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Hauherr202013 May 2020 06:54Hello! I own a plot of land and am currently the sole owner in the land registry. Now, I want to build a house on it together with my boyfriend. Naturally, he will also contribute 50% to the future mortgage.
My question is: How can we secure his ownership rights—preferably in a cost-effective way?
1.) Gift? The tax-free allowance here for unmarried couples is only 20,000 EUR. The land is definitely worth much more (400 EUR per sqm (107 USD per sqft) according to the official land value on 757 sqm (8145 sqft)).
2.) Sale of a share? Is it possible for me to sell him part of the land for, say, 1 EUR to avoid property transfer tax?
3.) I transfer part of the land to him—how is the value of the land and therefore the amount of property transfer tax determined? I only bought the plot 2.5 years ago. There is still an outstanding loan. Will the purchase price from 2.5 years ago be used, or the official land value instead?
4.) I transfer only a minimum share of 10%, and we arrange the exact division through a cohabitation agreement (or a marital contract).
5.) Any other options?
Have you ever faced a similar issue?
I have called several tax offices, but unfortunately, no one has time for us. The COVID crisis is causing a lot of extra workload there :-(
Thanks in advance!!
My question is: How can we secure his ownership rights—preferably in a cost-effective way?
1.) Gift? The tax-free allowance here for unmarried couples is only 20,000 EUR. The land is definitely worth much more (400 EUR per sqm (107 USD per sqft) according to the official land value on 757 sqm (8145 sqft)).
2.) Sale of a share? Is it possible for me to sell him part of the land for, say, 1 EUR to avoid property transfer tax?
3.) I transfer part of the land to him—how is the value of the land and therefore the amount of property transfer tax determined? I only bought the plot 2.5 years ago. There is still an outstanding loan. Will the purchase price from 2.5 years ago be used, or the official land value instead?
4.) I transfer only a minimum share of 10%, and we arrange the exact division through a cohabitation agreement (or a marital contract).
5.) Any other options?
Have you ever faced a similar issue?
I have called several tax offices, but unfortunately, no one has time for us. The COVID crisis is causing a lot of extra workload there :-(
Thanks in advance!!
The simplest answer: Get married!
Honestly, if you want to build together, you might as well get married. Basically, both options are designed for spending the rest of your lives together. Then you can also arrange everything in a marriage contract about what happens in case something goes wrong. And if desired, you can gift him half and have it recorded in the land register accordingly.
Regarding your ideas:
2.) In theory, that would be possible, meaning the sale itself. But the tax office won’t agree and will likely apply the official property value for calculating the real estate transfer tax / stamp duty.
3.) Here, too, the current official property value will probably be used, as that is what authorities refer to, not the value from 2.5 years ago.
4.) The tax office will definitely look closely here as well; clearly, if he receives a 10% share registered in the land register, only that portion will be considered.
This is just my opinion and not legal advice!
Honestly, if you want to build together, you might as well get married. Basically, both options are designed for spending the rest of your lives together. Then you can also arrange everything in a marriage contract about what happens in case something goes wrong. And if desired, you can gift him half and have it recorded in the land register accordingly.
Regarding your ideas:
2.) In theory, that would be possible, meaning the sale itself. But the tax office won’t agree and will likely apply the official property value for calculating the real estate transfer tax / stamp duty.
3.) Here, too, the current official property value will probably be used, as that is what authorities refer to, not the value from 2.5 years ago.
4.) The tax office will definitely look closely here as well; clearly, if he receives a 10% share registered in the land register, only that portion will be considered.
This is just my opinion and not legal advice!
If you don’t want any botched work, the partner must be listed on the property title as a co-owner.
You already mentioned yourself: either as a gift or as a purchase.
...exactly, and then “gift” the property. It stays within the gift tax allowance and will be accounted for over the next 10 years, but normally that shouldn’t be an issue.
If it should happen before marriage, either gift it—but that is quite disadvantageous because of taxes—or sell it. However, real money should actually change hands. Forget about the 1 EUR (1 USD). Selling below market value doesn’t bother anyone, but these kinds of gimmicks won’t work.
In my opinion, all of this is nonsense. But I’m not a tax advisor or notary; of course, it’s “annoying” if they reject everything.
You already mentioned yourself: either as a gift or as a purchase.
cschiko schrieb:
The simplest answer: Get married!
...exactly, and then “gift” the property. It stays within the gift tax allowance and will be accounted for over the next 10 years, but normally that shouldn’t be an issue.
If it should happen before marriage, either gift it—but that is quite disadvantageous because of taxes—or sell it. However, real money should actually change hands. Forget about the 1 EUR (1 USD). Selling below market value doesn’t bother anyone, but these kinds of gimmicks won’t work.
In my opinion, all of this is nonsense. But I’m not a tax advisor or notary; of course, it’s “annoying” if they reject everything.
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saralina8713 May 2020 07:58... if possible and already planned, I would also consider getting married.
The "problem" isn’t just the current gift, which always happens in some form from a tax perspective, but also the potential risk if something happens to one of you... Inheritance tax must also be paid. And if you are not married, depending on the region and the house, this could mean that the surviving partner has to sell the property.
The "problem" isn’t just the current gift, which always happens in some form from a tax perspective, but also the potential risk if something happens to one of you... Inheritance tax must also be paid. And if you are not married, depending on the region and the house, this could mean that the surviving partner has to sell the property.
But if the property is still under mortgage, what does the bank say if I simply gift half of it? Does the new 50% owner then have to be included in the mortgage agreement? Or does it not matter because the bank is already listed as the primary mortgage holder in the land register regardless of who owns the property?
And how does it work if you get married only after building the house and then the gift is basically increased by the value of the house (or half of it), since a house always belongs to whoever owns the land beneath it...
In that case, in some areas, the tax-free gift allowance might be exceeded? Is the tax then only applied to the amount exceeding the allowance, or to the entire amount?
And how does it work if you get married only after building the house and then the gift is basically increased by the value of the house (or half of it), since a house always belongs to whoever owns the land beneath it...
In that case, in some areas, the tax-free gift allowance might be exceeded? Is the tax then only applied to the amount exceeding the allowance, or to the entire amount?
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saralina8713 May 2020 08:28I don’t know how the bank will view it, but I think it probably doesn’t matter much who is registered as the owner. It doesn’t change the priority of the mortgage. The only disadvantage would be if a separation happens and only one person is on the loan—but I believe that’s not really an issue for the OP.
The tax-free allowance for gifts between spouses is 500,000 euros (about 540,000 USD) every ten years. It’s definitely worth calculating in advance whether it makes sense to get married before building the house, especially if that is planned in the near future.
Once the house is built, it generally belongs to whoever owns the land.
The tax-free allowance for gifts between spouses is 500,000 euros (about 540,000 USD) every ten years. It’s definitely worth calculating in advance whether it makes sense to get married before building the house, especially if that is planned in the near future.
Once the house is built, it generally belongs to whoever owns the land.
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