Introduction

Here, we document the database of homeownership taxation indices. First, we describe how the indices are constructed. Next, we report the legal acts that were used as a basis for the index construction. Finally, we depict overall homeownership taxation index for each country as an interactive graph as well as in form of animation that allows seeing the evolution of the overall index in space and over years.

Creation of such databases is a lengthy process. And, although an impressive amount of work has been carried out, there is still a lot of work to be done. Therefore, everybody desiring to contribute to the further development of the database is welcome! The development of such indicators improves our knowledge about governmental policies and enables us to assess their impact on the economy and society.

Index construction

Here, we measure the attractivity of homeownership taxation using four types of taxation: the tax on imputed rent, the deductibility of mortgage payments, the capital gains tax on housing, and the value added tax on the newly built dwellings.

First, for each of the four taxation types, a binary index is constructed that equals one, if regulation is more favorable with respect to the homeowners, and zero, otherwise: \[ I^k_{jt}= \begin{cases} 1,& \text{if taxation of type $j$ is favorable to homeowners in period $t$}\\ 0, & \text{otherwise} \end{cases} \] Thus, the binary indices for the imputed rent tax, capital gains tax, and VAT are equal to 1, when the homeowners are not subject to these taxes, while the binary index for mortgage interest deductibility is equal to 1, when such an option is provided to the homeowners. The resulting binary indices are plotted in Figures 1 through 4 as shaded areas. The darker shades of grey correspond to regulations that are more beneficial with respect to homeowners. Yellow denotes the missing observations.

Figure 1: Tax on imputed rent

Figure 1: Tax on imputed rent

Figure 2: Mortgage interest deduction

Figure 2: Mortgage interest deduction

Figure 3: Capital gain tax

Figure 3: Capital gain tax

Figure 4: Value added tax on newly built dwellings

Figure 4: Value added tax on newly built dwellings

Second, a composite homeowneship taxation attractivity index is computed as a simple average of binary variables: \[HOTA_{t}= \frac{1}{J}\sum_{j=1}^{J} I_{jt} \] where \(J=4\) is the number of individual binary taxation indices. Hence, the index can vary between 0 and 1. The higher its values the more favorable the housing taxation with respect to the homeowners.

The binary and composite indices are constructed for a large balanced panel of 37 countries or subnational regions (4233 nations) covering the period 1910–2019, see Table 2. The choice of countries is dictated by the availability of legal acts. The best coverage exists for Europe, Asia, and Latin America.

Download regulation indices

Use the table below to download rental housing market regulation indices.

Table 1: Data on regulation indices

Table 2: List of countries, for which homeownership taxation indices are constructed

Visualization of regulation intensities

Figure 5 allows examining the overall homeownership taxation index for each country. You just need to select the options you are interested in.

Figure 5: Choice of homeownership taxation index by country

Evolution of the country-specific homeownership tax treatment

Argentina

An imputed rent tax for owner-occupied dwellings was provided for by the Ley 11.682 regimen sobre impuesto a los réditos of January 4, 1933. It was based on the fiscal valuation (valuación fiscal) of the dwelling. Cheaper dwellings were exempted from this tax. Since the introduction of the Ley 20.628 sobre impuesto a las ganancias of December 29, 1973, it does not exist anymore. However, if one possesses a second dwelling, it is subject to the imputed rent tax. The capital gains tax for owner-occupied dwellings has never existed.1 The possibility to deduct mortgage payments from income taxes was first provided for in the Ley 11.682 Regimen sobre impuesto a los réditos, which allowed to subtract the annual amount of mortgage interests from the tax basis. Later, it was modified by the Ley 20.628 sobre impuesto a las ganancias, which permits reducing the income tax by a certain amount. This amount is adjusted on a regular basis by the legislators in order to account for inflation. The VAT on newly built housing is levied at least since its origins in Argentina by the Ley 20.631 Impuesto al valor agregado of December 29, 1974. However, prior to its origins, it can be traced to the indirect tax that was introduced by the Ley 12.143 Impuesto a las ventas of January 10, 1935. Nevertheless, it is only the Decreto 24.671/45 of October 10, 1945 that extended the tax to the real estate.

Australia

In 1915, the first income tax was introduced in Australia (Income Tax Act 1915). Imputed rent was subject to income taxation for 8 years until 1923. The Income Tax Assessment Act 1915 defined 5% of the capital value of a residential home as taxable income which was offset by any interest paid on mortgage for that residence therefore allowing mortgage interest deduction for a relatively short time. The Income Tax Act 1923 abolished these measures and the taxation policy regarding imputed rent and interest deduction remained like that until now. Capital gains taxation emerged in 1985 (Income Tax Assessment Amendment (Capital Gains) Act 1986) but gains from the sale of an owner occupied property were secured under the principal residence exemption which remained in place until now. The sale of new residential properties is taxed since 2000 under the New Tax System (Goods and Services Tax) Act 1999. But it does not apply to the re-sale of these properties.

