VwGH: Main residence exemption only for land and property up to 1,000 m2
In its ruling of 24 April 2024, the Administrative Court clarified its case law according to which the main residence exemption for private property sales does not apply to properties of any size, but only insofar as the property size is “usually” required. The main residence exemption is therefore only granted for land up to 1,000 m2 in the case of private property sales.
The VwGH recently had to decide on an ordinary appeal, whereby it was questionable whether – as already assumed by the Federal Fiscal Court (BFG) – the main residence exemption pursuant to Sec 30 (2) no. 1 EStG 1988 only exempts properties up to a size of 1,000 m2 from income tax. The VwGH confirmed the legal opinion of the BFG and referred in particular to the materials of the original version of the EStG 1988, according to which only the “typically” required building site is included in the exemption. This results in the need for a standardised approach.
VwGH 24.04.2024, Ro 2022/15/00201
1. Facts of the case
The appellant (Rw) sold a property in 2013. The property contained a building used as a main residence; the total plot size was 3,637 m2. A neighbouring property was also sold with the aforementioned property. As part of the self-calculation and payment of real estate income tax (ImmoESt), the portion of the purchase price attributable to the building and the land of the first-mentioned property was left tax-free in accordance with Sec 30 (2) no. 1 lit a EStG 1988 (main residence exemption).
As a result of an external audit at the Rw, the tax office did not follow the judgement of the Rw and only took land into account to the extent of 1,000 m2 within the scope of the main residence exemption.
Neither the tax office (as part of the preliminary appeal decision) nor the BFG (as a result of the request for referral) upheld the appeal lodged against this. The BFG considered the reference to a floor area of 1,000 m2 to be practicable and sufficient and stated that the VwGH had ruled in the decision VwGH 29.03.2017, Ro 2015/15/0025 that the exemption pursuant to Sec 30 (2) no. 1 EStG 1988 only allocates land to the favoured home to the extent that is usually required for a building site. The BFG therefore allowed the appeal on the grounds that there was a lack of case law from the VwGH on the question of whether the size of a building plot usually required should be determined on the basis of a standardised approach or whether the local conditions should be taken into account.
2. Decision of the VwGH
Sec 30 (2) EStG 1988 exempts income from the sale of owner-occupied homes and flats including land from taxation under certain conditions. The explanatory notes to the original version of Sec 30 EStG 1988 state that the tax exemption also applies to the “portion of land or the land that is usually required as a building site”. From this, the Court deduced in its ruling VwGH 29.032017, Ro 2015/15/0025, that the main residence exemption would be subject to a size-related restriction with regard to land. Furthermore, the necessity of the limitation would also result from the income tax performance principle and the resulting requirement to contribute to the uniformity of taxation.
Sec 30 (2) no. 1 EStG 1988 is to be interpreted in such a way that land is favoured to the extent normally required as a building site. The location and development of the specific plot of land is not decisive here. Rather, a standardised approach is required, which – from the point of view of uniformity of taxation – must be based on average values.
Within the scope of the EStG 1972, previous administrative practice considered a building plot size of 500 m2 to be appropriate; this was based on the case law of the VwGH on workers’ housing. After the limitation on usable floor space for owner-occupied homes and flats was abolished3 , the size of a “generally customary building plot” was assumed to be 1,000 m2. According to the VwGH, a building plot of this size is typically considered sufficient, especially as land is limited and building plots tend to become smaller with increasing development.
The tax office and the BFG assumed that the Rw was entitled to the tax exemption pursuant to Sec 30 (2) no. 1 EStG 1988 up to a plot area of 1,000 m2. It is not recognisable to the Administrative Court that the rights of the Rw are infringed as a result and this is also not comprehensibly demonstrated in the appeal. The appeal was therefore unfounded, which is why it had to be dismissed.
Conclusion
With this ruling, the VwGH clarifies its case law according to which the main residence exemption pursuant to Sec 30 (2) no. 1 EStG 1988 does not apply to properties of any size, but only insofar as the property size is “usually” required. Sec 30 (2) subpara. 1 EStG 1988 has applied since the 1. StabG 2012 and, according to the materials, the proceeds of the sale should be available undiminished for the creation of a new residence. The present decision is probably not in line with this objective.
In contrast, the VwGH also referred to the materials on the original version of Sec 30 EStG 1988 because the main residence exemption as amended by the 1. StabG 2012 is intended to exempt “as before, owner-occupied homes and owner-occupied flats including land”. As the materials clearly state that only the “normally” required proportion of land is to be exempted, a standardised approach appears to be in line with the legislator’s intention.
Of course, quantifying the “luxury tangent for land” and limiting this to 1,000 m2 could be a practicable solution. At the same time, however, a standardised approach can also lead to blatant valuation contradictions in individual cases. The fact that, for example, the proceeds from the sale of a 1,100 m2 property in a rural area are not fully exempt, while a 900 m2 property in a prime urban location (with presumably significantly higher proceeds from the sale) is exempt, can hardly be justified on the basis of the ability-to-pay principle, which was also invoked by the Administrative Court.
