REALWorld Law


Taxation of acquisitions

What taxes are payable in relation to the purchase of real estate via the various types of corporate vehicle available and who is responsible for the payment of these taxes?



From 1 January 2015 any acquisition of a building and/or a development site from a VAT payer is subject to VAT at the rate of 25%. This rule applies to buildings, which are new, ie have not been in use since their construction and buildings in respect of which the time elapsed since their first use up to the sale is two years or less. Acquisitions of “old” (used) buildings, ie those which do not fall into the above categories, are subject to land transfer tax unless both parties (being VAT payers) agree on VAT and reverse charge. Acquisitions of land which is not a development site are either subject to VAT (if the buyer is also a VAT payer and both the seller and the buyer agree to apply VAT) or land transfer tax. VAT is paid by the buyer.

Acquisition of real estate assets that are not subject to VAT are subject to real estate transfer tax at the rate of 4% (since 1 January 2017). Real estate transfer tax is payable on the market value of the property and the tax authorities have the right to perform their own assessment of this if appropriate. Generally, real estate transfer tax is paid by the buyer. However, the seller is also a guarantor for the payment.

Exemptions from real estate transfer tax (if applicable) apply in the following cases:

  • A transfer of real estate made as a contribution to the registered capital or to the capital reserves of a company.
  • A transfer of real estate owned by a company as part of a merger, division or restructuring process.

Real estate cannot be contributed to the share capital of a closed end real estate investment fund, so this exemption from real estate transfer tax does not apply to these funds.