In December 2020, the Government commissioned the National Land Survey (Lantmäteriet) to investigate the conditions for introducing a general stamp duty obligation on the acquisition of real estate through, among other things, property formation. In the spring of 2022, Lantmäteriet has published a report with proposals for the introduction of a stamp duty obligation for the acquisition of real estate through property formation measures, similar to the stamp duty that arises when acquiring real estate through, for example, purchase or exchange.

Under the current rules, stamp duty is payable on the acquisition of immovable property (or leasehold) through, inter alia, purchase or exchange. For legal entities, the current stamp duty rate is 4.25 percent of the value of the acquired property. For tenant-owner associations and natural persons, the stamp duty rate is currently 1.5 percent. The value on which the tax is calculated is determined by comparing the purchase price with the property’s assessed value in the previous year. The higher of these two values is considered to be the value of the acquired property and the starting point for the stamp duty calculation.

The trigger for stamp duty to be paid on acquisition – i.e. the purchase or exchange – is that the application for title deed is granted. In the case of acquisition of immovable property through property formation measures, such as property regularisation and splitting, the application for title deeds should not be made, which is why stamp duty is avoided at the same time. Against this background, the National Land Survey proposes in its report that the stamp duty obligation be extended to also include the following property formation measures: (i) land acquisition followed by property formation, (ii) property regulation acquisition and (iii) splitting acquisition.

Land acquisition followed by property formation

Through property formation, a property acquired by purchase or exchange can be combined with a property for which the buyer already has title deeds. The acquisition is then followed by an application for either land regularisation or divestment with subsequent merger instead of application for title deed.

Once the property formation measure has taken place, the added property is covered by the existing title deed, which is why stamp duty does not arise under current law. In these cases, the initial acquisition is taxable but the event that triggers stamp duty, i.e. the granting of title deeds, never occurs when the acquisition is accompanied by a subsequent property formation action.

In order to extend the stamp duty liability to include property formation after a taxable acquisition, Lantmäteriet therefore proposes that tax liability should arise when information about property formation is registered in the land register.

Property regulation acquisitions

Property regulation refers to the transfer of immovable property from one or more properties to one or more properties. If the transferring real estate and the acquiring real estate are owned by different persons, an acquisition takes place which, according to current law, is stamp duty-free. Lantmäteriet therefore proposes that such acquisitions should be subject to stamp duty and that flat-rate tax should apply, whereby the tax should be based on the market value reduction of the transferring property in the transaction.

However, Lantmäteriet proposes a general tax reduction in order to limit an inhibiting effect on appropriate property regulations. For natural persons, this shall mean that taxation shall only take place on the part of the value that exceeds SEK 1,000,000 and for legal persons SEK 350,000.

In the case of a property regulation acquisition, no documentation is usually prepared that can be used for taxation in the ordinance. Lantmäteriet touched on the issue of how data should be collected and who should be subject to the obligation to provide information, but did not make any concrete proposals on how the issue should be handled, saying only that this should be investigated separately.

Splitting acquisition

Splitting a property means that the property is divided into several lots that can then form their own properties or be included in other properties through property formation measures. Under the current rules, a splitting acquisition is tax-free in the case of a so-called sham splitting. A sham splitting causes a jointly owned property to be split, after which one of the co-owners is allocated a larger ownership in the property in the form of a bigger splitting lot than he had in the original property.

Lantmäteriet proposes that splitting acquisitions should be subject to stamp duty and that the tax rate should be calculated on the market value of the share of the splitting lot that has been acquired. Furthermore, Lantmäteriet proposes that the same type of tax reduction as proposed for property regulation acquisitions should apply to the splitting acquisitions. In this situation, too, Lantmäteriet identifies the need for a special investigation to determine how the procedure for collecting taxes should be carried out.

What can be expected going forward?

Lantmäteriet’s report does not indicate a proposal for a date for the introduction of new rules.  Lantmäteriet estimates that the relevant authorities need one year to prepare organisational measures as a result of the new law.  Furthermore, Lantmäteriet believes that there is a need for further investigation before the proposal can enter into force, which gives an indication that implementation and entry into force will take more than a year.

Lantmäteriet also discusses the need for transitional provisions and proposes that new rules be applied to acquisitions where an application for property formation has been received after the entry into force of the proposal’s provisions.

Our comments

The question of a general stamp duty on the acquisition of immovable property through property formation measures has previously been raised, but postponed for various reasons. However, the proposal now submitted seems to bring the rules on stamp duty closer and closer.

In the event that Lantmäteriet’s proposal results in new legislation, both legal and natural persons can expect increased costs in connection with the acquisition of real estate. New legislation will also have an impact on the possibility of achieving an appropriate division of real estate, in particular with regard to forestry and agriculture and in inheritance cases.

Finally, a consequence of the new regulations is expected to be an increased flow of applications for property formations and also long processing times at Lantmäteriet before the entry into force.

Do you have questions about what applies to real estate transactions and property formation measures, or do you want to know more about real estate law in general? Get in touch with our specialists in real estate. You can reach them via the links below.