Hi All we are in the middle of purchasing and appartment . Our seller informed us that the city buro approved their property gain tax defferal due to purchase of another property . They want therefore delete a chapter saying we as buyers transfer portion of the purchase price into tax account .
Is there a risk there ? Is there a standard text we could add in the contract to protect the buyer incase of something going sideways and tax office coming after us to pay sellers tax since itis assigned tothe property?
thanks for your help
any other important things to be put in contract from your experience would be much appriciated thank you
That text the seller proposes to delete is exactly the standard text to protect you.
My instinct would be to keep it in and the seller can recover it from the tax authorities. Or you could put it back to their court and ask them to produce a confirmation from the tax authority together with a signed indemnity from them.
What they are saying is very common. Capital gains taxes are waived if the proceeds have been used to purchase another primary residence.
Ask the notary to replace the paragraph (they must have many alternatives) with ones that retains your protection.
Or ask for a confirmation from the tax authorities in writing. And keep a copy.
For such a substantial purchase you should be advised by your lawyer. Over the past 35 years I’ve seen people end up in bad situations when they do this stuff DIY.
I think we had a similar issue when we bought our house, and in the end the standard clause was included.
The problem with this tax is that although the burden falls on the sellers, it is ultimately encumbered on the property. That is my understanding.
That’s correct. And if the sellers don’t pay, it will be recovered via a lien on the property, so ultimately, the buyer ends up paying if the seller doesn’t.
It is not waived, it is deferred to the new property, which has to have been purchased for the same or more than the sales price of the first property.
As I understand it, it works like this:
1st property bought for 400’000, sold for 1’000’000. A tax is payable on the 600’000 gain.
But then the owners sell and buy a house for 2’000’000. The tax is deferred, and if they sell a few years later for 3’000’000, the taxable gain is now 1’600’000
What I am not sure of is the process by change of town. So if the first house is sold in town X, and the second in town Y, if there is any payment at the time of the second purchase or if the tax is split at the time of the second sale.
In Vaud the contract stipulated that the notary, from the amount paid, would deduce and pay the tax kind of on behalf of the seller, i.e. the tax was to be paid by the seller from the received amount, and it was no purchaser’s concern if the seller buys something else later on.
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That is how it should be, so that their is no risk the seller doesn’t pay up.