What is the market value adjustment


With the contested decision, the authority in question dismissed the complainant's appeal against, among other things, the decision on income tax 2001 as unfounded and changed the contested decision to the detriment of the complainant. As far as relevant to the complaint, she stated in the reasoning that the complainant had brought his installation company, run as a sole proprietorship (profit determination in accordance with Section 4 (1) of the Income Tax Act 1988), into a GmbH on October 1, 2001, of which he was the sole shareholder and managing director . In the course of an audit by the tax authorities covering the years 2000 to 2002, the following findings were made with regard to the removal of the company property: The operational part of the building constructed in 1994 and 1995 was at the book value instead of at the partial value on September 30, 2001 when the sole proprietorship was brought in has been taken over into private assets. In the course of the audit, an appraisal report by an expert was submitted, according to which the company building had a market value of 3.100.000, - calculated from the material value and the income value minus a discount for the market value adjustment. However, the opinion could not be accepted insofar as


the valuation did not take place on the key date of the extraction on September 30, 2001, but on January 1, 2004;


a private living room on the upper floor was included in the calculation of the new building value;


the assumed new building values ​​per cubic meter do not correspond to the actual conditions;


when determining the intrinsic value, a discount of 25% for lost construction costs was made without any justification;


the depreciation of age was taken into account with 12% (based on a service life of 60 years and an age of 10 years) instead of correctly with 6% (actual age: 6 years);


a monthly rent of just S 17,000.00 was used to determine the earnings value, although E.O.GmbH actually paid S 50,000.00 a month and an amount of

S 30,000 .-- seems appropriate and


an interest rate of only 4.5% instead of the correct 5.5% was used to determine the capitalization factor.

Taking into account the factors mentioned, a market value of S 4.308,000.00 calculated as the mean value of the asset value (S 4.896.000, -) and the income value (S 3.721.000, -)


to bring in approach.

In the appeal, the complainant had submitted that the partial value of the company building was S 3.800.000, - on the basis of the expert opinion, which has since been adapted. In this adapted report, the expert took into account the auditor's objections insofar as the valuation was based on the time of removal, the proportionate production costs for the private living room on the upper floor were eliminated and the calculation of the discounted earnings value based on a monthly rent of S 30,000 , - as well as a capitalization interest rate of 5.5%.

In the recital, the authority in question stated that the complainant had taken over the operational part of the building into the private property in the course of bringing his sole proprietorship into the GmbH and subsequently rented it to the GmbH. Such a transfer of business assets into private assets constitutes a withdrawal within the meaning of Section 4 (1) third sentence of the EStG 1988, which, according to Section 6 (4) EStG 1988, is to be assessed at the partial value at the time of the withdrawal. The expert commissioned by the complainant calculated in the adapted report for this purpose a building value of S 3,876,000.00 as follows:

Material value:

Net new building value



lost construction costs (25%)


- 1,251.200,--

New building value



Value deduction (6%)


- 225.216,--

Construction time value



Earned value:

Annual income (S 30,000.00 per month)



Discount expenses (24%)


- 86.400,--



Capitalization factor 5.5% over 50 years



Earned value



Rounded construction value (without basic share)



Earning value rounded








Discount adjustment property market (5%)


- 204.000,--

market value



Deviations from the auditor's calculation, which would have resulted in a market value of S 4.308,000.00, exist insofar as the auditor determined the new building value at S 5.208,000.00 and of this only the age-related devaluation (6%) but not the lost construction costs ( 25%), have taken into account a share of the income due to the land (S 53.794, -) when determining the discounted earnings value and have not made a deduction due to a drop in value on the property market.

The following should be stated in detail:

Material value:

The auditor had used a uniform cubic meter price of S 4,000.00 for the basement and the ground floor and a square meter price of S 2,000.00 for a canopy. The expert, however, had used cubic meter prices of S 2,400.00 (basement) and S 2,600.00 (ground floor) for the basement and the ground floor and a square meter price of S 1,500.00 for the canopy and individual items (foundation, lift, Flat roof, surrounding work) added separately. According to the auditor's calculation method, the new production costs would amount to S 5.208,000.00, according to that of the expert it would amount to S 5.004,000.00. In addition, the expert made a discount of 25% for lost construction costs from the calculated new construction costs. In addition, the expert submitted that the building's floor plan had to be adapted to the irregular base boundary and that the poor subsoil meant that considerable expenses were required for the foundation. This is appropriate because the high "start-up costs" can never be capitalized in the market value. Only if there is a technical benefit with a further expansion option, a corresponding part of the foundation can be included in the construction time value. The irregular floor plan and the room heights were also adapted to the existing operation due to a lack of space. In the event of a change in the company or the liquidation, these factors would constitute a considerable hindrance to the determination of the value. The division of space should also be taken into account if the new building is to be used for business purposes alone, as well as the fact that there is no surrounding area (basic reserve).

