How buyers and sellers split brokerage fee and who pays the real estate transfer tax

With the amendment of the Real Estate Brokerage Act in 2019, the costs of brokerage can only be paid by the service subscriber.

Usually, towards the end of the description of the real estate, advertisements on real estate portals – such as Nepremičnine.net – often state that the buyer of the real estate must undertake to pay real estate transfer tax. At first glance, these brings him additional costs, but in practice this is not the case. The service subscriber, for the purposes of this article we will assume the service subscriber is the seller, still pays 4% of the cost of the contract value of the real estate transaction, and the buyer 2% (but we have to keep in mind that their cost is not exactly the same as before, since on those 4% commission fee you additionally have to pay VAT, and on the 2% real estate transfer tax you do not have to pay VAT).

The real estate transaction is accompanied by three costs, which together amount to 6% of the contractual value of the transaction. Real estate companies charge a real estate commission, which is by law limited to 4% of the contract value. Additionally, 2% real estate transfer tax must be paid to the state.

The change took place in 2019

Amendments to the Real Estate Brokerage Act came into force in July 2019.

In the Act adopted in 2006, the second paragraph of Article 5 of this Act originally read as follows: “A real estate company may charge a brokerage fee only to a client on the basis of a real estate brokerage contract. If it is agreed between the parties to the sale, lease, rental or other contract for a particular real estate that the brokerage fee is to be paid by both parties, the amount referred to in the preceding paragraph shall be divided. “

By amending this Act, the last sentence of this paragraph has been deleted. Therefore, the sole owner of the brokerage fee is the client who has entered into a brokerage contract with the real estate company.

The amount of the brokerage fee is also determined in Article 5 of the Real Estate Brokerage Act: “The maximum allowed brokerage fee may not exceed four percent of the contract price in the case of buying or selling the same property,” unless the value of the property is less than ten thousand euros.

The old practice was as follows:

The seller of the real estate paid the state a 2% sales tax on the property, and another 2% commission to the real estate agency. The buyer only paid 2% commission to the real estate agency.

After the change:

Now, the composition of payments is different. The seller pays all 4% to the real estate agency for commission, and the buyer pays 2% real estate transfer tax to the state.

Two new solutions

Before the amendment of the Real Estate Brokerage Act, the buyer and seller generally agreed to share the brokerage costs (real estate agency commission). Now, things are arranged differently and there are 2 options:

1.) The first option is for the seller to assume a 4% payment for the brokerage.

2.) The second option is that the buyer and seller agree that the buyer will reimburse the seller 2% of the brokerage fee through the real estate company, with the seller paying a 2% real estate transfer tax.

Both are undisputable after the verification of documents.

Real Estate Transfer Tax

According to the Real Estate Sales Tax Act, the person liable to pay this tax is the seller of the real estate. However, if the buyer under the contract assumes the obligation to pay real estate transfer tax, he/she may be in the position of a client in the process of assessing real estate sales tax.

The Financial Administration of the Republic of Slovenia leaves the possibility of agreeing on this payment to buyers and sellers. If this tax is not paid, the taxpayer is called upon to pay it, which in most cases is the seller.

Brokerage fee

Even though, according to the law, the real estate company can only charge the client for the turnover fee, the buyer and the seller can split the payment of the 4% commission.

Sharing of brokerage costs is a matter of agreement between the client and a third party. As we said, for the purposes of this article, our client is the seller and the third party is the buyer of the property.

The client and the third party can agree on the payment or sharing of brokerage costs, with the third party (in our case, the buyer) paying part of this commission to the client (in our case, the seller), who is the client of the brokerage service. However, a real estate company may not charge a third party (the buyer) for these services. However, this payment can be recovered by the customer (the seller) in agreement with a third party (the buyer).

Source: Finance

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