Who actually pays the absolute rights transfer tax?

cityexpert Legal advice

Who actually pays the absolute rights transfer tax?

In order to answer this question of whether the absolute rights transfer tax is paid by the seller or the buyer, we have to look at legal regulations which define this matter of practice in the domain of real-estate sale.

The law states that the seller is obliged to pay the absolute rights transfer tax.

The property tax law states that absolute rights transfer tax must be paid by the property seller. However, in most cases it is the buyer who takes this responsibility. In the event that the buyer and seller have agreed that the buyer will pay this tax, this obligation should be defined in the real-estate sale contract.

Even when the contract on real estate sale states that the buyer will pay this tax, the resolution will still be in the seller’s name because they are legally recognized as the taxpayer in this case, while the buyer will be listed as the joint and several debtor. In practice, this means that in case that the buyer doesn’t pay the tax, enforced collection will be launched against the seller who will be obliged to pay it and then demand a refund of the paid sum from the buyer. The tax report which is filed for the purpose of absolute rights transfer tax also must be in the seller’s name.

Things work differently in practice

Everything we’ve mentioned so far relates to legal regulation of this task, while in practice things usually work differently. Most commonly the buyer will pay this tax while the seller will authorize them within the sale or special rights contract to file the tax report in their name and for their account and to represent them in the process of establishing and paying the absolute rights transfer law.

Tax exemption for those purchasing their first apartment

What’s interesting in this story is the right to tax exemption which the above mentioned Law defines for those who are purchasing their first apartment. The law states that the seller must pay the tax and then lists the right of the  buyer to the tax exemption. it seems that the Law itself recognizes the frequent practice where the buyers take it upon themselves to pay this task, so they receive this benefit in the form of tax exemption.

Pay attention when composing the real-estate sales contract

As we’ve established, it depends on the agreement between the seller and the buyer whose responsibility it will be to pay the absolute rights transfer tax. If the real-estate sales contract doesn’t list an article stating otherwise, the burden of payment will be on the seller by default because they are legally defined as the taxpayer in this process. This is why it’s important to pay attention to this matter when constructing the real-estate sales contract and rely on a professional intermediary in real-estate and an attorney.

City Expert real estate agency is there to make the entire process of purchasing real-estate or selling real-estate much easier.

Aleksandra Đ. Andrejić
Aleksandra Đ. Andrejić
Attorney at law
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