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Tax-exempt property sale – Definition of owner occupation that is deemed to be not harmful prior to the sale

If a property that is held as a private asset is sold during the speculation period then the value appreciation that has been realised has to be taxed as a gain from a private sale transaction. However, under certain circumstances, there could be a tax exemption if the property had been occupied by the owner prior to the sale.

Non-taxation in the case of a sale within a ten-year period requires usage for own residential purposes to have been either

  • during the entire period between the purchase and sale, or
  • in the year of the sale as well as both the preceding years.

The Federal Ministry of Finance, in a circular from 17.6.2020, has now provided a specific time frame over which the period of owner occupation has to extend in the above-mentioned second scenario. The fiscal authority has applied the newer principles of the case law of the Federal Fiscal Court, from 2019, and now also presumes that the legal requirement of owner occupation “in the year of the sale as well as both the preceding years“ would be met if this had been the case

  • in the year of the sale at least on 1.1,
  • in the previous year continuously and
  • in the year before that at least on 31.12.

Therefore, for a tax-exempt sale of a property, it would be sufficient if the period of owner occupation had lasted continuously for a period of one year and two days, although this has to be spread over three calendar years prior to the sale. Thus, in the year of the sale, the property can still be rented out to a third party in the period after 1.1 and until the sale without having to tax the profit on disposal as a result.

Please note: It is however essential that owner occupation in the year prior to the sale is continuous. If, during that year, the property is temporarily rented out to a third party or is left vacant then the subsequent profit on disposal would have to be taxed.

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