Income from the sale of property

What it means

For an individual, income from the sale of property is what the seller actually received, less the provable expense: normally the acquisition price and the documented costs of the sale. It is taxed as other income unless the property sat in business assets.

The holding period decides: five years after acquisition the sale is exempt and never appears in the return. The exemption also has special cases, such as inheritance in the direct line, where the deceased’s holding period counts; for property withdrawn from business assets the clock starts at the withdrawal.

Transferring a co-ownership share also counts as a sale, and in an exchange of properties the income is the value of what the seller received in return. The five-year period runs separately for each property and each share, from when it was acquired, so a half of a flat bought later can be treated differently from the original half.

How it works in practice

The date of acquisition follows the entry of ownership in the land register, not the signing of the contract. The income belongs to the year in which it was received: a December contract paid in January goes into the following year’s tax return.

Expenses can be claimed only up to the amount of the income, so a loss on the sale is not deductible. Taxable proceeds also enter the annual health insurance reconciliation, and after the transfer both seller and buyer must file a property tax return with the municipality by the end of January.

When a flat that was let for years is sold, we first check whether it was included in business assets, for example because it was depreciated against rental income. That decides when the five-year period starts and what can be deducted as an expense on the sale.

What to watch out for

The costly mistake is selling inside five years on the belief that no tax arises because the money goes into a new home. Slovak law knows no such rollover: the whole difference between the sale price and the acquisition is taxed, a health levy is added, and a penalty for the unfiled return comes on top.

Another mistake is failing to claim expenses the seller was entitled to simply because the documents were not kept: the estate agent’s commission, a valuation report or legal fees for the sale. Without them only the acquisition cost shown in the contract is accepted, and the tax comes out higher than it had to.