We would like to draw your attention to changes in the taxation of real estate sale by individuals. Firstly, the time test for the exemption of income from real estate sale has been extended from five to ten years. That means that the income from real estate sale is exempt from income tax if the period between its acquisition and sale exceeds 10 years. It follows from the transitional provisions that this new time test applies only if the immovable property was acquired by an individual after the amendment came into force (i.e. on 1 January 2021 and later). If a real estate acquired before the amendment came into force is sold, then the previous (five-year) exemption period applies.
At the same time, the amendment has added the possibility to exempt income from the sale of real estate in a situation when the period between its acquisition and its sale does not exceed 10 years if the taxpayer uses the collected funds to obtain their own housing needs. This exemption can be applied to the sale of real estate acquired after 1 January 2021. Moreover, this exemption can be used if two conditions are met: 1) the taxpayer notifies the Tax Authority of the receipt of these funds by the deadline for filing the tax return for the tax period in which they were obtained 2) and uses these funds for acquisition of own housing needs, either until the end of the tax period immediately following the tax period in which the taxpayer received these funds, or used them to obtain their own housing in the tax period immediately preceding the tax period in which the taxpayer received these funds.
We would like to point out that the exemption is granted to individual income tax payers outside of their business activities. Thus, this exemption does not apply either to business income nor to corporations.