In the preliminary ruling on the appeal, the tax office pointed out that the only obvious additional costs for foundation and excavation securing in the requested invoice from the construction company were those of around S 140,000.00 for the underpinning. No such additional costs are included in the cubic meter prices used. A discount should therefore not be made.

The complainant had pointed out that the expert had used the actual construction costs to determine the new building value (S 5,260,800.00), which according to the accounting would have been S 5,223,170.12. He also pointed out that the unfavorable location of the property resulted in an increased construction value, which is why a discount of 25% should be made because a possible subsequent user would not compensate for these disadvantages.

In the end, however, nothing could be gained for the complainant. Apart from the fact that the expert also used flat-rate cubic meter prices in his report, the new production costs determined there could not be used as a basis for the determination of the material value, especially with regard to the actual production costs mentioned. The complainant put the actual production costs at S 5,223,370, - in the preliminary appeal decision, the tax office had the production costs incurred in the years 1994 to 1997 as S 2,461,040.87 (1994), S 2,008,296.38 (1995), S 364,225.26 (1996) and S 141.824.90 (1997) numbered, so a total of S 4,975,387.41. The difference is likely to be due to the fact that the amount quoted by the complainant also includes the costs for the upper floor to be removed. However, if the manufacturing costs incurred in 1994 and 1995 were essentially S 4,975,387.41, then the value of S 5.004,000 calculated in the report would be equivalent to the fact that in the years from 1994 to 2004 there was no de facto price increase would have occurred. Such an assumption stands apart from any reality.

In the preliminary ruling on the appeal, the tax office had extrapolated the new construction costs from the actual construction costs using the construction cost index and, after deducting additional costs for securing the excavation (S 140,000.00), calculated an amount of S 5,646,081.18. Such a method can in principle be regarded as suitable in particular if there were only a few years between manufacture and the valuation date. In such a case, however, according to Kranewitter (property valuation, 5th edition, page 68), it is not the building cost index but the lower building price index that should be used for the calculation; this is based on the prices actually paid and is below the building cost index because, for reasons of competition, the building contractors do not always pass on the actual cost increases in full to the prices.

In any case, the complainant could not consider himself to be complained by the fact that the amount was significantly below the building value calculated by the tax office on the basis of the building cost index and not significantly above the estimated value according to the expert opinion. Rather, the new building value used by the inspector only appears to be appropriate if it is assumed that at least the increased costs for the foundation or excavation securing are taken into account. A further discount for lost construction costs, as made by the expert, is out of the question. Not only that the complainant's statements could not explain why the building contractor did not charge any additional expenses for foundations and property securing beyond the amount mentioned (S 140,000.00), if the location or form of the Property, the lack of basic reserves and the room layout would be brought into play to include aspects that are primarily reflected in the value of the land or in the earnings value, but not in the real value of the building. In addition, it was not specified in more detail to what extent the room layout should have a negative effect on the property and it was also not claimed that the usability of the building would be restricted due to the construction method required by the shape of the property.

Earned value:

Instead of the interest rate of 4.5% used in the original report to determine the capitalization factor, the tax office used an interest rate of 5.5%. The expert also adopted this value in the adapted valuation. When determining the earnings value, the tax office had also excluded a share of the income attributable to the land, because it can be assumed that the rental fee for the entire property and thus in the capitalized earnings value included a share attributable to the land (reference to the ed . Findings from October 17, 2001, 2000/13/0157).

Discount property market:

In the original report, it was stated in this regard that there are very strong drops in value on the current property market, these would be between 5% and 15% and, in the given case, a discount of 5% is still considered appropriate for the market value adjustment. In the adapted report it is noted that due to the collapse in value on the property market, a market value adjustment of -5% is to be assumed.