Austria

The income tax act from 1896 (Gesetz betreffend der direkten Personalsteuern) already included taxation of imputed rent and allowed interest deduction. In 1973, taxation of imputed rent expired along with mortgage interest deductibility (Merz 1977). Interestingly, mortgage interest deductibility was reintroduced in 1979 (Änderung des Einkommensteuergesetzes 1972, des Umsatzsteuergesetzes 1972 und des Familienlastenausgleichsgesetzes 1967) but came to an end in 2015 (Steuerreformgesetz 2015/16). For a long time, capital gains were only subject to taxation if they derived from speculative transactions, which normally is not the case for owner occupied housing. This changed in 1939, when the Austrian tax legislation was adjusted to the German legislation, which imposed a capital gains tax on the sale of real estate within two years. In 2012, the Austrian government introduced a law (1. Stabilitätsgesetz 2012) that made an exemption for owner occupied housing. The Austrian sales tax (Umsatzsteuer) does not apply to real property as long as real property transfer tax (Grunderwerbssteuer) is paid.

Belgium

The tax on imputed rent existed as part of the personal income tax based on rental value of one’s property existed since the 19th century. In 1919, a schedular tax based on the (actual or presumed) rental value was introduced by the Wet van 29 october 1919 tot vestiging van cedulaire belastingen op de inkomsten en van eene bijkomende belasting op het globaal inkomen (Law establishing schedular taxes on income and an additional tax on global income). In 1962, a personal tax on income from real estate (Inkomen van onroerende goederen) was introduced, based on the cadastral value of property (Traversa and Possoz 2019). Since 2005, according to the Loi portant réforme de l’impôt des personnes physiquesw (Law reforming personal income tax) of 2001, imputed rent is no longer subject to taxation. The mortgage interest deduction takes form of a tax credit without time limit. It is provided for new and owner occupied residential property; see van der Hoek and Radloff (2007), p. 399 and Cheung (2011), p. 38. Tax on capital gains from the transfer of real estate is not levied, if occupied by the owner in the last 12 months.2

The acquisition of new buildings is subject to VAT. VAT in Belgium was introduced by the Loi du 3 juillet 1969 créant le Code de la taxe sur la valeur ajoutée and took effect in 1971.

Brazil

No information on the imputed rent tax for the owner-occupied dwellings could be found in Brazilian legal acts between 1922 and 2020. Therefore, it is assumed that such tax did not exist there. The possibility of mortgage interest deductibility was provided for in the Lei No. 4.625, de 31 de dezembro de 1922 and was enacted in 1924. It was abolished by the Decreto-lei No. 1.887, de 29 de outubro de 1981. The capital gains tax existed during two periods: 1) 1946–1966, when it was introduced by the Decreto-lei nº 9.330, de 10 de junho de 1946 and abolished by the Lei No. 5.172, de 25 de outubro de 1966 and 2) since 1979, when it was re-introduced by the Decreto-lei n º 1.641 de 7 de dezembro de 1978. An analog of the VAT on newly built housing originated from the Lei nº 5.172, de 25 de outubro de 1966, which created the tax on services of any nature (impôsto sôbre serviços de qualquer natureza) that covers also construction services and is levied by the municipalities.

Canada

The first income tax in Canada was introduced in 1917 as a temporary measure to pay for war expenses (Income War Tax Act, 1917). In this act imputed rent was not considered as taxable income and this did not change in the following years. Since imputed rent was not taxed, home mortgage interest was not deductible either. The 1917 act only allowed mortgage interest deduction for rental property but not for owner occupied housing and this policy remained until the current day. Capital gains tax was introduced in 1971 (1971 Tax Reform Legislation) but included the principal residence exemption from the start, which means that capital gains derived from the sale of an owner occupied dwelling are not subject of taxation in Canada. The first VAT-like tax in Canada was introduced in 1920 (An Act to Amend the Special War Revenue Act, 1915) but only lasted for a very short time and did not apply to real estate. The manufacturer’s sales tax of 1924 similarly applied to manufactured goods and not real estate. This changed in 1991 when the Goods and Services Tax was passed. Real property sales are taxed under this act ever since.

Chile

The imputed rent tax for the owner-occupied dwellings existed between 1866 (Decreto 30 de Abril de 1866, Contribucion sobre la renta) and 1975 (Decreto Ley No. 824, Ley sobre Impuesto a la Renta). We suppose that the deductibility of mortgage interests was allowed during two periods: 1) until 1923, since it is not mentioned explicitly in the Lei No. 3.996, que establece un impuesto sobre las rentas3 and 2) since 1975, when it was re-introduced by the Decreto Ley No. 824 of 1974. The capital gains tax for owner-occupied housing was first introduced by the Ley 20.780 de 2014 sobre Reforma Tributaria beginning in 2016. Until then, only persons and firms whose business consisted in buying and selling real estates were subject to this tax. Although the value-added tax in Chile was introduced already in 1974 by the Decreto Ley No. 825, Ley sobre impuesto a las ventas y servicios, it did not cover construction services. It is only since 1987 that the Ley 18630 incorporates them into the list of activities subject to the VAT.

