Right of occupancy and benefits derived from surrendered property
Right of occupancy and benefits derived from surrendered property means that the person who buys an agricultural property pays for this in the form of annual benefits for the rest of the seller's lifetime, for example that the seller is allowed to live on the farm.
Short description
- Right of occupancy means that the seller is given the right to live on the farm for their entire lifetime.
- Benefits derived from surrendered property means that the seller receives a sum of money or products from the farm every year for their entire lifetime. For example, this could be vegetables, firewood, or similar.
The seller can also get a combination of right of occupancy and benefits derived from surrendered property.
For a payment to be considered right of occupancy or benefits derived from surrendered property, it must run annually throughout the seller's lifetime. Agreements where payment must be made up to a certain date are not right of occupancy/benefits derived from surrendered property. It is an instalment payment.
What you need to do
Select the option that applies to you:
You must pay tax on the value of right of occupancy/benefits derived from surrendered property you receive each year, whether it is money or products from the farm.
The amount is usually pre-filled in your tax return, but you need to check that it is correct.
The value of right of occupancy and benefits derived from surrendered property is personal income and is included in the basis for the minimum standard deduction.
You must divide the purchase price or consideration among the various assets that come with the farm.
The value of right of occupancy/benefits derived from surrendered property must be deducted before you divide the purchase price or consideration between the various assets.
The value of right of occupancy must be deducted from the residential property. Other benefits are divided proportionally across all assets.
State the deductions in the tax return:
You get a deduction for what you pay in the form of right of occupancy/benefits derived from surrendered property, whether it is money or products from the farm.
You will also be entitled to a deduction for expenses related to the surrendered property, in accordance with the rules for renting out residential properties.
You must state the deductions in the tax return.
Submit the a-melding:
You must submit an a-melding once a year in which you state the values as salary/pension for the person(s) who have right of occupancy/benefits derived from surrendered property.
If you are engaged in agricultural activity, the value of right of occupancy/benefits derived from surrendered property must also be stated as income in the agricultural activity.
If you cease your agricultural activity, you must still state the income in the tax return for as long as right of occupancy/benefits derived from surrendered property lasts.
If the seller receives product from the farm, the value of these must be set to market value.
Milk, potatoes, fish, reindeer meat, and firewood have their own rates. You will find these in the valuation rules that are updated every year.
For other products, you must state the market value yourself, that means what you could sell the products for.
Right of occupancy/benefits derived from surrendered property runs for as long as the seller lives. If the agreement is ended before that time, the buyer must calculate and pay out the difference to the seller.
To find the difference, you must calculate the value of right of occupancy/benefits derived from surrendered property for the current age of the seller and deduct the original value.
The sum that you pay to the seller must be added to the original purchase price of the farm.
For the seller, this payment will be taxable income.
If the seller waives right of occupancy/benefits derived from surrendered property completely, this will normally be considered a tax-free gift. In this case, there is no tax effect for either the buyer or the seller.
Supporting documents
You do not need to send us supporting documents now, but you must be able to provide them if asked.