Austrian Supreme Administrative Court (VwGH): calculation of real estate transfer tax
In its ruling of 24 October 2024 (Ro 2022/16/0023-4), the VwGH clarified issues regarding the calculation of real estate transfer tax for industrial buildings using the lump sum approach (“Pauschalwertmodell”) as well as issues in connection with construction rights (“Baurecht”), i.e. the right to build and own a building/construction on a land whereby the latter is owned by a third party.
Facts and circumstances
An Austrian holding company acquired all shares in a private limited company (GmbH) holding construction rights in properties with production and warehouse facilities. These facilities were used for the manufacturing and storing of construction materials. The real estate transfer tax based on the transfer of shares was calculated according to the lump sum approach (section 2 GrWV – Austrian Property Value Ordinance), according to which the relevant property value (“Grundstückswert”) is composed of the value of the land and the value of the building. The building value is determined by multiplying the floor space with a specific construction cost factor, taking into account certain adjustments.
The matter in dispute was whether these facilities are to be classified as “industrial building” or “simple building”. This is decisive when determining the amount of the construction cost factor. Industrial buildings come with a construction cost factor of 60%, while simple buildings, such as an uninsulated warehouse, have a construction cost factor of only 25%.
Ruling of the VwGH
The VwGH confirmed that the production and warehouse facilities are to be classified as industrial buildings. Since these buildings were used for the production and storage of construction materials, they formed part of the factory property’s economic unit. Neither the structural simplicity nor the lack of heating could impact this classification which is why a categorisation as “simple building” was denied. Therefore, the (higher) construction cost factor of 60% was applied.
Moreover, the VwGH dealt with the specific calculation of real estate transfer tax in the context of construction rights. In determining the rateable value (“Einheitswert”) when evaluating the construction right, section 56 para. 3 subsec. 1 BewG (Austrian Valuation Law) regulates that the respective value must be reduced depending on the remaining useful life (simplified: the shorter the remaining useful life, the lower the value of the construction right). The VwGH clarified that, pursuant to the provisions of the GrEStG (Austrian Real Estate Transfer Tax Law), the property value of a construction right – in contrast to the rateable value – is to be recognised to the full amount and without the reductions of the BewG.
In conclusion
In practice, the calculation of the real estate transfer tax often gives rise to various issues, such as that the classification of buildings may be unclear when determining the construction cost factor. In this respect, the VwGH now clarified that production and warehouse facilities – even when they may be regarded as simple and unheated – are to be classified as “industrial buildings”, if they form part of a factory’s economic unit. Classification of the buildings must be carried out using objective criteria only. In addition, this court ruling underlines that in determining the property value using a lump sum approach – in contrast to when determining the rateable value –, it is inadmissible to reduce the value based on the remaining useful life of construction rights.
Authors: Yunus Altintas, Matthias Mayer