Colombia

Before 1961, property was subject to a real property tax upon the cadastral value. Assessment was carried out by the Geographic Institute and its cadastral offices (McLure and Zodrow 1991, 18). The imputed rent tax was introduced together with mortgage interest deduction and a capital gains tax for property transfer in the course of a major 1960 tax reform (Law 81 of 1960 Reorganizing Income Tax). Houses or apartments valued below 100,000 pesos remained tax-free, for other real property a progressive tax rate scale was introduced. A number of deductions were allowed including interest paid on loans. Capital gains tax on the transfer of real estate was introduced in the form that reduced the tax base by 10% for every year the property was held. Thus, after 10 years an owner could sell the property tax-free. Under the current regulation, gains from selling real property are generally subject to a capital gains tax, whereby a lower rate applies for property held for at least two years (National Tax Statute, Article 300). The imputed rent tax was abolished by Law 75 of 1986. Mortgage interest payments were kept deductible up to a certain limit, which is regularly adjusted. VAT in Colombia was introduced in several phases starting from 1963. However, it was in fact never applied to owner-occupied housing, although an attempt was made by the Law 1819 of 2016, which however was declared unenforceable by the court and was repealed in 2018.

Czech Republic

Prior to 1918, Czechia formed part of Austria–Hungary. Therefore, we assume that Austrian laws also applied to the Czech territory. The Czech Republic that gained independence in 1918 does not have a tradition of taxing imputed rent. In the period between the world wars, a house tax (per room) and a land tax have been applied in Czechoslovakia (Englis 1929, 227–28). Interest costs were not tax-deductible (Spitaler 1929, 97f). This opportunity was only introduced by the Law 210/1997 coming into force in 1998. The VAT has been introduced starting from 1993 by the VAT Law 222/1992 and was also imposed on the transfer of immovable property (at a reduced rate for most cases) from the start. The 1992 Act of the Czech National Council on Income Taxes also introduced a tax on the income from the sale of immovable property, whereby such transactions become tax-free after a 2-year holding period.

Denmark

The taxation of imputed rent goes back to the first introduction of income taxation in Copenhagen in 1861 and on the national level in 1903. In 2000, the taxation of imputed rent was replaced by a general property tax independent of income (Wood 2019). With the introduction of national income taxation in 1903, mortgage interest payments also became deductible (Torgersen 1996). But interest deduction even goes back to the 1881 Copenhagen Tax Act (Zimmer 1982). The capital gains tax for owner-occupied housing was introduced in 1903 with exemptions for long holdings. In 1960, a special income tax scheme for ordinary people came into force with the result that the capital gains of most taxpayers were taxed (Atkinson and Søgaard 2013). The VAT on new homes was imposed by the Value added tax law of 1967, although VAT on new houses was partly deductible at a flat rate (Shoup 1969). An exemption was introduced in 1994. This exemption for newly constructed buildings has however been abolished starting in 2011. Before the VAT there was the sales tax of 1962 (Lov om almindelig omsætningsafgift), however this act contained an exemption for real estate.

Estonia

Prior to 1918, Estonia formed part of the former Russian Empire. Therefore, we assume that it was subject to the same laws as Russia. There is no tax on imputed rent in Estonia. The gains from the transfer of real estate are not taxed if the property has been the main residence of the taxpayer (Income Tax Act of 1993). Mortgage interest became deductible starting from 1996 through the Income Tax Act Amendment Act of 1995. Selling of new housing is subject to VAT since its introduction on the 1.1.1992 (VAT Act of 1991), although most other real estate transactions were made VAT-exempt by the 1995 Income Tax Act Amendment Act.

