Supreme Court judgement provides for the possibility of refund of stamp duty
When acquiring property, stamp duty must be paid. According to the first paragraph in section 9 of the Stamp Duty Act at registration authorities (Sw. 9 § lag (1984:404) om stämpelskatt vid inskrivningsmyndigheter), the stamp duty for purchase of real estate is calculated on the higher of either:
- the purchase price; or
- the tax assessment value for the year immediately preceding the year in which the application for registration of title deed is granted.
The second paragraph of the section states that in the event that a tax assessment value is missing, the stamp duty shall instead be based on the highest of the purchase price and a value based on a valuation certificate. The question open for assessment by the Supreme Court's was whether this valuation certificate should reflect the property's market value, or a deemed tax assessment value (about 75% of the market value).
The circumstances of the case and the Supreme Court’s judgment
In 2014, a company acquired a real property that was taxed as a so-called special property according to the 3 chapter of the Property Taxation Act (Sw. fastighetstaxeringslagen (1979: 1152), and therefore lacked tax assessment value. The purchase price amounted to approximately SEK 81 million. The company applied for registration of title deed and to the application the company attached a value certificate prepared by a real property valuation specialist on behalf of the seller. According to the certificate, the property's market value in December 2014 amounted to just over SEK 131 million. Lantmäteriet, which is the real property registration authority, decided to determine the stamp duty calculated on the basis of the valuation certificate, i.e. based on the property's market value.
The company appealed the decision and stated that the stamp duty would instead be calculated on the basis of the purchase price and therefore determined at a lower amount. In connection with the appeal, the company submitted its own investigation, according to which an estimated tax assessment value for the property at the time of acquisition amounted to approximately SEK 80 million.
The District Court and the Court of Appeal rejected the company's appeal. The Supreme Court granted review dispensation.
The Supreme Court begins by stating that it is not possible to determine from the wording whether the word value refers to the property's real value (market value) or whether it refers to a deemed assessment value. The Supreme Court notes, however, that in the preparatory work for the previous Stamp Duty Act, reference is made to value calculated according to the basis for determining the tax assessment value, and that when the current legislation was introduced it was stated that no substantial change of the law was intended.
The Supreme Court further states that if the market value were to constitute comparative value, an unjustified difference in treatment arises in relation to the normal cases regulated in section 9, first paragraph, of the Stamp Duty Act (i.e. that the purchase price shall be compared with the tax assessment value).
In light of the above, the Supreme Court considers that the comparative value can be calculated based on a basis for determining the tax assessment in accordance with the Property Taxation Act.
The Supreme Court’s ruling is very welcome as it regulates a question that has long been perceived as unclear: why would the business conducted in a real property affect the size of the stamp duty? There has been no reason why a higher stamp duty was paid on the acquisition of a school that has no assessment value, compared with, for example, an office building.It can further be noted that also when acquiring a real property that during the year has been subject to property development measures (for example a subdivision) and thus lacks tax assessment value the year preceding the transfer year, Lantmäteriet has historically calculated stamp duty based on a market value according to a valuation certificate.
In the light of the Supreme Court’s judgment, in these situations a “fictitious” tax assessment value should now be calculated based on the principles that apply to real property assessment. The Supreme Court emphasizes that this should not lead to any practical application difficulties; corresponding grounds are applied by the Swedish Tax Agency in accordance with the Act on special estimation value of property (Sw. lag (1971:171) om särskilt uppskattningsvärde på fastigheter), e.g. when an owner of a property that has been exempted from tax liability requests it.
As we wrote about in the previous Tax Alert, the government has commissioned Lantmäteriet to investigate certain stamp tax issues. It will be interesting to follow how that investigative work continues, and whether the effects that this ruling gives rise to will in any way be affected within the framework of that investigation.
Feel free to contact us if you want to know more about how the Supreme Court’s judgment affects your situation and if there is also an opportunity for you to recover stamp duty paid.