When buying a new-build property, one of the key pieces of information a buyer must check is the tax treatment of the property. This determines the final price you will pay for the property.
In Slovenia, two VAT rates apply to the construction and renovation of property: a reduced rate (9.5%) and the standard rate (22%). For residential property, the reduced VAT rate of 9.5% may apply under certain conditions; in other cases, the standard rate of 22% applies.
Which rate applies to a purchase depends primarily on the type of property, its intended use, its usable floor area and other conditions laid down by law.
When is 9.5% VAT charged on the purchase of a new-build property?
The reduced rate of 9.5 per cent may be applied to residential properties intended for permanent occupation which meet the conditions under which they are regarded as forming part of housing policy.
The usable floor area is also a relevant factor in this regard.
Apartment in an apartment building
For an apartment in an apartment building, the limit is 120 m² of usable floor area.
If the apartment also meets the other prescribed conditions, 9.5% VAT may be charged on its sale.
Detached house
For a detached house, the limit is 250 m² of usable floor area of the residential building.
In this case, too, floor area alone is not the only criterion. The intended use of the building, its classification and other conditions laid down by law are also important.
Detached house, Gornja Radgona
What does ‘usable floor area’ mean?
When assessing the conditions for a reduced VAT rate, it is not the gross or total area of the property that is decisive, but the usable area, as defined by the regulations.
The regulations stipulate that, for this purpose, the usable area is the sum of the areas of the living spaces. The CC-SI classification is used when classifying a property.
Therefore, when checking whether a property meets the conditions for a 9.5% VAT rate, it is not sufficient to simply look at the total floor area stated in the advertisement.
When does the 22% VAT rate apply?
If the conditions for applying the reduced rate are not met, the standard VAT rate of 22% applies.
This may be relevant for properties not intended for permanent residence, certain business premises and residential properties that do not meet the conditions for the reduced rate.
In the case of larger flats, therefore, it is not possible to conclude that the 9.5% rate will apply simply on the basis that the property is a new build.
Overview: 9.5 per cent or 22 per cent? A comparative overview: 9.5% vs. 22% VAT
| Service / Goods | VAT rate |
| Construction of a house under 250 m² (contractor’s labour and materials) | 9,5 % |
| Construction of a flat under 120 m² (contractor’s labour and materials) | 9,5 % |
| Buying materials from a shop to fit them yourself | 22 % |
| Construction of a house with a usable floor area of over 250 m² | 22 % |
| Building commercial premises or a holiday home | 22 % |
For each individual property, it is always necessary to check the specific tax treatment, as the type of property or its floor area alone is not necessarily sufficient to determine the VAT rate.
Semi-detached house, Ljubljana Dravlje
VAT or property transfer tax?
When purchasing property, the issue of property transfer tax (DPN) often arises.
In the case of new-build properties, where VAT is charged on the sale, the 2% DPN is not, as a rule, charged on the same transaction. DPN is primarily relevant for property transactions where VAT is not charged.
It is therefore important to check, when making a purchase, whether VAT is already included in the stated sale price and which rate applies.
For more detailed information on DPN, please see our article – https://bazarealestate.com/en/property-transaction-tax/
What should you look out for as a buyer?
Before signing a contract to purchase a new-build property, you should check the following in particular:
Does the price include VAT?
Check whether the price quoted is the final price, including VAT.
What VAT rate applies?
For new-build residential properties, either the 9.5% or 22% rate may apply, depending on whether the legal conditions are met.
What is the usable floor area?
When checking the conditions for the reduced rate, the usable floor area is important, not just the gross floor area.
What is included in the price?
When buying, also check how the associated parts of the property are treated for tax purposes, such as a parking space, garage, storage room or other parts of the building.
Why is VAT important when comparing new-build properties?
When comparing several new-build properties, it is not enough to compare only the advertised prices.
It is important to check whether the price:
- whether the price is quoted inclusive or exclusive of VAT,
- whether a 9.5% or 22% VAT rate applies,
- whether the price includes a parking space, storage room and other associated features,
- and whether there are any other costs associated with the purchase.
Only in this way can you compare the actual final price of each property.
4-room apartment, Slovenska Bistrica
Are you buying a new-build property?
When buying a new-build property, we can help you check key details about the property, its price and the terms of sale. At BAZA Agency, we assist you in selecting and purchasing a property and guide you through the entire process.
For further information, please contact us on 00386 40 626 131 or at tajnistvo@bazarealestate.com.
This article is for information purposes only and does not constitute tax advice. When making a specific purchase, the tax treatment must be checked in light of the type of property, the project documentation, the terms of sale and the applicable legislation.