Finland

Income taxation was introduced in 1920 (Laki tulo- ja omaisuusverosta 207/1920) and included imputed rent taxation. The tax was revised in 1924 (Laki tulo- ja omaisuusverosta 306/1924) but remained similar to the former act which was copied from the Swedish model (Tapaninaho 2016). In 1973, a separate law for imputed rent taxation was enacted (Laki asuntotulon verottamisesta eräissä tapauksissa 505/1973). In 1992 this law was repealed and imputed rent taxation was replaced by a property tax. Interest deduction was introduced in 1920 but interest on capital invested in one’s own home was exempted from this (Laki tulo- ja omaisuusverosta 207/1920). In 1943, mortgage interest payments became fully deductible (Tulo- ja omaisuusverolaki 888/1943) until 1973 when interest deduction was limited (Tulo- ja varallisuusverolaki 1043/1974). Capital gains were taxable under the 1920 act for a holding period of less than 10 years. Under the 1943 these gains were taxed with the same rules as capital gains from other assets (Tulo- ja omaisuusverolaki 888/1943). Since 1974 capital gains from selling one’s home are tax free if the building was the permanent residence for at least one years before the transfer (Tulo- ja varallisuusverolaki 1043/1974). This was changed to two years in 1992. A sales tax was introduced in 1941 but with an exemption for real property (Linnakangas, Juanto, et al. 2016). A new sales tax came into force in 1964 but still with an exemption for real property (Tait and Due 1965). This exemption also remained for the VAT of 1993 (Arvonlisäverolaki 30.12.1993/1501).

France

The imputed rent tax for the owner-occupied dwellings has a long history in France having its origins in as early as 1792 (Allix and Lecerclé 1926). However, starting in 1965 it is not levied anymore, being eliminated by the Loi No. 64-1279 de finances pour 1965 of December 23, 1964. The same Loi n° 64-1279 allowed for the interest deductibility, until the Loi n° 96-1181 du 30 décembre 1996 de finances pour 1997 suppressed it. Nevertheless, it was restored for a short period 2007–2010 by the Loi No. 2007-1223 du 21 août 2007 en faveur du travail, de l’emploi et du pouvoir d’achat in the form of a tax credit (crédit d’impôt). The capital gains tax was introduced in 1964 by the Loi n° 63-254 portant réforme de l’enregistrement, du timbre et de la fiscalité immobilière of March 15, 1963. Initially, after 10 years of possessing the real estate, the owner was exempted from the tax. However, over time, the period has been extended to 30 years. The VAT on newly built housing was first imposed in 1963 by the Loi No. 63-254.

Germany

Germany implemented its first nationwide income tax in 1920, replacing the separate income taxes imposed by various German states. According to the 1920 law known as the Einkommensteuergesetz, 1920, imputed rent was considered taxable income, meaning that mortgage interest was recognized as an expense and therefore deductible. This changed in 1986 when imputed rent ceased to be considered income under the Einkommensteuergesetz. Consequently, imputed rent is no longer subject to taxation, and mortgage interest is no longer deductible.

Starting from 1920, capital gains from the sale of a dwelling were taxable if the sale occurred within ten years of purchase or if the dwelling was acquired with the intention of resale. Over time, the time limit for taxation was reduced to two years. In 1999, the German government enacted the Steuerentlastungsgesetz 1999/2000/2002, which reset the time limit to 10 years and introduced an exemption for owner-occupied housing.

The first German sales tax was introduced in 1918. Initially, real property was included in the sales tax. However, in 1932, real property was excluded from the sales tax on the condition that real property transfer tax (Grunderwerbssteuer) was paid.

India

Taxation of imputed rent was part of the Indian Income Tax from the beginning in 1860. The Income Tax Act 1860 was meant to be a temporary measure to create more revenue but taxation of imputed rent remained in place throughout the 20th century until now. Since imputed rent was regarded as taxable income from land and houses, any interest that was paid on mortgage was deductible which is also the case under the Income Tax Act 1961, which is in application now. A capital gains tax was introduced in 1946 through an amendment of the Income Tax Act. The capital gains tax is also part of the current Income Tax Act, which covers gains from the sale of real estate and there is no exemption for a primary residence in place. A nationwide value-added tax was only introduced in 2017 (Goods and Services Tax). It is applicable to real estate, which is still under construction but does not apply to the sale of completed properties or resale of older properties. Before that there were several sales taxes on state level since the Government of India Act 1935 allowed states to impose their own sales taxes, which usually did not involve residential properties.

Ireland

Ireland gained independence from the United Kingdom in 1919, but the income taxation stayed the same for the following years. In 1970 (seven years after the UK), Ireland abolished imputed rent taxation (Merz 1977). Mortgage interest deduction, on the other hand, remained in place for many more years but was downgraded gradually. In 1974, the government introduced a ceiling to mortgage interest relief which was cut in 1987, 1990 and 1997 (Norris 2016). Mortgages taken out after 2012 are not entitled for mortgage interest relief. In 2015, the first-time-buyers relief was introduced, which is an amount of tax deducted at source from interest that is paid on money saved in certain financial institutions. A capital gains tax was introduced in 1975 (Capital Gains Act, 1975) but it included a private residence exemption. In order to join the European Economic Community Ireland had to introduce a VAT as well, which it did in 1972 (Value-Added Tax Act, 1972). This tax also applies to newly built houses and is still in place today.

