VAT tax on real estate sales. When should it be paid?

VAT tax on real estate sales is one of the most common areas of tax risk. Incorrect classification of a transaction may lead to tax arrears with interest, disputes with authorities, the need for adjustments to settlements, and in practice also to complications when drawing up a notarial deed and settling the price.

In this guide, we explain when the obligation to settle VAT on the sale of real estate arises, when an exemption may be applied, how to correctly distinguish between VAT and PCC (civil law transaction tax), and what steps should be taken before the transaction to effectively reduce tax risk.

Real Estate Sales and VAT: First, Determine if the Seller is a VAT taxpayer.

The key question is whether the seller is acting as a VAT taxpayer. In other words, are they operating within the scope of business activity under the Goods and Services Tax Act of 11 March 2004? (Consolidated text, Journal of Laws 2025, item 775).

Business Sale vs. Private Sale – Why VAT and PIT Treat the Transaction Differently

For VAT purposes, the definition of business activity is broad. It includes activities carried out in an organised, repeated, and professional manner. Consequently:

• An individual without a registered business may still be considered a VAT taxpayer when selling real estate.
• At the same time, the same sale may not be classified as business income for PIT purposes.

Assessment always depends on the full set of circumstances. A single factor rarely decides the outcome.

Circumstances that most often shift the sale towards VAT recognition

Tax authorities and courts often check whether the seller acted like a trader or a developer. Risk indicators include:

• Land development (utilities and connections).
• Subdivision into smaller plots and creation of internal roads.
• Obtaining building permits or other investment decisions.
• Purchasing property with the intent to resell.
• Multiple or repeated transactions.
• Marketing activities beyond a simple listing.
• Professional sales organisation (e.g., preparing documentation for investors).

Legal expert tip:

If a transaction is ‘on the edge’ – for example, selling private assets with some professional elements – it is often worth considering a request for an individual interpretation. This can serve as a tool to secure tax settlements.

Land/ Building/ Unit and VAT – What Is the Subject of the Transaction?

Under VAT, selling real estate is generally treated as a supply of goods, i.e. transfer of ownership rights. Tax consequences depend on whether you sell:

• Undeveloped land,
• Developed land,
• A building, structure, or part of it (in practice: a unit),
• The right of perpetual usufruct.

In the next steps, two ‘decision points’ are crucial:

• Is the land designated as a building plot?
• For buildings or units – has the first VAT settlement occurred, and have the required deadlines passed?

VAT Exemption on Real Estate Sales – Key Rules and Conditions

Exemptions are as important as taxation rules. Even if the seller is a VAT taxpayer, the sale may be:

• Taxable (e.g., 23% or 8%).
• Exempt (under certain conditions).
• Covered by the possibility of opting out of the exemption.

Exemption for Undeveloped Land (Non-Building Grounds)

Undeveloped land may be exempt from VAT if it is not building land.

A building land is – in short – land intended for construction:

• according to the local zoning plan.
• or, if no plan exists, according to the decision on the conditions of building and land development

Practical risk: Technical infrastructure. Disputes arise if a plot has existing utilities (e.g., gas pipelines, power lines). Courts may use a strict legal approach. The case law often states an economic argument: do the objects change the land’s function and purpose?

Exemption After 2 Years from First VAT Settlement

This is the most common exemption in practice for units and buildings. Generally, the sale of buildings, structures, or units thereof is exempt if:

• It is not made during or before the first settlement.
• At least two years have passed since the first settlement.

What is the First VAT Settlement in Practice?

First VAT settlement occurs when the building, structure, or unit:

• Is delivered for use to the first buyer or user, or
• It begins to be used for the owner’s own purposes

…after construction or improvement.

Improvement matters if costs exceed 30% of the initial value. In that case, a “new” first settlement may occur, restarting the 2-year period.

Conditional Exemption (If 2 Years Have Not Passed)

If the sale occurs within 2 years of the first settlement, the exemption may still apply if:

• The seller had no right to VAT deduction, and
• The seller did not incur any improvement expenses (or spent less than 30% of the initial value).

Practical note:

The reason for the lack of deduction matters. Situations where deduction is legally denied differ from cases where the taxpayer simply did not use the deduction.

Opting Out Of the Exemption: When May Taxation be More Beneficial?

Exemption is not always the best option. Taxation may be beneficial when:

• The buyer is an active VAT taxpayer and wants to deduct VAT.
• The seller wants to avoid interpretation disputes about the exemption.
• The seller wants to limit the risk of VAT corrections (or at least plan them consciously).

As a rule, opting out of the exemption is possible when:

• Both seller and buyer are active VAT taxpayers.
• They submit a joint statement before delivery (often in the form of a notarial deed).

