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In Germany, another sweet way for a company to avoid paying property taxes is that a good percentage of relevant properties are owned not by the company itself
by kleiba 6y ago
In Germany, another sweet way for a company to avoid paying property taxes is that a good percentage of relevant properties are owned not by the company itself but by a subsidiary "company" specifically founded solely for that purpose.
Then, when a property is to change hands, it isn't actually sold at all. Instead, the subsidiary company changes owners. Actually not even that, only the majority of the ownership is transferred, or else some other tax laws would kick in. But this way, if you do it right, almost no taxes need to be paid by either party.
- dahfizz 6y agoDoesn't the subsidiary which owns the property still have to pay the tax for the property they own? I don't understand how this decreases total tax paid.
- akiselev 6y agoThey still pay the annual property tax but avoid the real estate transfer tax and the speculative tax, which can be 5-10 years worth of the property tax.
- compsciphd 6y agomy guess: in some places there are "purchase taxes" on real estate. so if you don't purchase the real estate, just the company that owns it, you don't pay the purchase tax as the real estate itself never changed hands.
- joshlemer 6y agoYou avoid land-transfer taxes.
- philsnow 6y agoThere's some sort of similar law in California where transferring whole ownership or majority ownership triggers re-assessment of value for tax purposes, and if you can manage to somehow sell a house without triggering a re-assessment / the property keeps the old assessment even though years of appreciation have happened, the buyers can save a ton of money on property taxes. (at least, this was my completely amateur reading of the law at the time) The last time I bought a house, I thought about creating one or more LLCs solely to own the house, so that when it came time to sell the house, I would sell each LLC one at a time to the buyer. Of course the idea falls down completely in practice in a number of ways [0], but for some reason my mind can't help but consider the law as a puzzle. [0] you'd never find a buyer who was willing to do this weird LLC purchase instead of buying it through a realtor. also, the buyer would have to have some assurance that, after selling you one or two of the LLCs, you'd sell the remaining ones to them as well under the same terms... but that sounds a lot like a contract to sell all three, which is transferring whole ownership. absolutely any judge would look at this and be very cross with me. All of this is completely aside from the question of whether it's immoral to try to dodge property taxes to begin with (though in this case, I wouldn't be, I would be facilitating the next buyer to do so).
- sjg007 6y agoThe LLC trick doesn't work because you get reappraised when ownership changes at 50%. I am sure there are schemes to work around this but I think California is cracking down on it. There are parent-child exclusions though and some weird rules with trusts.
- varispeed 5y agoI wonder why such laws exist when someone, who can afford solicitors who know these quirks, can avoid paying tax versus someone who does not have as much money to do such setup has to pay. Laws should have equal effect on the poor and the rich, so why German people don't demand that this is wholly scrapped? Either everyone should pay tax or no one* (the poor shouldn't pay tax).