Israel

Israel largely inherited the British law system in the initial years of its independence. The 1947 Income Tax Ordinance included the imputed rent tax, mortgage interest deductibility and a capital gains tax for real estate. The 1968 reform abolished the first two but kept the capital gains tax (Law on the Amendment of the Income Tax Ordinance No. 13). The VAT was introduced in Israel in 1976 (Value-Added Tax Law 5736-1975). Sale of properties by VAT dealers is subject to VAT, transactions between private individuals are VAT-exempt.

Italy

The imputed rent tax for owner-occupied dwellings in Italy is known since at least the Regio decreto-legge n. 652 of April 13, 1939. It was abolished informally in 2000 (Hilber 2007). The interest deductibility was established by the Regio decreto 30 dicembre 1923, n. 3062. The capital gains tax became effective since 1974, being introduced by the Decreto del Presidente della Repubblica del 29 settembre 1973, n. 597, but eliminated again by the Finanziaria 2002 — Legge 28 dicembre 2001, n. 448. The VAT on newly built housing was introduced by the Decreto del Presidente della Repubblica del 26 ottobre 1972 n. 633. For a discussion of the 1974–2014 period see also Bises and Scialà (2014).

Japan

In the case of construction of owner occupied houses by the household sector, a tax system different from that applicable to rental housing construction is applied. In particular, no tax is levied on the imputed rent and no interest cost is deducted from the taxable income (Iwata, Suzuki, and Yoshida 1987, 23). Tax on capital gains from the transfer of real estate was for the first time introduced through the Income Tax Act of 1947 and had progressive rates between 25 and 65% (Shiomi 1957, 66–69). VAT (or consumption tax) is levied on new homes starting with the introduction of VAT in Japan on April 1, 1989.4 The consumption tax is imposed on the sale and purchase of housing and the construction of new housing at the time of hand over.

Latvia

Prior to 1918, Latvia formed part of the former Russian Empire. Therefore, we assume that it was subject to the same laws as Russia. In the interwar period, a capital gains tax on real estate transfer was applied in Latvia (Siew 1925, 115). No tax on imputed rent and no interest tax deduction were applied. According to the current legislation (1993 Law on Personal Income Tax), no mortgage interest deduction is allowed. Transfer of real estate is tax-free if it is owned for longer than 5 years. The sale of new residential property is subject to VAT since 1995 Law on value-added tax.

Lithuania

Prior to 1918, Lithuania formed part of the former Russian Empire. Therefore, we assume that it was subject to the same laws as Russia. Lithuania has not apply an imputed rent tax. The 2002 Law on personal income tax introduced the possibility to deduct mortgage interest payments from the income. However, this clause has been removed by the 2008 Amendment of the law on personal income tax. The same amendment set the holding period for the tax-free transfer of real estate to two years, instead of three years previously. Transactions with real estate are subject to VAT since its introduction by the VAT law of 1994.

Luxembourg

The application of the imputed rent income taxation in Luxembourg has its roots in the German tax laws imposed in 1940 and kept by the Grand-Ducal decree of October 26, 1944 concerning taxes, fees, contributions and duties. The rental value of the home occupied by the owner has been treated as a source of income in the income tax law until the Grand-Ducal Regulation of 23 December 2016 amending the amended Grand-Ducal Regulation of 12 July 1968 concerning the fixing of the rental value of the dwelling, which set this value to zero. Mortgage interest payments became deductible with the Law of 29 December 1983 amending article 111 of the law of 4 December 1967 on income tax. There is no capital gains tax on primary residence in Luxembourg. The VAT has been introduced in 1970 and applies to new real estate, although at a reduced rate (VAT tax law).

Netherlands

There is no tax on capital gains from the transfer of real estate (Cheung 2011, 39).5 The tax on imputed rent was introduced through the Wet op de vermogensbelasting (Property Tax Act) of 1892, according to which the income from property over fl. 13.000 was taxed in the form of a fictitious yield of 4% (Fritschy 1997, 1045). It currently still exists (Needham, Koenders, and Kruijt 2018, 135). The mortgage interest deduction was introduced by the Wet op de bedrijfsbelasting (Business Tax Act) in 1893 as an element of the first personal income tax (van der Hoek and Radloff 2007, 407) and it is still being applied [@ Needham_et_al_2018_urban, p. 136]. The VAT in The Netherlands was introduced in 1968 by the Wet op de omzetbelasting (Turnover Tax Act). A ``new’’ home is defined as the one that was bought before or no later than two years after the time at which it was first occupied. When buying new property in this sense, a 21% VAT is currently payable.

