Buying a house for demolition and rebuilding: can the 2% rate apply?

An existing dwelling was replaced

In December 2022, the buyers acquired a property for €715,000 which was, by its nature, a dwelling at legal transfer. They demolished the structures, built a replacement house and moved into it. They had paid €57,200 in transfer tax at the 8% rate applied at that time. The dispute was whether they were instead entitled to the 2% rate.

The main-residence condition was central

The inspector argued that the buyers did not meet the main-residence condition because they never intended to live in the original structures. The court rejected that strict approach. The differentiated rates were intended to favour buyers seeking their own home over investors. These buyers actually used the replacement house as their permanent main residence.

Comparison with extensive renovation

The court observed that a major renovation can also make a dwelling temporarily uninhabitable. In practice, the distinction from almost complete replacement may be small. In this case, a poor, uninhabitable dwelling was replaced by a home meeting modern housing requirements. The legislative history gave the court no reason to treat these buyers differently from buyers who first carry out extensive renovation.

Not a general rule for building land

A crucial fact was that the property already qualified by its nature as a dwelling at transfer. The judgment therefore does not automatically apply to undeveloped land or every demolition and construction project. Compliance with the other conditions for the reduced rate was not disputed. The court awarded a refund of €42,900. The 8% figure relates to the 2022 acquisition and is not a general statement of current rates.

Assess the project before completion

Establish precisely what you are acquiring legally and physically, the intended use and the supporting evidence. Keep the purchase agreement, building plans and evidence of intended owner occupation. Coordinate the tax assessment with the notary before transfer tax is declared.

This is an appeal-court judgment: any subsequent proceedings and the facts of your purchase may matter. Oudshoorn can review the tax aspects of your acquisition and redevelopment so that the rate is assessed against the actual transaction.

More information from Oudshoorn

• Real estate taxation
• VAT and transfer tax in construction and real estate