The construction company went bankrupt before my new apartment was finished. When and how must I pay transfer tax for my purchase?

In the case of a sale-and-purchase contract of ‘new construction’ as defined by law, the usual deadline for submitting the transfer tax return form and paying the tax is 2 months from the date when ownership rights are passed on to the buyer.

However, when a residential building is still unfinished and the company in charge of constructing it is in bankruptcy, and there is no commitment by the bankruptcy estate to continue with the construction work, you the buyer can either cancel the contract or assume responsibility for finishing the construction work. If you opt to deal with the construction work, please note that the deadline dates for transfer tax will come sooner.

If you cancel the contract

If your decision is to cancel the contract entirely, it requires no transfer tax return to be submitted and no tax to be paid.

If you continue with the unfinished construction work

If instead you decide to continue constructing the residential house or building, your requirement to submit a transfer tax return and pay the transfer tax gets an earlier deadline date. This is because the right of ownership is now transferred to you at an earlier date, compared to the original contract you had signed for purchasing the ‘new construction’. In this case, the counting of time for the transfer-tax deadline is no longer based on the date indicated by that contract.

Start date for the counting of time depends on whether you already paid the contract price in full: you may have paid it already, or there may still be an instalment that you need to remit to the bankruptcy estate.

1. In the latter case, the date when you pay the contract price in full to the construction company’s bankruptcy estate will be the start date for the counting of time.
2. In addition, if your paid-in amounts, at the time when bankruptcy begins, make up a higher sum than the true value of the housing-company shares you are buying, the counting of time starts from the date when your option to cancel the contract expired.
3. Correspondingly, if you paid the contract price in full, the counting of time starts the date when your option to cancel the contract expired.

Which amount is the base for the transfer tax?

If you assume responsibility for constructing and finishing the unfinished building, you must pay an amount equalling the value, at the time when bankruptcy begins, of the housing-company shares that you bought. The unfinished building’s fair market value depends on its percentage of completion.

After the following calculations are conducted, the base of the tax can be determined:

• Sum of money paid to the construction company so far (typically, there are some instalments already paid, and others still unpaid)
• Add the sum of money, if any, paid to the bankruptcy estate
• Add the part of the housing company’s debt, which is attributed to the shares you are buying, and which you already paid for by the date of transfer of ownership
• Subtract the part of the housing company’s debt attributed to the shares you are buying, still remaining unpaid at the date of transfer of ownership

If you believe that you paid too much transfer tax, you can submit a transfer-tax refund application. Fill in a calculation outlining the amount of transfer tax that you should have paid, including clear reasoning of your position.

Here’s how to ask for refund of a paid transfer tax.