Last week, the National Land Survey presented its study into the broadening of liability for stamp duty. The National Land Survey proposes that acquisitions through land parcelling measures be liable for stamp duty in the same way as acquisitions through purchase or exchange.
Stamp duty is levied on certain acquisitions of real estate at a percentage of the taxable value of the property. For legal entities, the tax rate is usually 4.25 per cent and for natural persons it is usually 1.5 per cent. In some cases, land parcelling measures lead to changes in ownership without being taxable. The National Land Survey has identified three situations – (i) acquisitions under the Code of Land Laws followed by land parcelling, (ii) land consolidation acquisitions and (iii) split acquisitions – which are tax-free at present but which are subject to a proposal that they be made liable for stamp duty.
Acquisitions under the Code of Land Laws followed by land parcelling
Land parcelling allows a property which has been acquired to be combined with a property on which the purchaser already holds registration of title. The purchase is then followed by an application for land parcelling rather than an application for registration of title. The acquisition is liable for tax in itself, but no tax liability ever arises because taxation occurs only at the moment when registration of title is granted and no registration of title is granted in this situation. The study proposes that land parcelling carried out at the time of a taxable acquisition be liable for stamp duty.
Land consolidation acquisitions
Land consolidation is a tax-free land parcelling measure whereby real property can be transferred from one property to another. If the transferring property and the property taking over the real property are owned by different persons, a property acquisition takes place which is not liable for stamp duty under current rules. The study proposes liability for stamp duty in land consolidation acquisitions of this kind. The National Land Survey proposes a flat-rate tax levied on acquisitions of this kind and the tax will be based on the reduction in market value of the property surrendering the real property in the transaction. The reduction in market value will be be assessed on the basis of a certificate of value or other investigation. It is proposed that limit values be introduced for when stamp duty must be levied in order to limit the restrictive effects of the taxation on appropriate land consolidations. For private individuals, this must only occur if the value exceeds SEK 1,000,000. If the person acquiring the property is a legal entity, the value must instead only be taxed if it exceeds SEK 350,000.
In acquisitions of this kind, it is often the case that no supporting documents are drawn up that can be used for taxation in official procedures, unlike in an ordinary acquisition under the Code of Land Laws. The study raises the question of how this information must be collected and on whom the requirement to provide the data must be imposed. The National Land Survey issues no specific proposal in this regard, but states that it should be studied in a specific procedure.
Split acquisitions
Splitting enables a property to be divided into several plots which can either constitute properties themselves or which can be included in other properties through land consolidation, for example. A tax-free property acquisition can occur when a jointly-owned property is split and that split results in one of the owners receiving a larger share of the property in a split plot than the owner had in the split property, i.e. in the case of a so-called lopsided split. The National Land Survey proposes that property acquisitions of this kind also be liable for stamp duty.
It is proposed that the stamp duty be calculated on the market value of the share of the split plot acquired, i.e. the difference in value between what was owned before the split and what is owned after the split. The same type of tax reduction as that proposed for land consolidation acquisitions is also proposed for split acquisitions. For acquisitions of this type, the National Land Survey has also identified a need for a special study to determine the procedure for levying tax.
Entry into force
It is proposed that the provisions in the proposal be applied to acquisitions submitted to the National Land Survey for land parcelling after the entry into force of the provisions in the proposal.
What happens now?
No timeframe is specified for the introduction of the proposed changes, but the National Land Survey considers that the public authorities concerned will need a year to adapt their organisation to the proposed legal regulation. The National Land Survey also points out that there is a need for further investigation before the proposals can enter into force, which means that it would be more than a year before the proposals could become a reality.
Comments
Taxation of the acquisition of real estate is an ever-present political issue and the question of levying stamp duty on acquisitions of properties taking place through land parcelling has been discussed before.
If the proposal results in new legislation according to the National Land Survey’s proposals, it will mean higher costs for those acquiring real property. It will also affect the ability to carry out a suitable property classification in forestry and agriculture, for example, and also in the context of generational change.
The fact that it is proposed that the new regulations apply to acquisitions submitted to the National Land Survey for land parcelling after the entry into force means that a temporary increase in the flow of applications can be expected just before the entry into force.
We have extensive experience of assisting clients in the acquisition and reorganisation of properties as well as in planning an appropriate acquisition and ownership structure. Please contact us if you want to know more about how this can affect your business.
(in Swedish)
