Are parents allowed to build a house on their child's property?

Good day,

For tax reasons, parents would like to gift a plot of land to their child. However, they might want to build a house on this plot in the future.

Is this possible, or what should be considered?

Thank you very much

For tax reasons, parents would like to gift their child a plot of land. However, they might want to build a house on this plot in the future. Is that possible or what should be considered?

1. Gifting land is straightforward. No real estate transfer tax, but possibly gift tax should be considered. 2. Building a house on the child’s land. ==> The land belongs to the child; if the child says "No," nothing can be done. If the child says "Yes, no problem," then the parents can build there. BUT: The house then also belongs to the child, as it is inseparably connected to the land. Therefore, contractual or land registry arrangements must be made.

1. Giving a plot of land as a gift is easy. No real estate transfer tax, possibly consider gift tax. 2. Build a house on the child's plot of land. ==> The plot belongs to the child, if they say "No," nothing works. If the child says "Yes, no problem," then the parents are welcome to build there. BUT: The house then also belongs to the child, as it is inseparably connected to the plot. Therefore, contractual or land register arrangements must be made.

Thank you for the answer. Could the parents have a usufruct right of the plot registered in the land register? "The house then also belongs to the child" - Upon completion of the house, does it belong to the child and is gift tax incurred?

Could the parents have a usufruct right of the property registered in the land register?

That would be an option.

"The house then also belongs to the child" - Upon completion of the house, does it belong to the child and gift tax applies?

That would basically be the case. The gift takes place continuously during the construction.

Overall, I would only take this as a suggestion. You cannot avoid binding advice and a legally sound solution based on it. So get both a tax advisor and a notary involved. And please do so early.

The construct is comparable to the hereditary building right. In my opinion, the house does not necessarily belong to the child. Otherwise, there would be no leasehold properties. The land reverts to the child after a fixed lease period expires. Compensation is then due for the house.

The construct is comparable to the hereditary building right.

No, legally and also in terms of handling, the construct is completely different from a hereditary building right. Under civil law, the child in the aforementioned construct becomes the owner – this is not open to discussion (the Building Code §94 and §946 can be used as a basis). Under civil law and thus tax law, it can look different (e.g., in the case of usufruct). For beneficial ownership, one can also inform oneself in AO § 39. In the case of usufruct, hereditary building right, etc., it then moves in the direction of Building Code §95. Therefore, I maintain that the question requires the involvement of a tax advisor and notary to be legally sound.