VwGH: ImmoESt on the sale of donated land

Oct 6, 2021 Benn-Ibler Rechtsanwälte

The Administrative Court (Verwaltungsgerichtshof, VwGH) examined the question of whether real estate income tax (Immobilienertragsteuer, ImmoESt) can be incurred on the sale of inherited or donated real estate by a non-profit legal entity.

The participating party was a non-profit association in the field of child and youth welfare which benefited from donations. In order to raise funds, the party involved sold various plots of land, which were donated to the party by way of gifts and inheritance.

The tax office (Finanzamt, FA) assumed that the sale of real estate was taxable and assessed the income and the related corporate income tax (Körperschaftsteuer, ImmoESt) for the party involved.

The Federal Fiscal Court (Bundesfinanzgericht, BFG) upheld the appeals filed by the party involved and stated that the properties, which had been transferred free of charge, belonged to the assets of the party's indispensable auxiliary business (purpose-oriented business, “Zweckverwirklichungsbetrieb”) within the meaning of Section 45 para 2 of the Federal Fiscal Code (Bundesabgabenordnung, BAO), which is why no tax obligation existed for the profits accruing.

The VwGH took a different view: If the donated properties do not directly serve the fulfilment of the beneficiary purpose (e.g. use of the properties for the accommodation/supply of the persons to be cared for), the sale of (inherited or donated) properties does not constitute a charitable activity. This is also not the case if the financial means generated are used for the beneficiary purpose. According to the VwGH, pure fundraising operations neither constitute an independent indispensable auxiliary business within the meaning of Sec. 45 para 2 BAO nor do they constitute a dependent part of an existing purpose-oriented business.

If a non-profit legal entity continuously (sustainably) sells real estate, it is, in the opinion of the VwGH, a dispensable auxiliary business within the meaning of Sec. 45 para 1 BAO. The taxation of real estate transactions is then carried out according to Sec. 7 para 2 Corporation Tax Act (Körperschaftsteuergesetz, KStG) in conjunction with Sec. 4 para 3a Income Tax Act (Einkommensteuergesetz, EStG). If, on the other hand, individual plots of land are not sold on a sustained basis (with a recognisable intention to repeat the transaction), this leads, according to the VwGH, to income from the private sale of real estate, which - as in the case in question - is taxable under section 21(3)(4) KStG in conjunction with Sec. 30(1) EStG.

VwGH Ra 2019/15/0046 (26.05.2021)