Guide for entrepreneurs: how to buy a home from your own company
Home ・ 07.01.2025
Small and micro-entrepreneurs often find themselves purchasing property under their company’s name due to practical reasons or time constraints. But what happens when you want to turn that property into your personal home? This process can come with its share of challenges. Karin Ossipova, Head of Home Loans at Coop Pank, provides advice on how to approach this situation efficiently.
The best way to buy a home is always as an individual—it’s simpler, more cost-effective, and tax-friendly, especially when using a home loan. However, obtaining a home loan requires demonstrating repayment ability, which might need some preparation.
For instance, if you’ve kept your salary low to optimize expenses, you may need to increase your income before applying. Additionally, the bank will review your company’s financial health.
What to do if the property was purchased with a business loan?
If the property was purchased under the company’s name using a business loan, and you now plan to transfer it to your name, the best option is to apply for a home loan. This allows you to buy the property from the company through a sale-purchase transaction. Given that business loans usually have higher interest rates and shorter terms, this approach can help reduce monthly expenses significantly.
It’s also important to address how the property is used while it’s under the company’s name. If it’s used for personal purposes, paying market-rate rent to the company is essential to avoid tax complications.
Avoid tax issues: sell at market value
If you want to buy property owned by your company, the transaction price is critical. Transactions below market value require understanding tax implications, as they may involve income and fringe benefit taxes.
For instance, if you’re a company owner but not an employee or board member, only income tax applies. If you are also a board member, the transaction is considered a fringe benefit, subject to both income and social taxes.
Taxes are calculated based on the difference between the property’s market value and the sale price. The larger the gap, the higher the tax liability. Notably, market value is not the price seen in property listings but the value determined by an independent property valuation expert.
Example of Tax Calculation
If we assume that the property’s market value, based on the appraisal, is €150,000 and the company owner, who is also a board member, plans to purchase the property from the company at its original purchase price of €100,000, the taxable difference is €50,000 (the gap between the market value and the sale price). Taxes are calculated as follows:
- Income tax: 22/78 (equivalent to 28,2%) of €50,000 = €14,100
- Social tax: 33% of (€50,000 + €14,100) = €21,153
Total fringe benefit tax for this example: €35,253.
As the example shows, transactions below market value are possible, but the financial advantage is negligible since the resulting tax liability often offsets most of the savings. When an entrepreneur applies for a home loan to purchase property, the bank will also verify whether they are aware of the tax regulations for transactions conducted below market value.
Understanding tax rules is particularly crucial for small and micro-entrepreneurs, whose income is often directly tied to their company’s financial health. If a business owner is unaware of the tax obligations associated with such a transaction, an unexpected tax liability could significantly impact the company’s financial position. This, in turn, may affect the owner’s ability to service their home loan in the future.
What if you’ve provided a loan to the company?
If the property was purchased using a loan provided by the owner to the company, the purchase price can be offset by this loan. This means the owner’s loan can be counted as part of the payment. Coop Pank recognizes the offset as a down payment for the home loan. Given the legal complexities, consulting a notary early in the process is highly recommended.
Before purchasing property from your company, it’s essential to thoroughly research all tax implications and consult with a loan manager and, if necessary, a notary. Their advice will help you find the best possible solution and avoid unexpected issues.
If you’re planning to buy property from your company, Coop Pank’s experts are here to help—together, we’ll find the perfect solution for you!