Reduce real estate transfer tax retroactively - Depreciation of fitted kitchens
July 10, 2016 | 30,00 EUR | answered by Oliver Burchardt
Hello,
I acquired a multi-family house in May 2016. The house is fully rented out. Each apartment has a fitted kitchen, which was included in the purchase price. The fitted kitchens were mentioned separately in the sales contract, but without a specific amount, as it would have caused issues with financing. (The bank does not consider inventory)
It was planned to allocate 5,000 EUR separately for the kitchens in order to accordingly reduce the real estate transfer tax.
Question 1:
Can the real estate transfer tax assessment be changed to include the fitted kitchens retroactively? What is the best way to proceed?
Question 2:
Can the existing fitted kitchens be depreciated as advertising expenses according to the AFA method, or do they belong to the building portion of the purchase price and must be depreciated using the 2% rule?
Thank you in advance.
Best regards
Dear questioner,
Thank you for your inquiry, which I would like to answer as part of an initial consultation.
1. The problem you are facing is that the price was not listed in the purchase contract. As a result, the property tax has been correctly calculated based on the total amount according to current case law. Only by changing the purchase contract do you have a chance of excluding the fitted kitchens from the basis of assessment. Just changing the contract will cost you money again (and whether the seller will agree to this is just as questionable as whether a notary would even certify such a change), and whether the potential reduction in real estate transfer tax is still beneficial, you must assess. While you could file an objection and try to prove elsewhere that the €5,000 for the kitchens are reasonable, the tax office is likely to reject this, meaning you would have to take legal action, with all the associated costs for you. Whether the €250 - €300 for the kitchens (depending on the amount of tax) are worth it, you must assess. I cannot advise you to sue here, as the chances of success are at best uncertain. You can file an objection, as it will not cost you anything. So, you have nothing to lose.
2. In principle, you can depreciate the kitchens over a shorter period than the building. However, you once again face the problem of proving the amount of expenses for the kitchens. If you were to depreciate the kitchens over, for example, 10 years, the tax office would point out that you do not have proof for this amount, as the purchase contract does not specify it. I recommend depreciating the kitchens over 10 years, but in a accompanying letter to the tax office, explain what you have done to avoid any criminal accusations. If the tax office does not accept this approach, you once again have the opportunity to file an objection and potentially take legal action.
Best regards,
Oliver Burchardt
