Hello! 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!!
N
nordbayer13 May 2020 08:58It is best if, in the end, everyone’s share in the land register corresponds to the total financial contribution they have made towards the house including the land. This applies regardless of whether or not there is a marriage. Anything else always leads to unfairness in cases of divorce or separation. Without advice from a notary and tax consultant, this is hardly manageable. Do not rely on the risky half-knowledge found in forums.
And shortly before the marriage, make sure to carefully document your financial situation.
And shortly before the marriage, make sure to carefully document your financial situation.
S
saralina8713 May 2020 08:59The situation is not actually that complicated to require a tax advisor. However, it certainly wouldn’t hurt!
N
nordbayer13 May 2020 09:01saralina87 schrieb:
The situation isn’t actually that complicated to require an accountant. But it certainly wouldn’t hurt!Yes, it is.
The challenge is not the tax portion—that can be broken down fairly quickly depending on the option.
The real difficulty lies in clarifying the ownership structures in each individual case.
What is actually intended, what is the current situation, and what potential pitfalls exist before marriage, after marriage, separation, divorce, or death.
And depending on the option, this can indeed be somewhat more complicated. However, in these cases, a tax advisor might not be the right person—even though they may have a tax-related professional opinion that should be taken into account—but rather a legal expert, such as a notary or lawyer.
The real difficulty lies in clarifying the ownership structures in each individual case.
What is actually intended, what is the current situation, and what potential pitfalls exist before marriage, after marriage, separation, divorce, or death.
And depending on the option, this can indeed be somewhat more complicated. However, in these cases, a tax advisor might not be the right person—even though they may have a tax-related professional opinion that should be taken into account—but rather a legal expert, such as a notary or lawyer.
S
saralina8713 May 2020 09:44nordbayer schrieb:
But it is.No, it is not. Keep in mind property transfer tax and gift or inheritance tax, and it’s not rocket science.
Like @face26, I believe that the legal ownership arrangements are the more complex issues depending on the specific circumstances. I also think that the notary would be the best person to consult.
N
nordbayer13 May 2020 12:23saralina87 schrieb:
No, it is not. Keep in mind property transfer tax and gift or inheritance tax, and it’s not complicated. Then explain whether you would apply the gift tax to the full land value when part of the existing loan related to the land is effectively "gifted," or if instead a purchase price is agreed upon and financed by modifying the mortgage. I believe there are several structural questions to consider.
Marriage might simplify things thanks to exemption allowances, but without marriage, the risk of unexpected tax consequences seems a bit too high for me.