The real estate acquisition tax is cancelled!

2020-09-21 08:12:16

On the 15th of September, 2020 deputies finally approved the cancellation of the real estate acquisition tax. Once it is signed by the President of the Czech Republic, this law will be published in the Collection of laws.  The purpose of the update is to create more comfortable conditions for purchasing accommodation, to stimulate the real estate market, and to reduce the level of speculation in it. 

The renewal of the law also is retroactive which means that it applies to the real estate purchased since the 1st of December, 2019. Therefore, the tax should not be paid in case a record in the real estate cadastre was made after the 1st of December, 2019. Those who already paid this tax before the 31st of March, 2020 (during the pandemic, the tax payment term was postponed to a later date, till the end of 2020) will receive a refund. Along with the cancellation of the tax payment, the necessity of filing a tax return for the real estate purchase will also be eliminated (ed. from Czech přiznání k dani z nabytí nemovitých věcí).  

The tax for real estate acquisition used to be 4% of the property price. Since 2016 it was paid by the buying party (previously it was covered by the selling one). The first purchase of the real estate in the new building was exempt from property transfer tax.

The change in conditions for reducing the tax base for the amount of paid mortgage interests

Anyone who purchases real estate on a mortgage and uses it for personal or family residence when preparing an annual income tax for individuals has the right to reduce the tax base by the amount of interest paid for the mortgage loan. Due to the adoption of amendments to the law, this opportunity will be preserved with the introduction of restrictions on the use of mortgage interest from 1.01.2022 to reduce the tax base from 300.000 to 150.000 korunas. These restrictions do not apply till the end of 2021.

Increase in the time test for releasing income from the sale of real estate

The government also extended a time test to release income from property sales. Today, income from the sale of real estate that an individual owns for more than 5 years is exempt from the income tax. The updated law implies the extension of this period from 5 years to 10. The specified time test will apply to the income from the real estate sale acquired from the 1st of January, 2021. For income from the own accommodation sale used for personal residence the time test remains the same 2 years. 

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