ᐅ Is it common to buy land and pay part of the price in cash?
Created on: 14 Feb 2018 12:53
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Vanyleon87
Hello,
I’m not sure if this is the right place, but we need some help. Here’s the situation: we found a piece of land privately where we want to build. However, the owner wants to do it so that only part of the amount is stated in the official purchase contract, and we would pay the rest in cash. (She mentioned maybe in an envelope in the notary’s waiting room, so she doesn’t have to pay tax on the full amount.)
We are very uncertain and find it strange that she wants to handle it this way. What do you think about that? We’re not sure if this could be considered tax evasion, which of course is completely unacceptable!
Thank you very much for your help.
I’m not sure if this is the right place, but we need some help. Here’s the situation: we found a piece of land privately where we want to build. However, the owner wants to do it so that only part of the amount is stated in the official purchase contract, and we would pay the rest in cash. (She mentioned maybe in an envelope in the notary’s waiting room, so she doesn’t have to pay tax on the full amount.)
We are very uncertain and find it strange that she wants to handle it this way. What do you think about that? We’re not sure if this could be considered tax evasion, which of course is completely unacceptable!
Thank you very much for your help.
Regarding my personal viewpoint:
1) In 2016, we sold building land. We were also offered this option to save on property transfer tax / stamp duty. We declined, citing our profession/status/legal reasons. This was accepted. By the way, the expert committee valued our land at 22 euros per square meter (about 2.0 USD per square foot) less than its actual market value.
2) Yes, I believe that a society without fraud, legal violations, etc., is not achievable without excessive intervention in our lives (see China, where public shaming is now being used as a method). I do not want to live in such a system.
3) I think the best protection against legal violations is when the law aligns closely with what we perceive as fair.
4) Based on my sense of justice, the property transfer tax / stamp duty is unfair—at least in transactions between private individuals—and I also find it unjust that real estate transactions are taxed at the regular income tax rate, which is higher compared to capital gains on stocks.
5) Moreover, I find our entire tax system complicated, cumbersome, and the progression far too steep. If a government seriously considers offering public transport free of charge, then it simply has too much money, which it previously took from us. Karsten
1) In 2016, we sold building land. We were also offered this option to save on property transfer tax / stamp duty. We declined, citing our profession/status/legal reasons. This was accepted. By the way, the expert committee valued our land at 22 euros per square meter (about 2.0 USD per square foot) less than its actual market value.
2) Yes, I believe that a society without fraud, legal violations, etc., is not achievable without excessive intervention in our lives (see China, where public shaming is now being used as a method). I do not want to live in such a system.
3) I think the best protection against legal violations is when the law aligns closely with what we perceive as fair.
4) Based on my sense of justice, the property transfer tax / stamp duty is unfair—at least in transactions between private individuals—and I also find it unjust that real estate transactions are taxed at the regular income tax rate, which is higher compared to capital gains on stocks.
5) Moreover, I find our entire tax system complicated, cumbersome, and the progression far too steep. If a government seriously considers offering public transport free of charge, then it simply has too much money, which it previously took from us. Karsten
86bibo schrieb:
The question is what the government can practically do about it. Personally, I also find the property transfer tax quite unfair and difficult to justify with normal reasoning.Are you referring to the discrepancy compared to the standard VAT rate of 19% on almost all other goods and services?
The 19% argument doesn't convince me. If someone buys a ship for 500,000, they pay 19% on it. That amounts to nearly 600,000 gross. If they sell this ship within the EU for 500,000 after a few years, no VAT applies. Once at purchase, but not afterward. With land: the tax authorities claim their share every time.
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chand198615 Feb 2018 21:52Either you handle it like with other cases: net price plus VAT on purchase.
Or: tax-exempt purchase, but profits on sale are taxed according to the capital gains tax rate.
The reason there is a capital gains tax rate for certain types of profits, instead of taxing everything as regular income, is also a result of lobbying.
But if that were the case, would there be less cheating?
Which tax feels fair to you?
The law is designed precisely for the many opposing situations. Going out from the pub with pitchforks to lynch some alleged child abusers would be perceived by many as very fair—but it is forbidden for very good reasons.
Preventing lawbreaking by legalizing it is therefore not always a good idea. Civilizational achievements such as the constitution are not intuitively rooted in humans; otherwise, they would not have needed to be invented. For example, slavery was intuitive for thousands of years of history. Therefore, it is not wise for humans to constantly rely on their feelings, which are partly archaic.
That is why using a sense of justice as a standard for law is not a good idea—even though, without an indirect link between both, society cannot function properly, so I do agree with you on that.
Or: tax-exempt purchase, but profits on sale are taxed according to the capital gains tax rate.
The reason there is a capital gains tax rate for certain types of profits, instead of taxing everything as regular income, is also a result of lobbying.
But if that were the case, would there be less cheating?
Nordlys schrieb:
According to my sense of justice, property transfer tax is not fair,
Which tax feels fair to you?
Nordlys schrieb:
I believe the best protection against breaking the law is when what is legal and what we perceive as fair are closely aligned.
The law is designed precisely for the many opposing situations. Going out from the pub with pitchforks to lynch some alleged child abusers would be perceived by many as very fair—but it is forbidden for very good reasons.
Preventing lawbreaking by legalizing it is therefore not always a good idea. Civilizational achievements such as the constitution are not intuitively rooted in humans; otherwise, they would not have needed to be invented. For example, slavery was intuitive for thousands of years of history. Therefore, it is not wise for humans to constantly rely on their feelings, which are partly archaic.
That is why using a sense of justice as a standard for law is not a good idea—even though, without an indirect link between both, society cannot function properly, so I do agree with you on that.
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Bieber081516 Feb 2018 00:17The purpose of the withholding tax was to bring capital gains from abroad back and to simplify the double taxation (first at the corporate level, then upon distribution to the owner). Whether this has been successful overall is another matter. The coalition agreement of the best grand coalition ever plans to return to personal tax rates for interest income. Dividends are more complicated because they have already been taxed at the corporate level. It’s not that simple...
And yes, the property transfer tax is unfair. There is a lack of an exemption threshold or a "free allowance" for first-time purchases. We paid more than 20,000 euros (about 22,000 US dollars) in property transfer tax when buying from the developer. When companies or investors transfer real estate, they usually do not pay property transfer tax because they prefer selling companies instead of the properties themselves. This option is not available to private individuals.
And yes, the property transfer tax is unfair. There is a lack of an exemption threshold or a "free allowance" for first-time purchases. We paid more than 20,000 euros (about 22,000 US dollars) in property transfer tax when buying from the developer. When companies or investors transfer real estate, they usually do not pay property transfer tax because they prefer selling companies instead of the properties themselves. This option is not available to private individuals.