New Zealand

The first income tax in New Zealand came into force in 1891 (Land and Income Assessment Act, 1891) and did not include taxation of imputed rent nor mortgage interest deduction. The following governments kept this policy in place including the Income Tax Act 2007 which is the current legislation. Capital gains from the sale of property on the other hand were taxed under the Property Speculation Tax Act, 1973 and currently under the Taxation (Bright-Line Test for Residential Land) Act, 2015. Neither of these two acts applies to the primary residence. Since the Goods and Services Tax Act, 1985 the sale of new homes is subject to a value-added tax. This was not the case under different sales taxes before 1985 because they were only applicable to movable property.

Norway

The imputed rent tax for the owner-occupied dwellings was already introduced in 1882 in Norway and confirmed in the big income-tax reform of 1911 (Torgersen 1996). It was abolished in 2004 (Sørvoll 2011). Interest deduction emerged very early in 1882 and remained in place ever since (Zimmer 1982). The capital gains tax for owner-occupied housing was introduced in the income-taxation law in 1911 for speculative gains. In 1918 a 5-year holding exemption was introduced. This was changed to a 10-year holding rule later but since 1987 the capital gain is tax free if the house was owned for at least one year and was owner-occupied for at least one year during the last two years (Zimmer 1982). A national sales tax for goods and property was introduced as a temporary measure in 1935 (midlertidig omsetningsavgift til kriseformål) and changed to a last link system in 1940. The taxes are not known to have exemptions for new housing constructions. The Act relating to value added tax was adopted in 1969 and real estate has been exempted since then.

Peru

The imputed rent tax for the owner-occupied dwellings was introduced as soon as 1935 by the Ley 7904 del 26 de julio de 1934 and was lifted in 1999 by the Decreto Supremo No. 054-99-EF. The deductibility of mortgage interests exists at latest since 1981 and was allowed for by the Decreto Legislativo 200 — Ley del Impuesto a la Renta. The capital gains tax was imposed already in 1935 by the Ley 7904 of 1934. Between 1981 and 1998, it was not levied, according to the Decreto Legislativo 200 of 1981. Since 1999, it is imposed again by the Decreto Supremo N° 054-99-EF. The VAT on newly built dwellings was introduced since 1973 by the Decreto-Ley 19620 of 1972.

Poland

According to the 1991 Income Tax Law, imputed rentals for owner-occupied housing are not taxed and neither are realized capital gains, if the property is held for more than 5 years. Interest deductibility was first introduced by the Act of November 21, 2001 Amending the Act on Income Tax from Natural Persons, but it was repealed already 5 years later by the Act of November 16, 2006 Amending the Personal Income Tax Act and Certain Other Acts. VAT was originally applied at a 0% rate to the sales of residential premises through real estate agents. This exemption has however been repealed by the 2001 Ordinance of the Minister of Finance amending the ordinance on the implementation of certain provisions of the Act on tax on goods and services and on excise duty.

Portugal

The imputed rent tax for the owner-occupied dwellings apparently has not been levied in Portugal, as no evidence of its existence could be found in the principal legal acts on personal income tax, between Lei No. 1368 of September 21, 1922 and Decreto-Lei 442-A/88 Aprova o Código do Imposto sobre o Rendimento das Pessoas Singulares (IRS) of November 30, 1988. The mortgage interest deductibility became possible starting from at least 1922 (Lei No. 1368), but was suppressed in 2011 in accordance to the Memorandum of Understanding on specific economic policy conditionality imposed in the wake of the Great Recession by the Troika (the European Commission, the ECB, and the IMF). The capital gains tax was introduced by the Decreto-Lei No. 46373, Aprova o Código do Imposto de Mais-Valias of June 9, 1965. The VAT on newly built housing is levied since the promulgation of the Decreto-Lei 394-B/84, Aprova o Código do Imposto sobre o Valor Acrescentado of December 26, 1984.

Russia

The imputed rent tax for owner-occupied dwellings existed in Russia between 1892, when it was introduced by the Положение «О государственном квартирном налоге» of May 26 (May 14, according to the Julian calendar) 1892, and 1930, when it was abolished by the Постановление ЦИК и СНК СССР «О налоговой реформе» of September 2, 1930. Deduction of mortgage payments from income taxes was first provided for by the Положение «O гocyдapcтвeннoм пoдoхoднoм нaлoгe» of April 19 (6), 1916. However, already in the next year, it was eliminated by the Bolshevik government. Its new life began 74 years later with the Федеральный закон № 112-ФЗ «О внесении изменений в статьи 220 и 224 части второй Налогового кодекса Российской Федерации» of August 20, 2008. Both prior to the October 1917 revolution and during the Soviet period, the capital gains tax was not levied. It is only the Закон РСФСР № 1998-1 «О подоходном налоге» of December 7, 1991 that made the sale of real estates subject to this tax. The VAT on newly built housing was first introduced by the Закон РСФСР № 1992-1 «О налоге на добавленную стоимость» of December 6, 1991. Prior to that, the predecessor of the VAT, the sales tax, did not cover transactions related to housing.

