Do You Have to Pay Taxes When Buying or Selling Property? (Part 2)
Tax authorities are tightening their watch, cracking down on false claims of personal residence!
In Part 1, we analyzed Case No. D21/22 to understand how the tax office assesses your “intent” when purchasing property, which determines if you owe taxes on the sale. A key factor is the property’s usage; many claim “personal residence” to contest tax assessments, yet most appeals fail. This article reveals how the tax office gathers evidence to accurately gauge your actual residency.
Evidence of Personal Use is Traceable
In a recent case, the appellant purchased and sold 17 properties between the fiscal years 2007/08 and 2011/12. The tax office deemed these transactions are business activities, making them subject to profit tax.
The appellant claimed that 7 of these properties were for his family’s residence, not for flipping. However, the tax office discovered that the electricity usage was extremely low—at one point, it was just 1 kilowatt hour—indicating the properties were uninhabited. The tax authority has a robust database, making it easy to verify utility registrations and consumption. This helps clarify whether a property is owner-occupied, rented, or vacant.
Furthermore, the appellant admitted to the tax office that he occupied the properties to avoid lowering their selling price and to facilitate viewings by potential buyers—clear evidence of her intent of selling at the point of purchase.
The Burden of Proof Lies with the Taxpayer
Of course, property usage can change. Initial plans for personal residence may shift due to job relocations, canceled bus routes, or even poor living conditions. However, the onus is on the taxpayer to provide evidence that the change in usage was reasonable and not part of an original intent to sell at the time of purchase.
The first step in contesting a tax assessment is to consult a professional accountant, who can gather relevant documents—such as contracts and utility bills—to submit proper evidence to the tax office. Hasty or incorrect submissions can cast doubt on your case and complicate matters further.
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