Taxation of real-estate transactions in Serbia: current and future rules
| 28 June 2007 - Comments (0) | Procedures |
The gouverment of Serbia has laid out a proposition that is going to give first time buyers a chance to buy an apartment or a house (almost) free of tax from July 8th this year.
Let's look at what is the current situation regarding taxation of real-estate and what that new proposition will change.
Current situation
Existing object
When buying an existing apartment or house from its current owner, you have to pay, on top of the declared sale price, 5% for the transfer of property rights tax. This tax add up on the declared sale price.
New object
Since the law on Value Added Tax (VAT) has passed, new constructions are subject to the VAT at the reduced rate of 8% and not to the 5% transfer of property rights tax.
There is a bit of confusion, whether the publicized price of a new construction does include or not the VAT. Unless it is explicitly specified, when buying a new apartment or a new house, check whether 8% of VAT is to be added on top of the declared sale price or if it is already included in the price.
What is going to change
The current proposition aims at helping those who struggle to make their first buy. Here the details, based on the explainations given by Mrs. Nataša Kovačević, Chief of the Tax Office in the Ministry of Finance, in the Dnevnik online.
First time buyer
Part of those new measures are reserved to first time buyer of an apartment or house. The law precises that first-time buyers are those who reached majority (18 years old or older), who have Serbian citizenship and have a residence in Serbia, and who, by the 1st of July last year, did not have ownership of any real-estate in Serbia.
Existing object
This new law reduces the tax on the transfer of property rights to 2.5% instead of 5% previously. So when buying an existing apartment or house from its current owner, you will pay, on top of the declared sale price, 2,5% for the transfer of property rights tax.
In addition, a first-time buyer as defined above, will not pay this tax on the superficie of 40m² + 15m² for each additional member of his family (excluding him or her). Family is taken in the strict sens of spouse and dependents. For example, a four members family will not pay this tax on a superficie of 85m² (40m² + 3x15m²).
If you buy a place bigger than the superficie you are entitled to for the tax rebate, you will pay the 2,5% transfer of property rights tax only on the difference in the superficies.
New object
The new law does not change anything on the VAT rate (8%) already applied. Nevertheless, first-time buyers will be able to get the VAT they pay on a new apartement or house refunded partially or in totality. As explained above, they will get refunded on the superficie of 40m² + 15m² for each additional member of their family.
Of course, the tax on transfer of absolute rights does not apply in case of new objects.
This is certainly great news for first time buyer and could boost the real-estate market.
