Selling price too low: taxation on the part of the buyer?
March 2021 – Mr X buys a house from company A, in which his father was a shareholder. According to the tax authorities, the house was sold at a price lower than its real value. The taxman therefore wants to tax the advantage to X as miscellaneous income. The Brussels court called the tax authorities to order.
Below the value
A construction company sells in 2010 several residential units in a new apartment building to family members of a former shareholder.
During an audit of the construction company, the ISI found that the housing units sold to family members were sold at a price lower than the average price per square metre of usable floor space paid by purchasers not related to the company.
The tax authorities wish to tax the advantage thus obtained as miscellaneous income for the buyers.
One of the members of this family, who is in the ISI's sights, namely the son of the former shareholder, objects that he bought the casco house, which explains why the price is much lower. He cannot, however, provide proof of the costs incurred for the completion of the work. His claim is rejected.
The case is then referred to the court of first instance.
What is meant by miscellaneous income?
The court first examines the definition of "miscellaneous income". Miscellaneous income is profits or gains, which result, even occasionally or fortuitously, from services, operations or speculations of any kind or from services rendered to third parties, outside the exercise of a professional activity, with the exception of the normal management of private assets consisting of real estate, portfolio securities and movable assets.
The court considers that this provision does not authorise the tax authorities to tax the taxpayer on hypothetical or future profits or gains. It is not sufficient that there is a question of an abnormal transaction giving rise to an advantage. According to the court, the advantage must also have been expressed in profits or gains.
And in this specific case, the advantage that the taxpayer has enjoyed according to the tax authorities is future and purely hypothetical. The advantage was expressed in profits or profits at the time of purchase. It is not certain that it will be expressed in the future (e.g. through resale).
Two more thoughts
Although the court ruled in favour of the taxpayer in principle, it also found that the taxpayer had in fact paid less than what was stated in the notarial deed. According to the judge, this price difference constitutes a real advantage, which can be taxed as miscellaneous income.
Moreover, it is strange that the tax authorities should attack the buyer. In such a situation, the Income Tax Code also allows the tax authorities to attack the seller and tax him on the amount of the "abnormal and gratuitous advantage" granted.
