Profits from the sale of private property may be exempt from income tax under certain conditions in accordance with Section 30 (2) Austrian Income Tax Act (so-called main residence exemption). A key requirement for the exemption is that the main residence must be given up in the course of the sale of the property.
The tax authorities allow a tolerance period of one year for giving up the main residence (see EStR 2000 Rz 6641). The main residence exemption can therefore also be applied if there is a period of one year between the sale of the property and giving up the main residence.
The rigid tolerance period granted by the tax authorities is not covered by case law. Rather, according to established case law, the taxpayer is entitled to “an appropriate period of time” to give up their main residence and establish a new main residence. The circumstances of the individual case must always be taken into account. However, the reasons for the delay should not lie within the sphere of the taxpayer.
In particular, the intention of the taxpayer at the time of the sale of the property must be taken into account. If this intention is clearly to give up the previous main residence and establish a new main residence, an appropriate period should be applied depending on the circumstances of the individual case. If the procurement of a new main residence takes a longer period of time, this can also extend beyond one year (VwGH 1.6.2017, Ro 2015/15/0006).
In a recent decision (VwGH 22.2.2024, Ra 2022/13/0091), the VwGH had to deal with the following case: a seller of a property had stipulated a three-and-a-half-year “precarium” in the contract, whereby the main residence could still be retained in the sold building as contractually secured. A property for the construction of a new main residence was only acquired months after the sale; the construction notice was only issued approximately one year after the sale. No circumstances could be established for these delays that were not within the sphere of the seller.
In this context, the VwGH stated that the condition of a “precarium” for three and a half years means that it can be assumed that the intention at the time of the sale was not to give up the main residence for a longer period of time. Such a long period, which was intended in advance, cannot be considered reasonable without further ado. The exemption was therefore to be denied in this specific case.
Contact us!
We will be happy to assist you with any tax issues in connection with the sale of your real estate.
Please do not hesitate to contact us at office@vanas.at or +43 1 312 505.
We are looking forward to hearing from you!
