{"id":104601,"date":"2024-12-17T04:57:40","date_gmt":"2024-12-17T04:57:40","guid":{"rendered":"https:\/\/teknomers.com\/en\/the-housing-king-waived-tax-on-the-mass-sale-of-housing-estates-news-norway-overview-of-news-from-different-parts-of-the-country\/"},"modified":"2024-12-17T04:57:41","modified_gmt":"2024-12-17T04:57:41","slug":"the-housing-king-waived-tax-on-the-mass-sale-of-housing-estates-news-norway-overview-of-news-from-different-parts-of-the-country","status":"publish","type":"post","link":"https:\/\/teknomers.com\/en\/the-housing-king-waived-tax-on-the-mass-sale-of-housing-estates-news-norway-overview-of-news-from-different-parts-of-the-country\/","title":{"rendered":"The housing king waived tax on the mass sale of housing estates – news Norway – Overview of news from different parts of the country"},"content":{"rendered":"\n

Ivar Tollefsen established himself as a rental king in the capital in the 1990s. Today, he is the largest housing investor in Norway through the company Heimstaden. Heimstaden’s apartments in Norway have had an extraordinary price increase since the company bought them. In the autumn, Tollefsen started a mass sale of these apartments. He can then collect large profits from the price increase. Actually, residential investors must tax 22 per cent of such gains. But Tollefsen and other investors have found a tax trap, which the government calls “undesirable”. Nedre gate 8 on Gr\u00fcnerl\u00f8kka in Oslo is one of many urban gardens that Heimstaden owns. Photo: Hallgeir Aunan \/ Hallgeir Aunan The smart move Housing investors take a smart move before the flats are sold: They convert urban gardens into condominiums. By using several rules on tax-free transfers, residential investors can avoid tax, regardless of how large the gains are. The housing cooperative model through an example For the sake of the thought experiment, let’s imagine a townhouse that was bought for NOK 100 million ten years ago. Bygarden is owned by a property company. All the flats in Bygard have been let, but now the owner of the property company wants to sell the flats. The apartments currently have a total market value of NOK 200 million. This results in a profit of NOK 100 million. Then the seller must initially pay NOK 22 million in profit tax (22 per cent of the profit of NOK 100 million). By using the rules on tax-free share sales and tax-free mergers, the seller can save tax in the following way: 1. A holding company is established which becomes the owner of all the shares in the ownership company, so that the ownership company becomes a wholly owned subsidiary of the holding company. 2. The holding company establishes a co-operative society according to the rules of the Co-operative Society Act. 3. The cooperative buys all the shares from the holding company at the market price at the time of the purchase, which is NOK 200 million. This transfer is tax-free for the holding company according to rules that gains from the sale of shares are tax-free (exemption method). 4. Then a merger (merger) is made of the housing association and the property company. The merger is tax-free according to non-statutory rules on tax-free reorganization. The property company hereby ceases to exist, and the newly formed housing association owns the property. 5. The holding company now has a claim against the housing association, which has not paid for the shares in the ownership company. But since it is the same person who owns the holding company and the housing association, he can choose not to collect the debt. With the sum for which the housing association has bought the shares, a new value has been established for the flats which corresponds to the market value. If the flats are sold at market price, there does not appear to be any profit to be taxed. We are talking about large amounts that become tax-free in this way. Altogether, Heimstaden has converted more than 2,000 flats into housing association shares, the Property Register shows. So far, at least 75 of these apartments have been sold. Heimstaden has sold these for NOK 352 million, according to news’s \u200b\u200breview of the Property Register. Heimstaden’s condominiums, which may be sold in the future, are worth many billions of kroner. Heimstaden has converted over 2,000 flats in Norway into housing cooperative shares. Photo: Fredrik Kampevoll \/ news Communications Manager Ina Karine Hesle in Heimstaden confirms that it has not been long since these city gardens were converted into condominiums: “The properties you are showing were converted into condominiums in 2023 and will be sold at market price,” writes Hesle in a email to news. “No tenants will be affected, as we have only started sale of apartments where the tenants themselves have resigned, or where the lease has expired,” she adds. Heimstaden did not wish to answer the following questions: To what extent is the conversion of the city gardens into housing associations tax-motivated? Does Heimstaden save tax on turning the properties into condominiums before the sale? If so, how much do they expect to save? If so, how much has been saved on this so far this year? This is Heimstaden. Heimstaden is a housing company that mainly deals with letting. In Norway, the company owns approximately 4,000 apartments. In addition, the company owns around 163,000 residential properties in nine different countries, including Sweden, Denmark and Germany. Ivar Tollefsen controls Heimstaden through the investment company Fredensborg. In addition to Tollefsen, several funds are major owners in Heimstaden. Green light from the Swedish Tax Agency Is this legal? The tax authorities have stated several times that this is legal. – What the taxpayer is doing is just using different parts of the tax law. And then put it into a system. The disadvantage is that Norway receives lower tax revenues. That’s what Eivind Furuseth, head of the department of legal studies at BI, says. He has researched the Norwegian tax system. Eivind Furuseth at BI says it is the politicians’ responsibility to change the rules if they think the gain should be taxed. Photo: Celina Ekholt \/ news Furuseth does not think the idea behind the law was that garden owners should save tax on profits. – It is not as if the tax authorities have arranged for this. This is what someone