VAT or Tax on Civil Law Transactions on Real Estate Sales – How to Determine It Safely?

The “VAT or tax on civil law transactions” question appears very often in real estate trading. Two basic rules apply (with exceptions):

• If the sale is taxed under VAT, it is usually not subject to PCC.
• If the sale is exempt from VAT, PCC may apply depending on the transaction structure.

Remember: A transaction’s VAT status depends on the law, not the contract name or parties’ intent. You can read more about the Civil Law Transactions Tax (PCC) here.

Real Estate Sales by a Company and VAT – Rates, Corrections, and Consequences

Selling real estate as a VAT company requires a comprehensive analysis:

• Classification (exemption or taxation, first settlement, 2-year rule, VAT deduction).
• VAT rates (8% vs. 23%).
• Corrections of input VAT.

8% or 23% VAT?

In simple terms:

• 8% VAT applies to selected deliveries under social housing programs, with area limits.
• 23% VAT is the standard rate for commercial properties and most building plots.

Exceeding area limits may trigger proportional VAT application (part 8%, 23% for the excess).

Exempt Sale and Mandatory VAT Correction

If the taxpayer deducted VAT when acquiring or constructing the property and later sells it with exemption, a VAT correction may be necessary. For real estate, the correction period is usually 10 years.

This is a financial risk often overlooked during transaction planning.

Real Estate Sales and VAT vs. PIT – Two Taxes, Two Logics

VAT and PIT rules must be analysed separately. Common misunderstandings arise because:

• For PIT, the sale may be considered private.
• For VAT, the same sale may be a business activity (e.g., due to professional preparation of the ground for sale).

Practical recommendation suggests conducting a “double check”. First VAT (taxpayer status, exemptions), then PIT (income source, deadlines, costs).

Table 1. When is VAT on real estate sales particularly likely?

Table 2. Most common scenarios: exemption or taxation?

Practical Examples (5)

Example 1: Selling subdivided and serviced plots

An individual bought land, divided it into plots and connected utilities. He obtained a building permit. Even without business activity, authorities may treat the sale as a VAT transaction. The property sale will be subject to VAT.

Example 2: Selling a commercial unit by a company after 3 years

A company sells a unit used in business for over 2 years. VAT exemption after 2 years may apply, but opting out could be better if the buyer is a VAT payer. Check if exempt sale triggers VAT correction.

Example 3: Selling a newly built house as an investment project

The seller completes construction and plans an immediate sale. Usually, this counts as the first occupation for VAT, which excludes exemption. Analyse the applicable VAT rate (8% vs 23%) and qualification rules.

Example 4: Property improvements exceeding 30% of the initial value

Taxpayer modernises a building with expenses ≥ 30%. This may trigger a “new” first occupation for VAT. Sales within 2 years of improvement can be taxable.

Example 5: Land with technical infrastructure

A plot has a power line running through it. It may or may not be considered building land. Classification depends on circumstances, interpretations, and case law. Individual tax interpretation would be useful to secure the transaction.

Common Mistakes and Risks in Practice

• Equating a private PIT sale with no VAT taxpayer status.
• Ignoring zoning plans or building conditions for land sales.
• Overlooking the first VAT settlement and usage dates.
• Ignoring improvements (≥30%) and the 2-year resetting rule.
• Rejecting the exemption without a proper statement (including a notarial deed).
• Missing VAT corrections on exempt sales.
• Not analysing VAT vs. Civil Law Transactions Tax (PCC) before signing the notarial deed.

VAT Tax on Real Estate Sales – Summary

VAT tax on real estate sales depends on three key factors. First, the seller’s status as a VAT taxpayer. Second, the type of property – land, building, or unit. Third, the conditions for exemptions. This includes whether the plot is a building plot and whether 2 years have passed since the first occupation and VAT.

Before signing a sales agreement, it is wise to analyse “VAT or exemption” and “VAT or Civil Law Transactions Tax (PCC)” for the property. For corporate transactions, also assess the risk of VAT corrections. These checks are usually much cheaper than a tax dispute after the sale.

Consult an expert before selling property.

If you plan to sell real estate or want to review the tax implications of a transaction, consult an expert before signing the notarial deed. A firm can prepare a VAT analysis. The possible areas include, e.g. exemption vs. taxation, first occupation, opting out of exemption. We can assess your case in terms of “VAT or PCC”. We offer comprehensive support to help secure the transaction. Representation in a request for an individual tax ruling is also possible. Contact us for comprehensive legal and tax support.

FAQ – VAT Tax on Real Estate Sales