What is the tax on the transfer of absolute rights?

The tax on the transfer of absolute rights is a legal tax obligation of the seller characteristic for the sale of “used” real estate. However, in practice, it is common for the buyer and seller to mutually agree in the contract that the buyer will pay the tax on the transfer of absolute rights on behalf of the seller.

How much is it and how is it calculated?

The tax rate on the transfer of absolute rights for the sale of “used” real estate is 2.5%. The amount of tax calculated this way does not have to be paid by the buyer of the first property on the total amount of the agreed purchase price.

The procedure begins by submitting a tax return to the relevant tax authority in the seller’s place of residence. The form you fill out is called the PPI4 form and it must be filled out accurately and precisely under full material and criminal liability. The deadline for submitting the tax return is 30 days from the date of concluding the purchase agreement. If you are late in submitting the tax return, you may enter into a tax offense, so it is advisable to strictly adhere to the deadlines.

The tax on the transfer of absolute rights is calculated on the agreed purchase price, but if the tax authority determines that the price in the Contract is unrealistic, that is, lower than the current market value, the tax is calculated on the determined market value of the property.

For example, if the agreed purchase price is 50,000.00 euros, the tax on the transfer of absolute rights, which the buyer assumes as an obligation to pay instead of the seller, amounts to 1,250.00 euros.

Who pays the tax on the transfer of absolute rights?

As we have mentioned several times so far, the tax on the transfer of absolute rights is a legal obligation of the seller and the PPI4 form is submitted in the seller’s name. However, it is a common practice for the buyer to assume this obligation in their name (guarantor) and is obliged to settle the calculated tax on the transfer based on the decision, and based on the notarized Purchase Agreement.

Who is entitled to exemption from paying the tax on the transfer of absolute rights?

The right to exemption from paying the tax on the transfer of absolute rights is granted to the buyer of the first apartment up to 40 square meters, plus 15 square meters for each member of the household (usually a spouse and children).

This would look like this in practice:

You are married and live with your spouse and one child in a common household – registered at the same address. You have decided to buy an apartment and resolve your family’s housing issue. This is the first apartment you are buying in your name and you (nor your spouse) have not previously owned any real estate.

You have decided to buy an 80 square meter apartment. When exempting from the tax on the transfer of absolute rights, you are entitled to be exempted for 40 square meters for yourself and an additional 15 square meters for your spouse, as well as 15 square meters for the child. In this case, you will be exempt from paying tax on 70 square meters while you will pay tax of 2.5 percent on the remaining difference of 10 square meters.

To qualify for the exemption from tax, you must be an adult citizen of the Republic of Serbia and you must not have owned any real estate in your ownership or co-ownership during the period from 01.07.2006. to the date of notarization of the purchase agreement.

Documentation for submitting a request for exemption from tax

If you have the right to be exempt from paying tax, you must submit the following documentation to the relevant tax branch:

– Tax return filled out in the name of the seller on the PPI4 form, which you must personally submit (electronic submission is not possible);

– Photocopies of the personal ID of the buyer and seller;

– Purchase agreement for the first apartment;

– Statement from the buyer that this is the first apartment on the IKPS-PPAP form, notarized;

– Certificate of citizenship and birth certificate of the buyer;

– Certificate of residence of the buyer (obtained from the relevant unit of the Ministry of Interior);

– Proof of ownership of the property in the seller’s name – how the property was acquired;

– Certificate from the tax administration that you have not paid property tax in your name since 01.07.2006.

– If it is not specified in the purchase agreement, you also need a statement from the seller that you can submit the application to the tax administration on their behalf;

– If you have household members with whom you live and share living expenses, whether it is a spouse, parent, adoptive parent, biological or adopted children, you must submit a certificate of citizenship and birth certificates for each member;

– For the spouse, you also need a marriage certificate;

– For each adult member, you must submit a photocopy of their personal ID, a certificate of residence, and a certificate from the tax administration that the household member has not been a property tax payer from 01.07.2006. until the date of notarization of the real estate purchase;

*If you use the child for 15 square meters, they will no longer have the opportunity to claim the exemption for 40 square meters as a first buyer when they turn 18 by purchasing real estate in their name.

Heroldo Real Estate Agency, due to the complexity of the procedure, takes on the obligation to collect all necessary documents and submit the tax return to the relevant tax authority for its clients.