K7 - Sale of commercial property, the Results tab

Under K7 - Sale of commercial property, the Results tab, you can see the result of the sale and supplement with other information that affects the result.

Depreciation that has taken place against a replacement reserve for land

If you used a so-called replacement reserve for land when you bought the property, you must reverse an amount when calculating the profit. You must reverse an amount that corresponds to the provision that you made to the replacement reserve for land in that point of time.

Note that this only applies to the replacement reserve for land. You can also make a provision for e g replacement reserves for buildings and land development. Provisions for these funds shall not affect the calculation of profits. Deducted amounts related to these funds must instead be taken into account when reversing into the business.

Reversal of declined value

If you have sold the property at a loss, a certain part of the allowable depreciation deduction must be reversed in the profit calculation, instead of being reversed in the business.

Reversal of deferred tax amount

When you sell your property, the previously granted deferral amount belonging to the property must be reversed.

Deficit in business

If all or part of the property is sold at a profit and there is a deficit in the business where the property is currently included, the deficit must be deducted from the profit. Note that this rule is mandatory, meaning that you have to reduce the profit by the deficit. It is not necessary that the deficit in the business refers to the property sold.

However, the loss deduction must not exceed the profit. If the deficit is greater than the profit, the remaining part of the deficit must be rolled on as usual in the business.

Results

Profit is transferred to basis INK1 field 7.7 and loss to field 8.6.

A profit is taken up for tax purposes up to 90% in the income category capital and corresponds to a tax of 27%.

A loss is taken for tax purposes (deductible loss) up to 63% in the income category capital.

Deductions to be reversed to the business

Improving repairs and maintenance

Costs for improving repairs and maintenance on commercial properties may be deducted in the profit calculation if the deductions for the expenses meet one of these conditions:

• The expenses are reversed in the income category business activities.

• The expenses have already been reversed to the income category business operations because a property that was previously a commercial property has become a private residential property.

Costs for repairs and maintenance are deducted on an ongoing basis in the business. Deductions relating to the sales year or the five previous tax years shall be reversed to the business if the property is in better condition due to the measures at the time of sale than at the beginning of the fifth tax year before the sale year.

Depreciation deduction

The profit calculation is basically the same for the sale of commercial property as for the sale of private residential property. But when selling commercial properties, one considers, among other things the depreciation deductions etc that have been made in the business during the time you have owned the property (through so-called reversals).

During the time you have owned the commercial property, you have had to make deductions in the business operations for a certain part of the property's acquisition cost. You have done this through annual depreciation deductions. When you are now calculating the profit, you do not take into account the depreciation deductions. Instead, the profit is calculated on the basis of the original acquisition cost. In order for you not to receive a double deduction (both depreciation deduction and high acquisition cost), you must reverse the allowed depreciation deductions. You do this through a tax adjustment in the report of the business (at R26 on form NE).

Other deductions

When you sell a commercial property, you must also reverse forest deductions made, deductions for substantial reductions and deductions for depreciation against a replacement reserve and similar funds. You deduct the deductions through a tax adjustment in the business (at R26 on form NE).

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