmhouse, resulting in a loss that would not have been deductible under the rules concerning the realisation of residential property or holiday homes.
If the conditions for deducting losses aren't met under the rules concerning the realisation of ordinary farms, the proportion of the loss that is linked to the farmhouse may still be deductible under the rules concerning realisation of residential property or holiday homes.
Wealth taxation of housing
Wealth taxation of residential properties is generally based on the property’s registration in the land register (the country's official register of real property). This means that a property that is registered as a residential property and that is not your primary dwelling (the one you normally live in) will usually be considered a secondary dwelling when calculating wealth tax. This applies even if you actually use the property as a holiday home during holidays and your free time.
Tax rules in the event of sale
However, what the property is registered as in the land register, does not affect the tax liability when selling residential/holiday properties. In this case, the decisive factor is the actual use. If you use a property (which is considered a secondary dwelling for wealth tax purposes) for recreational purposes to a reasonable extent, then the rules for the holiday properties apply.
The tax rules applicable to selling holiday properties will therefore apply if you sell a house in a rural area, a farmhouse on a disused farm or an apartment in a town or city as long as the property is used as a holiday home.
In practice, there are stricter requirements for substantiating holiday use of properties that do not appear to be typical holiday homes. You must be able to substantiate that you use the property for recreationally oriented stays and purposes, including family gatherings and supervision, to a significant extent.
Please do not hesitate to contact us if anything is unclear.