The decision rendered on March 1, 2021, RV/6100391/2020, of the Tax Appeals Court dealt with the issue of how the transitional period between the sale of a condominium and the abandonment of the main residence is to be assessed in individual cases.
The complainants sold their condominium, which has their main residence for 14 years. When the apartment was sold on May 30, 2018 the complainants agreed with the new owners to draw up a lease agreement to give the former owners enough time to find a new apartment. This lease agreement was concluded on August 1, 2018, limited to three years, with the provision that the tenants could terminate the contract after one year, subject to a three-month notice period. For this purpose, the buyer assured that the lease could also be terminated earlier by mutual agreement.
The precarious financial situation, the real estate market as well as the possession of a dog and a rabbit made the search for a new apartment difficult. When the complainants finally found a suitable object, they wanted to terminate the lease prematurely by mutual agreement. At that time, the new owners did not want to know anything about such an agreement. Since the complainants could not afford to pay two rents simultaneously, they had to give up the potential new apartment. After further research on various Internet platforms, a lease agreement was concluded and the first rent including a deposit was transferred. However, the alleged landlord turned out to be a fraudster. After that, a real estate agent was commissioned to help with the search.
Finally, Capital Gains Tax (ImmoESt) was assessed because the competent authority considered that the main residence had not been abandoned, since a lease on the formerly owned apartment was drawn up and the complainants lived in the respective apartment for over a year.
The Tax Appeals Court decided that the main residence exemption applies. The court refers to the second offence of the main residence exemption, according to which such an exemption can be invoked if a property has been used as the main residence for five of the previous ten years. In this respect, it is irrelevant whether these five years are at the beginning, in the middle or at the end of this ten-year period. Therefore, the Tax Appeals Court held that the reference to a rigid deadline is not in the sense of the legislature. For the Court, it is crucial that there is a factual connection between the sale of a property and the surrender of the main residence.
The purpose of the main residence exemption is that the sales proceeds are available for the purchase of a new main residence. How much time may pass between the sale of the property and vacating the main residence for benefiting from the main residence exemption is not clearly regulated by law. While the tax authorities presume a rigid deadline of one year, previous Court decisions are based on an objective case-by-case analysis, according to which the period can also exceed a period of one year. In individual cases, the specific circumstances are decisive in the abandonment of the main residence.