South Africa

There is and was no tax on imputed rent in South Africa. Furthermore, there is no possibility of home mortgage interest deduction. The capital gains tax was introduced in 2001 (South African Reserve Bank 2015) and included a primary residence beyond 1 million rand. This threshold rose to 1.5 million rand in 2006 and to 2 million rand in 2012. The Value-Added Tax Act 89 of 1991 was introduced in 1991 and includes an exemption for leasing but not for sales of residential property.

South Korea

Between 1910 and 1945, Korea was under Japanese rule. Hence, it is assumed that in Korea some homeownership taxation was applied as in Japan. The 1949 Income Tax Act No. 33 did not include provisions for an imputed rent tax, interest cost deductibility, or a capital gains tax for owner-occupied housing. The capital gains tax adopted in 1967 aimed at reducing land speculation and made an exemption for housing owned for more than 3 years (Cho and Kim 1994, 260). A later Income Tax Act No. 6276 of 2000 introduced a possibility to deduct the interest paid on a long-term housing mortgage loan from labor income. The same law reduced the holding period needed for the exemption of a house transfer from the capital gains tax to two years. Currently, this period is set to 1 year (Income Tax Act No. 15225). A VAT was introduced in 1977 by the Value-Added Tax Act No. 2934 and is since then applicable to sales of private housing.

Spain

The imputed rent tax for the owner-occupied dwellings was introduced by the Law of November 20, 1932 and removed by the Ley 40/1998, del Impuesto sobre la Renta de las Personas Físicas y otras Normas Tributarias of December 9, 1998. The same Law of November 20, 1932 made mortgage payments deductible. Since January 1, 2013, this possibility does not exist anymore, because it was suppressed by the Ley 16/2012, por la que se adoptan diversas medidas tributarias dirigidas a la consolidación de las finanzas públicas y al impulso de la actividad económica of December 27, 2012. The capital gains tax was imposed by the Real Decreto of March 13, 1919 and at that time applied to the value increases of land (incrementos de valor de los terrenos). Since then, its existence has been confirmed by many consequent legal acts. The VAT on newly built housing was enacted on January 1, 1986 by the Ley 30/1985, del Impuesto sobre el Valor Añadido of August 2, 1985, which introduced for the first time in Spain the value-added tax. No information on any similar tax (e.g., sales tax) used until 1985 could be found.

Sweden

In 1910, an imputed income tax based on property assessment was added to the general income taxation at the local level, amount to about 6–7% (Stenkula 2015). This taxation was in addition to the true income coming from real estate and municipalities estimated a hypothetical value to assess imputed rents. In 1920, a guarantee system was implemented at the local level, which assured municipalities a tax flow even if the property did not generate direct income. In 1953, this system was more formalized in a system referred to as villaschablon where owner-occupiers (of one- or two-family houses) could also deduct interest payments from the imputed tax assessment base. However, interest deduction goes back to the state income tax of 1902 (Inkomstskatt), when interest payments were deductible on the state level and 1920 for the municipal level (Zimmer 1982). The tax rate on imputed income was 3%, but lowered to 2.5% and 2% in 1957 and 1965, respectively. In 1967, a progressivity was added, with rates between 2–8%, subject to various changes. Generally, the tax system was explicitly meant to aim at “neutrality of tenure” between the four different tenure forms: family-house ownership, flat ownership and public and private rentals (Bengtsson 2006). This taxation principle was made explicit in 1974 and mainly motivated additional subsidies for owner-occupiers. In 1985, an additional tax on old apartment flats, including those of housing associations, was introduced to make the tax system more equitable. The tax reform in 1990–1991 abolished the system of imputed rents, while the reform of 2008 abolished real estate taxes in the traditional sense altogether and replaced them with an annual “fee”. The former neutrality principle can be said to have stopped functioning since the 1990s (Bengtsson 2006). In 1911, the taxation of both wealth and capital gains was introduced (Stenkula 2014). Speculative gains were distinguished from non-speculative ones by exempting gains made after certain holding periods. Residential wealth was taxed at 75% of market value according to the taxeringsvärdet (Du Rietz and Henrekson 2015). Wealth taxation itself was abolished in 2007. In 1996, the capital-gains tax was estimated to add 0.38% to annual real estate taxes (Stenkula 2015). When real estate taxes were transformed to a fee in 2008, the tax rate on capital gains on housing were increased from 20 to 22% and the possibilities to postpone the tax reduced (Stenkula 2015). Custom duties and individual consumption taxes were replaced by a general value-added tax in 1960 (Stenkula 2015), but sales of real estate are exempted.

