Despite the current challenges that the global economy is facing, real estate deals have been extremely stable and have been even growing in the last few years. Along with the number of individuals (I) who increasingly sell properties, there are many legal entities that carry out the same activities.

As owners of taxable real estate, according to the Local Taxes and Fees Act (LTFA), the legal entities also owe taxes when acquiring a property. There are some specifics in the taxation of this type of tax, which we will explain in the following lines.

Tax assessment of the legal entities properties

There are fundamental differences between the tax due on real estate by enterprises, as legal entities, and that of individuals in terms of how to determine the tax assessment of the property.

The real estate tax of legal entities is determined depending on the tax assessment of the acquired real estate as of January 1 of the year for which it is due. In case there is a change in the boundaries of the settlements after decisions are made by the relevant municipal councils, the tax is determined on the new tax assessment for the respective year.

When acquiring property by a legal entity, the higher price between the book value and the tax assessment is taken (according to Appendix 2 of the Local Tax Act). When there is a lack of accounting data through which the tax assessment is determined of the property, it is then defined by an employee of the municipal administration.

The value of the property tax on legal entities

The amount of the real estate tax is determined according to an ordinance of the municipal council. According to Art. 22 of the Local Tax Act, the tax may be in the range between 0.1 to 4.5 per thousand on the tax assessment of the property.

When it comes to buildings that are newly built or newly acquired, the tax is determined by an employee of the municipal administration at the location of the property.

Some features and deadlines regarding the taxation of property of legal entities

The owners and users of properties, which are located within the boundaries of the populated places, annually owe tax on the properties owned/inhabited by them. An important feature regarding the taxation of legal entities is that along with the "Buildings" tax, they also pay a tax on the land on which the building is built. There are several other features regarding the taxation of legal entities' properties which are:

Taxation of properties outside the boundaries of the populated place

In case the building of the enterprise - user or owner, is located outside the boundaries of a populated place, but according to a detailed development plan / DDP / it is intended for residential, this property is subject to local tax.

Taxation of newly built properties

As of 01.01.2020, the taxation of newly constructed buildings is carried out according to new rules, such as: for the newly constructed buildings, subject to exploitation in accordance to the Spatial Planning Act, no tax return declarations for taxation with annual tax are submitted.

The data necessary for determining the tax of the newly constructed buildings or of the independent sites located in them shall be provided to the employees of the municipal administration. This is an obligation of the contracting authority of the construction, which should be fulfilled within two months after the completion of the building in rough construction.

Tax payment deadlines

In the case of newly constructed buildings or parts of buildings, the tax is due from the beginning of the month following the month in which the buildings were completed or their use has begun. Upon transfer or sale of the property, the new owner owes tax from the beginning of the month following the month in which the respective change in ownership or use has occurred.

The real estate tax is paid in two equal annual installments by the 30th of June and by the 31st of October of the year for which it is due. A 5% discount based on the annual tax is applicable for payments made by the 30th of April of the respective year.

Trust the experience!

The team of Atlantis Estates works with an expanded team of experienced professionals who are ready to assist our clients and partners through each step of buying and selling real estate.

This includes qualified financial advisers, lawyers, and accountants who are ready to answer all your questions and ensure a mutually beneficial deal - for both individuals and legal entities; as well as for both the seller and the buyer.

Because we know that the experience matters and that expertise guarantees security, stability, and mutual satisfaction for all parties!