Transfer tax has a reduced rate of 2% for the acquisition of a residential property. Is a former bank building that has been functioning as a shop for 10 years and is bought for residential purposes a dwelling or still a bank or shop? The Inland Revenue found the latter and imposed a hefty additional tax assessment on the buyer of the residential property. What does the court think?
Creation of statutory scheme for residential rate reduction
When the residential rate reduction was established, it was stipulated that residential property is understood to be immovable property which, at the time of the legal transfer, is intended by its nature to be occupied. If an immovable property is actually occupied, but by its nature is not intended for habitation, this immovable property will not be regarded as a dwelling. When in doubt as to whether an immovable property is, by its nature, intended for habitation, it is also important whether the municipality has given the immovable property a residential purpose. An immovable property that is not a dwelling but is converted into a dwelling does not fall under the measure. In any case, commercial buildings and premises cannot be regarded as dwellings.
Judge's considerations in the present case
It is established that this real estate was originally designed and built as a bank building. Until about 2008, the immovable property was also used as a bank.
Having regard to the construction drawings, photographs, data on planning permission and the explanations given by the parties, the court concludes that after the conversion work that took place in 2008 to make the immovable property suitable for use as a shop, the immovable property lost its character as a bank building. Considering the (structural) features and layout of the property existing at that time, the court finds it plausible that more than limited alterations were necessary to make the property suitable as a bank building again. By its nature, the immovable property was intended to serve as a shop/business premises from 2008. Until 2018, the immovable property was used as a shop.
It is up to the purchaser of the property, who invokes the application of the residential rate, to state and, if necessary, make a plausible case that the property transferred was, by its nature, intended for residential use at the time of transfer.
The buyer has argued that due to the granting of the planning permission in 2018 and the subsequent conversion work carried out in 2018 to make it suitable for habitation, the function of the immovable property changed to residential. In doing so, the buyer pointed out that the actual function of the immovable property should be considered and that it was purchased by him and intended as a dwelling.
The court held that the property had not lost the nature of shop/business premises due to the 2018 conversion. It is true that the remodelling in 2018 made the immovable property suitable for habitation by adding simple sanitary facilities in the form of a washbasin and a shower cubicle in the bank vault, but these changes do not make the immovable property, by its nature, intended for habitation. According to the court, no more than limited alterations are required to reclassify the immovable property as a shop/business building. No substantial change has been made by the conversion to the features of the structure itself, features objectively appropriate to a shop/business building. For example, the property has suspended ceilings, an entrance hall with draught excluder and (automatic) sliding doors, and the layout appropriate to its use as a shop as it existed has not been changed. What was mentioned in the Funda advertisement and the valuation report submitted confirm that the immovable property can easily be (re)used as a shop. The fact that the buyer bought the immovable property with the intention of using it as a home and has the right to furnish it to his own taste does not alter the foregoing.
The buyer still argued that various bodies, including government agencies, did classify the immovable property as a dwelling, as follows from the fact that the estate agent had used the model purchase agreement for dwellings, the mortgage loan had been granted under NHG, and that the Basic Administration of Addresses and Buildings (BAG) stated that the immovable property had a residential function. According to the court, however, this is irrelevant to the assessment.
Conclusion
What the buyer has argued does not lead to the conclusion that the immovable property was, by its nature, intended for residential use at the time of transfer. The tax authorities rightly imposed the additional tax assessment.
Note: If you buy a former commercial property to live in, even if it was simply occupied by the sellers, you can still miss out on the reduced transfer tax rate for residential property. The after-tax amount will then be 8.4% of the transfer price.
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