Buy property at friends price: starter exemption?

Husband and wife buy a house from an acquaintance of an uncle of the wife for €395,000. For financing purposes, the market value of the house was appraised at € 430,000. The limit for the starter's exemption transfer tax is €400,000. Does this exemption apply? The Inland Revenue and the court think not. How does the court rule on appeal?

The court held first that there was a transaction between independent parties and that, in general, a purchase price agreed between such parties does not differ from the fair market value of the property sold.

The Tax Administration's argument that the seller is an acquaintance of the woman and that this would constitute a transaction between non-independent parties in which the seller favoured the woman by stipulating a purchase price lower than the fair market value fails. The mere fact that the seller is an acquaintance of the woman's uncle is insufficient for the court to find that the agreed price deviates from the market value of the property. It is not plausible that the seller wanted to give a niece of an acquaintance together with her partner a benefit of €35,000.

The fact that no purchase and sales agent was used in the sale of the property and that the property was not offered through public sources does not mean that the property was not sold in the most appropriate manner after the best preparation to the highest-bidding candidate, as the Tax Office argues. No such conditions are imposed and, moreover, the court of appeal has not found from the documents in the case and the parties' mutual submissions that the sale of the property took place under non-market conditions. It is also taken into account that the husband and wife have stated, without being disputed, that the seller consulted three estate agents before the sale, mentioning amounts between €390,000 and €420,000.

Here, the court also takes into account that the valuation report was not prepared for the purpose of the purchase, but for the purpose of obtaining financing. Moreover, the valuer is a friend of the family. For these and the aforementioned reasons, the valuation report is unusable to serve as a yardstick, let alone to invalidate a price agreed between independent parties.

Appeal court verdict
The fair market value of the property and therefore the taxable amount is €395,000. Therefore, the start-up exemption applies and the couple should receive €8,600 transfer tax back. The appeal is therefore well-founded.

Note: It is striking (again) that the tax authorities are not applying the new rules on transfer tax on residential property very generously. The court went along with this, but the appeals court nevertheless ruled in favour of the taxpayers.