Converting a property into flats for financial gain is the main motive of Property Samba.
However, some people decide to lease the apartments and thus maximize both rental income in the short term and profit on sale in the long term, to get the maximum possible gain.
Regardless of the final intention of the flats, the tax implications of the conversion project vary greatly due to the distinctive nature of the circumstances of the project itself.
Every country or state imposes different taxes on converted apartments, so it is extremely important that you talk to an accountant when you do your feasibility study.
The first thing you will be interested in is the capital gains tax rate on real estate in the country or state where the property is located.
Capital Gains Tax is the tax you have to pay if you make a profit ('gain') when you sell (or 'dispose of') property that's not your home, for example:
buy-to-rent properties
business premises
land
inherited property
Tax Relief
Once the apartment is transferred in your name, you will be exempted* from paying the Capital Gains Tax when you sell it, if you meet all of the following terms:
If you have one property in your name and you have lived in it for the entire duration of the ownership;
If you haven't rented it;
If you have used it solely for residential purposes (you haven't used any part of it for business purposes);
Its total size is less than 5,000 square meters;
You didn't buy it to make gain (which is something that all developers do)
*Please note that all of the aforementioned terms and conditions for tax exemption vary in different states and countries. To check the prerequisites for real estate tax exemption in your country or state, please consult your local IRS (Internal Revenue Service) officials or Tax Authority office. Any physical and business entities that will perform the Property Samba Project in any US state can address all of their queries about taxes to the official US IRS website (http://www.irs.gov/), or get information about how you can get in touch with your local IRS Office (http://www.irs.gov/uac/Contact-Your-Local-IRS-Office-1).Any physical and business entities that will perform the Property Samba Project in the UK can get detailed information about real estate tax conditions at the following link (https://www.gov.uk/government/organisations/hm-revenue-customs), which is the official website of the UK's tax authority.
When you need to pay taxes
If you do not qualify for complete residential tax relief, then you will certainly have to pay taxes on your gain.
The gain is the difference between the amount you paid for the home as a buyer and the amount you received as a seller.
However, since part of the homeowner's property was signed over in your name without you actually purchasing the apartment, you will probably need to pay tax on the difference between the market value before construction and the selling price of that part of the house