The tax authorities become alert when parents sell their house to their child. Parents and children want the purchase price to be as low as possible in order to avoid different taxes.
Every parent also wants to help their child as well as possible as a starter on the housing market.
An option may therefore be to have the house appraised in a rented condition before the parents sell the house to their child. The house is rented out and the rental value is lower than the free market value. But be careful with this, the tax authorities pay attention to this.
In 2015, there was a lawsuit between parents (she wanted to sell their house to their child) and the tax inspector. The parents appraised the house in the rented condition, so that the value was lower. The child buys his parents’ house and sells it empty.
This gives the child an advantage, as they thought they would avoid gift tax. This is not according to the rules, so the judge agreed with the tax inspector.
If you give a house in its entirety to a child, you pay gift tax on the WOZ value. You can try to transfer the house to your child for the WOZ value.
But beware: there is a very good chance that the tax authorities will come after all because (extra) gift tax has to be paid. The reason for transferring the house for the WOZ value is that it is lower than the actual market value.
As mentioned before, the tax authorities are alert to transactions between parents and children. If there is an advantage with the WOZ value and the free market value, the tax authorities can later demand that you still pay gift tax on this difference.
What can you do to successfully sell your house to your child?
There are two options for organizing everything neatly when you sell your house to your child. We still assume that you want to sell your house to your child for the lowest possible amount.
If there are other people living in the house, selling in a rented state is an option. If this is not the case, you must hope that the WOZ value is favourable.
In both cases you can contact the tax authorities. Then you can show them whether they agree to transfer the house for WOZ value or value in the rented condition.
An accountant or tax specialist could also do this for you. When you have received a response from the tax authorities, you will have a definite answer about which option they will or will not accept when you sell the house to your child.
Another safe option is to simply have a valuation report prepared for the free market value. You are therefore in all cases well covered for the tax authorities and for any difficult questions from the notary.
What is not allowed, but sometimes happens, is that the house is given a major upgrade at the expense of the parents immediately after the valuation report has been issued. Think of a new kitchen, new bathroom, etc. Before the child buys the house from his parents.
In addition, you can give the jubelton to sell your house to your child more cheaply. As a parent, you can donate €106,671 tax-free to each child if that child is going to use the money for a house. With this jubelton you can excellently close a gap between the appraised value and the value for which you want to transfer the home to your child.
However, this arrangement will be changed as of January 2023. From this moment on you can only donate €27,231 tax-free. Furthermore, the jubelton will be completely abolished in 2024.
It is an option to temporarily take the child back into the parental home and rent out the house to a friend. In order to then transfer the house for the value in rented condition. Do not do this! You are committing a wrongful act that the tax authorities will see through.