Abolition of real estate acquisition tax in 2020 and new exemption tests for the sale of real estate to natural persons from 1 January 2021

09 October 2020

With effect from 26 September 2020, the real estate acquisition tax was abolished in the Czech Republic. This tax was applied to the acquisition of immovable property for a consideration, such as the purchase of land, the allocation of real estate to a trust fund or the acquisition of the right to build. Acquisitions of real estate registered in the Land Register after this date are therefore no longer subject to real estate acquisition tax.

According to the transitional provisions, the abolition of real estate tax also applies to the acquisition of real estate registered in the Land Register between 1 December 2019 and 25 September 2020. The date of registration in the Land Register is therefore decisive (and not, for example, the date of signature of the purchase agreement). In the case of real estate not registered in the Land Register, the decisive factor is the acquisition of ownership.

Taxpayers affected by the abolition of the tax have no obligations towards the financial administration. Therefore, they do not have to file a tax return or pay tax. However, if they have already paid the tax, they have the option of applying to the relevant tax office for a refund of the overpayment.

There is no automatic refund of paid property tax without applying.

In connection with the abolition of the acquisition tax, an amendment to the Income Tax Act was approved concerning the exemption test for the sale of real estate to natural persons, from five to ten years. This change only applies to real estate acquired from 1 January 2021. For real estate acquired before this date, the original five-year time test applies.

Another amendment to the Income Tax Act adopted in connection with the abolition of real estate acquisition tax is the reduction of the maximum amount of interest on mortgages which taxpayers can deduct from the personal income tax base, from CZK 300,000 to CZK 150,000 per calendar year.

The government is preparing another amendment to the tax laws, expected to take effect on 1 January 2021. It is proposed, for example, to introduce a meal voucher lump sum (a cash allowance for employees' meals). The government also announced the possibility of abolishing the super-gross wage (a method of calculating income tax). The tax package is currently being discussed in the Chamber of Deputies. We will inform you again about the changes it will bring in upcoming issues of this newsletter.

[email protected]