In such a general reference to value drops on the property market in 2004 and 2001, the authority concerned could not see any justification for the discount made, since the expert had not specified what his assumption of a 5 to 15% drop in value was based on, still comprehensibly explained how the value development was presented in concrete terms with regard to the location and building category to be assessed. The opinion of the appraiser that the price actually achievable on the free property market is to be determined and that it cannot be assumed that a price higher than the estimated value he has determined would be achievable on the free market can be countered by the fact that with such an approach the operational Conditions are not taken into account and thus the partial value concept is not taken into account. The partial value is an objective value based on the general public opinion, as it is expressed in the market situation on the reference date. With regard to the length of service, the partial value (in the case of fixed assets) is usually significantly higher than the retail price and, even in the worst case, cannot fall below the retail price (reference to the ed. Knowledge of June 11, 1991, 90/14/0175) . When determining the value of the individual asset in the case of a sale of the entire business within the scope of the total purchase price, it should not only be taken into account what the buyer would offer, but also whether the business owner (fictitious seller) actually sells the asset would be willing to surrender this price, which will not be the case in particular if the utility value of the asset for the company is higher than its individual selling price (reference to Hofstätter / Reichel, Die Income Tax, Commentary, § 6, general item 27). However, in the opinion of the authority concerned, it cannot be assumed that the complainant would accept such a reduction in value due to the circumstances mentioned in the event of an intended sale of the building after only six years of use.

In summary, the authority concerned could not see that the building value determined by the expert corresponds to the partial value more than the amount applied by the auditor. The appeal was to be denied a success.

After submitting the administrative files and submitting a reply to the complaint, the Administrative Court considered:

Insofar as the complainant submits that the authority concerned should have called in a corresponding official expert from the construction industry in accordance with Section 52 (1) AVG, he overlooks the fact that the authority concerned did not have to and did not apply the AVG. Rather, it correctly carried out the procedure in accordance with the provisions of the BAO.

According to Section 177 (1) BAO, the publicly appointed experts for reports of the required type are to be called in if it becomes necessary to take evidence by experts. Expert evidence is only necessary if the authority itself does not have the relevant knowledge or is able to acquire the knowledge through specialist literature (cf. Ritz, BAO3, § 177 Item 5 with reference to the case law). The expert opinion consists in the professional assessment of facts. Expert reports are also subject to the free assessment of evidence. The authority concerned not only has to check the findings of the findings, but also the conclusiveness of the report on the basis of the findings (see Ritz, loc. Cit., Items 1 to 3).

Insofar as the complainant states, from the point of illegality as a result of a violation of procedural regulations, that the authority in question should not have assumed the capitalization factor with 5.5% and the age depreciation with 6%, but rather had to obtain an expert opinion to determine these values, it must be pointed out that the adapted report submitted by the complainant also accepted these values. The authority concerned did not question these values. The purely contrary assertion in the complaint, which lacks an expert basis, cannot invalidate the expert opinion commissioned and submitted by the complainant (see Ritz, loc. Cit., § 177 item 4). This also applies to the new market value calculated in the complaint, deviating from the premises in the submitted report.

Finally, the complaint alleges that the authority in question did not accept the discount of 25% assumed by the submitted report for lost construction costs.

The complaint no longer denies the finding that the invoices of the company carrying out the construction only show additional costs for foundation and excavation securing in the amount of S 140,000.00. The conclusion of the authority concerned that a lost construction cost of 25% of the new building value is not to be deducted in this situation does not raise concerns for the reasons presented in the contested decision. It is also harmless if the authority concerned has rejected the expert's arguments for the lost construction effort, namely the location and shape of the property, the lack of basic reserves and the room layout.Such circumstances are not reflected in the real value of the building. This also applies to the claim in the complaint that the value adjustment is necessary because the market value of exactly the same building in a different location is different.

For the sake of completeness, the reply to the repeated reference in the complaint to the LGB is that, according to the judicature, this law does not represent a suitable basis for assessing the market value relevant for tax law (cf. the ed. Decision of 23 May 2007, 2004/13 / 0091).

The complaint thus proves to be unfounded and had to be dismissed in accordance with Section 42 (1) VwGG.

The decision on costs is based on §§ 47 ff VwGG i. V.m. of Regulation BGBl. II No. 455/2008.

Vienna, December 21, 2010