What does commercial property trading mean?
Property trading is deemed to be a commercial activity if the property trading goes beyond the scope of ordinary asset management and is carried out with the intention of generating income from the planned purchase and sale of properties. Gainful employment is deemed to exist if the taxpayer trades in real estate on a full-time basis or in close connection with the full-time activity on a part-time basis. However, a gainful activity can also be interpreted as only occasionally or sporadically buying and selling properties if the taxpayer endeavours to make a profit from the property market in the same way as a part-time self-employed person.
The assessment as a professional property trader by the tax office has serious consequences:
- In addition to property gains tax, the sales profit is also subject to direct federal tax and AHV for self-employed persons.
- The assessment also applies to all subsequent property sales and income from properties of the individual heirs, including those not related to the community of heirs.
The indications of commercial property trading are
- Frequency of the transactions
- Short period of ownership
- Utilisation of borrowed funds
- Connection with the professional activity
- Specialised knowledge
- Regularity or systematic nature of the procedure
- Establishment of condominium ownership. The heirs sell not just a single property as such, but various condominium units. Each sale counts for itself
- Profit-increasing activities of the taxpayer
- Re-utilisation of the sale proceeds
- Participation in a partnership or simple partnership.
It is therefore essential to seek professional advice before taking any legally relevant action on a construction project.