In recent days, you may have found a letter from the financial administration in your inbox alerting you to the return and payment of income tax due to the sale of the property. Such a letter was sent by the financial administration to each taxpayer who transferred ownership to the property between 2015 and 2019, without citing that income in the tax return. With such a precautionary step, the financial administration wants to ensure that taxpayers themselves and voluntarily receive such income and pay the tax in question. For everyone concerned by the above, we have prepared a summary of the most important information.
Who is affected by this obligation?
According to Section 8(b.b) of Act No. 595/2003 On Income Tax, as amended, income subject to tax is considered to be income from the transfer of ownership of real estate. This means that if you have sold the property, you are obliged to pay tax on this income. However, the Income Tax Act also imposes exceptions when this income is exempt.
Who is not affected by this obligation?
Section 9 of Act No. 595/2003 Z.z. on Income Tax, as amended, states when income from the sale of real estate is exempt from tax:
- if you have owned the property for more than 5 years and the property has not been included in commercial property or more than 5 years have passed since the commercial property was decommissioned,
- if you inherited the property directly (parents, children, grandparents, grandchiers) and the time from which the deceased owned the property together with the period from when you acquired the property is at least 5 years,
- if you have donated the property and you have not received any income from such a donation,
- if you have sold a property that has been issued to you as part of a restitution,
- if you have sold the property included in the estate.
Such as:
Your grandfather bought an apartment on 09.02.2013. On 09.03.2016 you inherited this apartment. You sold the apartment on 26.07.2020. You have owned the property for more than 7 years (3 years the deceased and the heir for over 4 years), and therefore this income is exempt.
What should I do if there is an obligation to pay property sales tax?
If you are obliged to pay income tax on the sale of real estate, you are obliged to settle this income in your tax return. This income can be settled only through the personal income tax return form type B.
If you have not fulfilled this obligation in your regular tax return for the relevant year, the Financial Administration recommends that all taxpayers declare the proceeds from the transfer of ownership to the property with an additional tax return by 31.03.2021.
If the taxpayer submits an additional tax return himself, the tax office is obliged to levy a fine of 3% per ante on the difference in tax, the fine being calculated for each day of delay.
If the tax inspection finds a difference in tax, it is also obliged to impose a fine of 10% p.a. on the difference in tax, the fine being calculated for each day of delay.
How much will I pay tax?
Income tax on the sale of a property is calculated on the difference between the amount for which you sold the property and the expenses you have incurred on that property.
Income means a person's pecuniary performance, non-monetary performance or confusion. In the case of cash performance, the income is considered to be what has been paidinto your account, possibly in cash or virtual currency. This does not apply to entrepreneurs who keep double-entry accounts.
Expenditure means everything you have spent on a given property, for example: the purchase price at which you acquired the property, the building modifications or any renovations that led to the sale of the property.
The tax rate on such a difference varies from 19% to 25%, depending on the total amount of your income and expenses.
Example:
You acquired the property by purchase contract on 30.04.2017 for the purpose of resale, in the amount of 76,000 euros. During 2017, you carried out a reconstruction of the roof in the amount of 3,000 euros on the property, exchange of electricity in the amount of 4,000 euros, and since these reconstructions or modifications you have a demonstrable document. On 30.12.2018 you sold this property under a sales contract for the amount of 90,000 euros. Funds from the sale of real estate came to your account on 23.01.2019.
Since you have not owned the property for more than 5 years and you are not affected by any of the above exceptions, you are obliged to include this income in your 2019 tax return. You will enter €90,000 in your income and put €83,000 (76,000+3,000+4,000) into your expenses. Your tax base will be 7,000 euros (90,000-83,000). Of the €7,000, a tax of 19% will be calculated. You will pay €1,330 from the income of the sale of the property to the state.
How do I fill out and file my tax return?
The revenue as well as related expenses related to the transfer of ownership of the property are shown in Section VIII, Table 3, line 2 of the personal tax return type B.
You can file your tax return in three ways:
- electronically via the website of the Financial Administration of the Slovak Republic,
- by post to the address of the locally competent tax authority,
- Post to the address of the locally competent tax authority,
In the context of an emergency situation, personal filing at a tax office branch may be limited.
If you have a business in addition to income from the sale of the property, you are obliged to file your tax return exclusively electronically.
How do I pay tax?
You will pay the tax on the personal account number of the taxpayer assigned by the tax office.
If you have previously registered for income tax or filed a tax return that resulted in tax liability, you may have already received the personal account number of the taxpayer from the tax office.
Otherwise, the tax office will send you this personal account number after filing your tax return.
Will I pay health or social security contributions on this income?
Health insurance for income from the sale of real estate pays. After filing your tax return, the relevant health insurance company will send you an annual statement, where it calculates the amount of health contributions. The premium rate is 14% or 7% if you are a person with a disability and calculates from the amount of the tax base (income-expense).
Social insurance is not payable on income from the sale of real estate.
If you are not sure if the tax liability applies to you or you do not like your tax return, do not hesitate to contact us at the email address dpfo@taxwise.sk.