Switzerland

The first income tax in Switzerland was introduced in 1915 as a temporary measure to pay for war expenses (Bundesbeschluss betreffend die eidgenössische Kriegssteuer), but did not include a taxation of imputed rent. This changed in 1934 with another temporary measure (Eidgenössiche Krisenabgabe). Since then, taxation of imputed rent and mortgage interest deduction remained an integral part of the Swiss tax system. Whether capital gains from the sale of a house were subject to taxation was dependent on the location of the estate for a long time since the different Cantons introduced a capital gains tax for real estate at different times. While some municipalities in Solothurn already introduced such a tax in 1912, other cantons followed in the second half of the 20th century (e.g., canton Glarus in 1971). Since 1990, all Cantons are required to impose a capital gains tax on real estate sales (Bundesgesetzes über die Harmonisierung der direkten Steuern der Kantone und Gemeinden). Real estate sales were not subject to sales tax throughout the history of Switzerland.

Turkey

Imputed rent taxation seems to have a long history in Turkey. The estimated rental income of a building has been taxed at least since 1910 (Halil 1938, 39–41). The 1931 Building tax law No. 1837 prescribed that the value of the building is estimated and 10% of it is accepted as net income subject to a tax. The 1934 Income Tax Law No. 2395 and a number of its later editions until today included provisions specifying the assessment of the equivalent rental value and its taxation. These laws only allowed for interest cost deductions for rented housing, and not for owner-occupied housing. The 1970 Financing Law No. 1318 introduced a real estate value increase tax, and overruled the previous provision of the 1949 Income Tax Law No. 5421 that left proceeds from real estate transfer tax-free after a 2-year holding period. The universal coverage was however abolished by the 1981 Law on Amendments to the Articles of the Financing Law No. 1318 on the Real Estate Gains Tax. Currently, only earnings arising from the disposal of the real estate within five years starting from the date of acquisition are subject to the capital gains tax (Income Tax Law No. 5615 of 2007). Real estate delivery in Turkey is in general subject to VAT since its introduction from 1985 onward (VAT Law of 1984). There exist multiple VAT rates for different provinces and areas.

United Kingdom

Imputed rent taxation was first introduced in 1803 in the United Kingdom under Schedule A of the Income Tax Act, granting His Majesty, until the sixth day of May next after the ratification of a definitive treaty of peace, a contribution on the profits arising from property, professions, trades and offices) as a temporary measure passed on August 11, 1803. It was then reintroduced in 1842 along with the possibility to fully deduct mortgage interest. Although the taxation of imputed rent was abolished in 1963, mortgage interest deductibility remained for many more years but was slowly phased out at the end of the 20th century, providing a so-called “homeownership bias”. In 1974, the ceiling for mortgage which was eligible for deduction was set to 25 000 pounds. In 1983, the UK government introduced MIRAS (Mortgage Interest Relief at Source), which lasted until 2000, when mortgage interest deduction came to an end. The capital gains tax was introduced in 1965 but included an exemption for owner occupied housing from the start which is applicable until now. The same is true for the value-added tax, which does apply to real estate, therefore meaning that neither capital gains nor sales of one’s personal home were taxed in the United Kingdom.

USA

In contrast to other countries, the homeownership policies did not change a lot over the years in the United States. In the Revenue Act of 1913, all interests were tax deductible, including mortgage interests. Although this changed in 1986 (Tax Reform Act of 1986), mortgage interest remained deductible throughout the years. This is quite an exception because most countries that allow mortgage interest deductibility view imputed rent as taxable income, which was never the case in the USA. Also starting in 1913, capital gains were taxed with the same rate as income. The rate of taxation changed multiple times until 1997, when the government introduced an exemption for owner occupied housing. Up to 250,000 dollars (500,000 dollars for married couples) of capital gains are not taxed when the property was owner occupied for at least 2 of the last 5 years. Since there is no federal sales tax in the United States, the sales taxes vary substantially across states. But generally the sales tax does not apply to transfer of real property. There are only very few examples of sales taxes that include real property (e.g., Washington).

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  1. Both the Ley 11.682 and the ley 20.628 covered only periodic incomes, but not the windfall gains. It is only with the advent of the Ley 27.430 Reforma tributaria of December 28, 2017 that capital gains become subject to the income tax. However, the owner-occupied housing remains exempted from it.↩︎

  2. https://www2.deloitte.com/content/dam/Deloitte/global/Documents/Tax/dttl-tax-belgiumhighlights-2019.pdf and Cheung (2011), p. 38.↩︎

  3. By contrast, the Decreto 30 de Abril de 1866 is very explicit on this matter.↩︎

  4. Japan: Selected issues. IMF country reports 18/334, https://www.concieria.tokyo/eng/news/japanese-real-estate-expertise/190719eng.↩︎

  5. See also Stephen Brunner (Deloitte) International Tax Netherlands Highlights 2019, https://www2.deloitte.com/content/dam/Deloitte/global/Documents/Tax/dttl-tax-netherlandshighlights-2019.pdf.↩︎