Tax Obligations and Reliefs in the Purchase of Real Estate as an Investment

Slovenia has recently witnessed an increase in the number of purchases of investment property, especially in the past year, when the property market experienced a marked upturn. Many individuals have chosen to buy flats and houses as investment properties, which has had an impact on the dynamics of the property market. For property owners who rent out their flat and declare their income, it is important to be aware that the FURS may recognize if they are not living in the flat, which may lead to a summons to pay additional property tax. This further emphasizes the importance of submitting tax returns and exemption applications on time and correctly.

In Slovenia, the Citizens’ Property Tax is a key element of property legislation, regulated by the Citizens’ Tax Act (CTA) of 1988. This tax applies to property owners who are natural persons and covers a wide range of properties, including apartments, houses, detached garages, holiday homes, and business premises. The good news for all property investors is that the legislation also grants them certain exemptions and reliefs.

One of the key ones is the tax exemption for first owners of new properties. First-time owners of new flats, houses, or garages are temporarily exempted from tax for ten years. The same applies to the heirs of the original owners, who, even if their deceased has already submitted an application, must also submit an application themselves to continue benefiting from the relief. A similar tax exemption is available for those properties that have been renovated or repaired if their value has increased by more than 50% as a result.

In addition, residential properties up to 160 m2 are exempt from tax, but only if they are occupied by the owner or a member of his/her immediate family. For families with more than three members permanently living in their own property, the tax levied on the fourth and each additional family member is reduced by 10%.

In order to qualify for the temporary exemption, there must be actual occupation of the entire (residential) unit.

In order to obtain the tax exemption, it is necessary for the property owners to submit an application to the tax office. The deadline for the application, which must be written by the taxpayer (no special form is created), is 31 January 2024. The date applies to applicants who have met the conditions for claiming the temporary tax exemption in the previous year and that the owner has not yet claimed the exemption in the previous year. If the owner misses the deadline, he can only apply for the tax exemption in the following year if he still qualifies.

It is also important to mention the building land use tax (LBTT), which is another form of tax burden for property owners in Slovenia. This tax varies from municipality to municipality and is usually paid by the occupier of the property. In certain cases, it is possible to obtain an exemption from or a reduction of the NUSZ for a period of five years, especially in cases where the property has been recently purchased or built.

Trends in recent years show an increase in the number of summonses issued and tax collected in Slovenia, which underlines the importance for property owners of timely and accurate claiming of potential tax exemptions. This not only eases the tax burden on owners but also contributes to a fairer and more balanced taxation of the property market.

Source: Finance Magazine https://shorturl.at/gjIP9

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