has found out is a clever idea, he says. – Housing investors get big tax benefits by using the housing association model. How do you rate this? – If the politicians believe that the tax rules should capture and tax that profit, they must change the tax rules. Taxpayers or investors are not doing anything wrong, he replies. The housing cooperative model through an example For the sake of the thought experiment, let’s imagine a townhouse that was bought for NOK 100 million ten years ago. Bygarden is owned by a property company. All the apartments in the city garden have been rented out, but now the owner of the property company wants to sell the apartments. The apartments currently have a total market value of NOK 200 million. This results in a profit of NOK 100 million. Then the seller must initially pay NOK 22 million in profit tax (22 per cent of the profit of NOK 100 million). By using the rules on tax-free share sales and tax-free mergers, the seller can save tax in the following way: 1. A holding company is established which becomes the owner of all the shares in the ownership company, so that the ownership company becomes a wholly owned subsidiary of the holding company. 2. The holding company establishes a co-operative society according to the rules of the Co-operative Society Act. 3. The cooperative buys all the shares from the holding company at the market price at the time of the purchase, which is NOK 200 million. This transfer is tax-free for the holding company according to rules that gains from the sale of shares are tax-free (exemption method). 4. Then a merger (merger) is made of the housing association and the property company. The merger is tax-free according to non-statutory rules on tax-free reorganization. The property company hereby ceases to exist, and the newly formed housing association owns the property. 5. The holding company now has a claim against the housing association, which has not paid for the shares in the ownership company. But since it is the same person who owns the holding company and the housing association, he can choose not to collect the debt. With the sum for which the housing association has bought the shares, a new value has been established for the flats which corresponds to the market value. If the flats are sold at market price, there does not appear to be any profit to be taxed. Call the tax measure “unwanted” In July, Finansavisen wrote about Heimstaden’s planned sale, and how the cooperative model would make the gains tax-free. Finance Minister Trygve Slagsvold Vedum (Sp) said he was aware of the housing investors’ tax moves. “I will therefore assess how such undesirable tax planning can be counteracted, in order to ensure a fair and well-functioning tax system”, he told the Storting. In August, Finance Minister Trygve Slagsvold Vedum (Sp) said that housing investors’ tax-free sale of apartments was undesirable. Photo: Cicilie Sigrid Andersen \/ news After Vedum said this in August, Tollefsen has sold houses for several hundred million kroner. So far, the government has not come up with measures. No one in the Ministry of Finance will be interviewed by news. In an e-mail from the press department, State Secretary Erlend Grimstad (Sp) states: “The cooperative model is used by a large number of housing developers, and we believe it is important to find a solution that works well. We are working on that. It is too early to say anything now about when the results of this work will be presented.” Center Party politician and state secretary Erlend Grimstad. Photo: Senterpartiet Grimstad adds: “If someone has to pay tax at the sale of a property, while others avoid tax in the same situation because they have the resources needed to organize themselves in a way that allows them to avoid paying tax, it can perceived as unreasonable and unfair”. news has asked the following questions, without getting an answer: – This has been a known way of saving tax for a long time, why has nothing been done about it before? news has submitted to Heimstaden that Vedum calls the tax measure housing investors use as undesirable. Heimstaden has also received questions about what the consequences will be if the government makes changes to the housing association model. Heimstaden has not commented on this. Billions in surplus – 5.8 million in tax How big the gains Heimstaden gets through the sale of apartments is difficult to say. But the calculations show that the added value has produced large profits. Heimstaden’s accounts for Norway show around NOK 3.7 billion in surplus between 2017 and 2023. NOK 2.7 billion of this surplus was value added. Heimstaden paid NOK 5.8 million in company tax from 2017 to 2022, according to figures from the Norwegian Tax Agency. One reason why Heimstaden has a few million in tax on billions in surplus is that capital gains are not taxed until a property is sold. But by using the housing cooperative model, Heimstaden avoided tax on the value added to the apartments they sell. Don’t think it’s a “smotthole” How common is it for housing investors to use the housing association model before selling? news has mapped unsold shares in housing associations that were founded in 2023 and 2024, and which are registered with a company. In total, over 3,600 housing cooperative shares have been registered, the Property Register shows. Lawyer and partner Roger Engebretsen in Sands Advokatfirma has helped several clients who own rental gardens. – It is a general trend that many of those who own this type of garden want to sell, he says. Higher interest rates and high tax on letting in combination with wealth tax mean that it can be more profitable to sell rather than rent out, says Engebretsen. He says that it has become more common for city garden owners to want to convert tenements into condominiums before the sale. – There has been more focus on the cooperative model in recent years. Roger Engebretsen at Sands Advokatfirma says the cooperative model has received increased attention in recent years. Photo: SANDS Engebretsen points out that the Tax Agency has been asked several times whether the cooperative model is legal, which they have confirmed that it is. – This is not a tax loophole in any way, he says. Published 17.12.2024, at 05.52
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