Speculation tax on selling house below value

It's about the following:

The parents bought the house at a price of 150,000.00 (at that time due to better financing options, etc.).

The house was rented out to the son and the loan was repaid through the rent.

The house should already be transferred to the son before the end of the 10-year period (for private reasons). The remaining loan amount (e.g. 100,000.00 euros) is to be taken as the purchase price.

Due to real estate development, the house is now probably worth about 250,000 euros.

If the sale takes place for 100,000.00 euros, the tax office can of course say "hidden gift," which would probably not matter with regard to the exemption amount.

The problem is likely the capital gains tax if a fictitious profit is assumed. Rental income would probably also have to be taken into account?

It’s about the following:

The parents bought the house at a price of 150,000.00 (at that time due to better financing options etc.).

The house was rented to the son and the loan was repaid through the rent.

The house should already be transferred to the son now (private reasons), before the expiration of the 10-year period. The purchase price is then supposed to be the remaining loan amount (for example 100,000.00 euros).

Due to the real estate market development, the house is probably worth about 250,000 euros by now.

If the sale now takes place for 100,000.00 euros, the tax office can of course say “hidden gift,” which would probably not matter with regard to the allowance.

Problematic would probably be the speculation tax if a fictitious gain is applied. Rental income would probably also have to be taken into account?

Speculation tax only applies in the case of a gain.
There is none here.

Problems, as said, rather: property transfer tax and gift tax (not now, since below the allowance for children, but maybe in case of further inheritance within 10 years), also the notary could and probably will set the value in order to calculate his fee.

I also don’t understand what the advantage is of not putting everything properly in the contract?

If the sale now takes place for 100,000.00 euros, the tax office can of course say "hidden gift," which would probably not matter with regard to the exemption amount.

Not can, but will. It also has an impact on the inheritance (if it should ever come to that in the future and disputes arise among the heirs). Why not formulate it clearly in the purchase contract? For that, involve the notary or a lawyer. No real estate transfer tax is due either. So that is not a problem. The notary will also base his invoice on the actual value of the property.

Just a quick off-topic note to clarify the facts about the "speculation tax." This concerns private sales transactions, Par. 22 No. 2 in conjunction with Par. 23 Abs. 1 No. 1 Income Tax Act. Both profits and losses can occur here. So it is actually not the case that only profits are taxed; see also Par. 23 Abs. 3 Income Tax Act, which explicitly refers to the determination of profit or loss from sales transactions. However, these losses can only be offset against profits from private sales transactions and not against other income.

For income tax purposes, it is usually irrelevant what you do in the present case (if the selling price approximately corresponds to the acquisition cost less depreciation, since it was rented out).

What is correct, however, is that a gift tax can be incurred if the exemption amount is insufficient.

The note regarding the municipality’s right of first refusal should be urgently considered if you are doing something below market value here.

In this specific case, I would consult a lawyer specializing in this field. You could also ask the notary, but he cannot and must not provide tax advice.

The problem is: as soon as the tax office recognizes a "too cheap" sale, it assumes that the "remainder" up to the regular market value was handed over under the table or given away. Both provoke unpleasant questions and possibly additional claims.

Without this being legal advice!

Basically, the whole thing only becomes a problem if something happens to the parents within 10 years. The values at stake here are initially covered by the exemption amount, and this also applies to the tax. It can become problematic if:

- additional inheritance from the parents follows within 10 years and the exemption amount is exceeded
- the parents should be dependent on social benefits within the 10 years, because then the social welfare office would very likely become active

Otherwise, the lower value will initially tend to only bother the notary with regard to the fee.