Observatory › Tax and returns › Sale of building land by private individuals: the capital gain and deductible costs

Sale of building land by private individuals: the capital gain and deductible costs

The sale of building land by a private individual always gives rise to a taxable capital gain. The practical difficulty lies in correctly determining the base cost and the costs that may be deducted.

The sale for consideration of land capable of being built on gives rise to a capital gain that is always taxable as other income, irrespective of how long the land has been held. The planning classification of the land at the time of sale is decisive.

How it is calculated

The gain is the difference between the consideration received and the acquisition cost (or the value declared where the land was acquired without payment), increased by the related costs: acquisition charges, notary fees, any infrastructure charges and other directly connected expenses.

Revaluation and the substitute tax

Where it is available, revaluing the land on the basis of a sworn valuation and paying the imposta sostitutiva (substitute tax) allows the base cost to be updated and the taxable gain reduced. It is a choice to weigh up early, comparing the cost of the revaluation against the expected saving.

• Art. 67(1)(b) TUIR – capital gains on building land.
• Art. 68 TUIR – calculation of the gain and related costs.
• The rules on redetermining the value of land (imposta sostitutiva).