Income approach valuation
October 5, 2018 | 30,00 EUR | answered by StB Steffen Becker
I want to gift a small, very old terraced house (84 sqm / 120 sqm / 1921 / land value 80 €) to my niece. I have told the notary an estimated house value of approximately € 70,000, which will also be set in the contractual documents.
Does the tax office use this amount to calculate the gift tax, or is it obligated to carry out its own calculation, for example using the income approach method? According to my own calculation, this would only result in a market value of around € 25,000.
Dear inquirer,
Thank you for your inquiry. I will answer this within the scope of an initial consultation based on the information provided. Missing or incorrect information can affect the legal result.
For gift tax, the tax office is bound to the valuation methods according to the Valuation Act. Depending on the type of property, the following valuation methods are applicable:
1. Comparison value method:
The comparison value method is used for condominiums, partial ownership, and family homes. The value is determined by comparing the actual realized purchase price with other comparable properties. Typically used for comparison are the year of construction, address, living area, balcony/garden, garage parking space.
2. Income value method:
The income value method is used to evaluate rental residential properties, commercial properties, and mixed-use properties. The income value is the sum of the expected future income from the property and the land value. The land value is calculated based on the "land value index" and the size of the property. When determining the annual gross income, the rent received is generally considered. The operating costs and the land value interest are also taken into account when calculating the building income value.
3. Asset value method:
To determine the asset value, the land value is determined as in the income value method and added to the value of the building. The building asset value is calculated by multiplying the ground area by the normal construction costs, i.e. the standardized costs of a new building at different standard levels (basic/high-end). The depreciation due to age is deducted. This value is then multiplied by a so-called asset value factor. Especially in the asset value method, which is used when the comparison value and income value methods do not apply, there is a risk of overvaluation for tax purposes.
I hope I was able to help you further.
Kind regards,
Steffen Becker
Tax advisor
