Hello,
we are planning to buy a plot of land and a house.
We will purchase the land separately from the developer, who will then build the house on it.
What are the advantages and especially the disadvantages of this setup?
What should we pay attention to?
Thank you in advance!
we are planning to buy a plot of land and a house.
We will purchase the land separately from the developer, who will then build the house on it.
What are the advantages and especially the disadvantages of this setup?
What should we pay attention to?
Thank you in advance!
If the tax office identifies a connection, the real estate transfer tax must be paid not only on the land but also on the house.
With a property developer, a connection is usually evident, whereas with a general contractor, this is not always the case.
It may be possible to avoid this with two independent contracts and a time gap, for example, purchasing the land in one year and signing the construction contract or starting the build the following year.
However, it also depends on the tax office itself, as some are more likely to assume a connection than others.
With a property developer, a connection is usually evident, whereas with a general contractor, this is not always the case.
It may be possible to avoid this with two independent contracts and a time gap, for example, purchasing the land in one year and signing the construction contract or starting the build the following year.
However, it also depends on the tax office itself, as some are more likely to assume a connection than others.
Hello and thank you for the quick response.
I am already accounting for land acquisition costs on both, but aside from the tax disadvantage, what else should we be aware of?
Are there any negative experiences?
What should we pay attention to contractually, and what type of construction contract would this be?
I am already accounting for land acquisition costs on both, but aside from the tax disadvantage, what else should we be aware of?
Are there any negative experiences?
What should we pay attention to contractually, and what type of construction contract would this be?
If it really is a property developer, there could be disadvantages for the developer regarding value-added tax (VAT), which they will pass on to you.
The developer cannot reclaim VAT from the tax office when purchasing materials. In turn, they do not have to charge VAT on the sale. In simple terms, the added value they create is not subject to VAT. The larger the developer’s own services are (for example, construction of the shell plus calculated profit), the more cost-effective the developer contract should theoretically be compared to a contractor agreement with a general contractor.
With the arrangement you have chosen, the general contractor must charge VAT on the added value. That means the price would have to increase by 19% on the created added value at the same calculated profit. At the same time, you are still required to pay the property transfer tax on the total price. Therefore, this is actually the most expensive option you can choose.
Furthermore, to my knowledge, a developer contract is heavily regulated (payment schedule, notarization, etc.). This can be quite advantageous for buyers without technical knowledge.
In contrast, the advantage of a contractor agreement compared to a developer contract is, in my view, if something goes wrong during construction (e.g., insolvency) since you do not yet own the land. Whether there are any safeguards in this case, perhaps others can comment—I am not very familiar with this.
Is there actually any reason to choose a contractor agreement over a developer contract?
The developer cannot reclaim VAT from the tax office when purchasing materials. In turn, they do not have to charge VAT on the sale. In simple terms, the added value they create is not subject to VAT. The larger the developer’s own services are (for example, construction of the shell plus calculated profit), the more cost-effective the developer contract should theoretically be compared to a contractor agreement with a general contractor.
With the arrangement you have chosen, the general contractor must charge VAT on the added value. That means the price would have to increase by 19% on the created added value at the same calculated profit. At the same time, you are still required to pay the property transfer tax on the total price. Therefore, this is actually the most expensive option you can choose.
Furthermore, to my knowledge, a developer contract is heavily regulated (payment schedule, notarization, etc.). This can be quite advantageous for buyers without technical knowledge.
In contrast, the advantage of a contractor agreement compared to a developer contract is, in my view, if something goes wrong during construction (e.g., insolvency) since you do not yet own the land. Whether there are any safeguards in this case, perhaps others can comment—I am not very familiar with this.
Is there actually any reason to choose a contractor agreement over a developer contract?