Buying a new flat before selling the old one

Financing the purchase of a new flat with the proceeds from selling our current property is a route many people take. This manoeuvre gives us the funds we need, but it is subject to legal restrictions. As a result, we may be forced to pay 19% PIT. Here are our tips on how to go about financing the purchase of your future property.

A flat from the primary or secondary market

When buying a new flat, many formalities depend on where the new home comes from. If it is a property from the primary market, we have to pay the entire sum at once. The exception is a flat that is still under construction by a developer, where we can afford to pay for it in instalments. This gives us extra time to find a buyer for our current flat. What matters most at this point is deciding to sell the property early enough.

Working with an estate agency is a great help for the seller: the agency will prepare a proper sales listing for the home and provide additional materials that help persuade potential buyers. The REMAX Gold office in Katowice offers professional Home Staging, which attracts the attention of a much larger group of people than standard methods of promoting a property.

What about income tax?

Under Article 21(1)(131) of the Personal Income Tax Act, income from the sale of real estate for consideration is exempt from tax if, within no more than two years from the date of the sale, the money received has been spent on one's own housing purposes. The trade press has repeatedly reported cases in which property owners, after selling a flat, were called on by the tax office to pay tax. The owners naturally relied on the above provision and the relief that follows from it. Yet that is not always enough for the officials to agree with us. Bear in mind that although we may not escape a battle with the tax authorities, it is still worth knowing our rights.

Case law from known appeals against tax authority decisions shows that a person claiming the relief must meet three conditions: obtain income from a specific source (the sale of a property), spend the money within two years of the date of the sale, and use it for their own housing needs (the purchase of a new property). In that case we are entitled to the tax relief and do not have to pay 19% income tax (PIT) on the sale of the property we owned.

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How to buy a flat before selling the old one?

Remember that there are many ways to finance a property, and the key to successfully buying a new home is preparing the financing properly. If we use the proceeds from selling the old flat to buy a new property within the two-year window, we must bear in mind that we have to be consistent and spend all of the proceeds from the sale on our own housing purposes.

Contact a representative of the REMAX Gold office and find the ideal flat for your family!