Changes to the tax rules from 1 January 2025 bring a number of new developments that will have a significant impact on the real estate sector. It is important that property owners and investors familiarise themselves with these changes and prepare for them. Proper understanding and use of the new rules can not only reduce the tax burden but also contribute to a more efficient and sustainable use of real estate. The main change is the amendment to the Value Added Tax (VAT) Act.
Main changes in VAT
DELIVERY OF LAND
From 1 July 2025 we should use the new definition of building plot:
For the purposes of VAT, building land will now be defined as land if a building fixed to the ground can be placed on this land on the basis of spatial planning documentation issued by the municipality, the definition of the built-up area or a decision of the building authority under the Building Act.
The only exceptions will be situations where it is apparent from objective circumstances that the land, although formally developable, cannot be developed with a building firmly attached to the ground or is highly unlikely to be developed.
Of course, a building plot will be considered in the case of building or paving the access road, bringing water supply and so on.
Please note that in the case of supply of land with a building, the VAT regime is assessed according to the building which forms a functional unit with the land. The law specifies that in the case of a supply of land with an insignificant building, this building will not be taken into account. We recommend a more detailed assessment in the case of the supply of land with a building to be demolished.
The mere supply of land which does not form a functional unit with a building firmly attached to the ground or which is not building land may be exempted from tax.
DELIVERY OF IMMOVABLE PROPERTY
While the existing legislation provides for a five-year time test, the amendment from 1 July 2025 aims to tax only the first supply of the selected immovable property within two years of its completion or substantial change. Even if there is a further supply within this new period, that supply will already be exempt. Deliveries made after this period will also be exempt. The option of voluntary taxation of the supply of immovable property which meets the conditions for exemption remains in force. If the purchaser is a taxpayer, he must give his written consent to this voluntary taxation. The supply of unfinished immovable property will always be subject to tax.
The construction is considered completed:
- on the date of entry into force of the first approval decision, or
- on the date of fulfilment of the conditions for permanent use of the selected immovable property, if the selected immovable property is not the subject of an approval decision.
A substantial alteration of a completed immovable property shall be a new alteration, the purpose of which is to change its use or the conditions of its occupation, if the actual costs incurred for such alteration, net of tax, by the person making the supply of the immovable property exceed 30% of the tax base on such supply. An expert's report is not required to substantiate this substantial change. The selling price without tax shall be used. A substantial change is not a material change in the case of regular maintenance, irrespective of its value.
BUILDING FOR HOUSING
For VAT purposes, from 1 July 2025, the definitions of the construction of a residential building and the construction of a family house will be based on the basic register of territorial identification, addresses and real estate.
The new definitions are necessary for assessing whether the reduced VAT rate applies to the construction or delivery of a new building. The issue of the reduced VAT rate is also addressed in the case of construction and installation work on a completed residential building.
PRICE EXCLUSIVE
From 1 January 2025, the normal price (for VAT purposes) must be determined if the taxpayer supplies immovable property to its employees or their relatives at a lower price.
PLACING
While the new rules for the creation of payers from 1 January 2025 do not have a direct impact on real estate transactions, there is one important change to note:
A taxable person (entrepreneur, corporation) who performs taxable supplies with a place of supply in the Czech Republic exceeding CZK 2,536,500 within a calendar year becomes a taxpayer. In such a case, the taxpayer's liability arises on the day following the day on which the threshold is exceeded.
When a taxable person becomes a VAT payer has therefore changed. Until the end of 2024, the taxpayer became a taxpayer on the first day of the second month following the month in which the person exceeded the turnover limit of CZK 2 million. However, he will now become a taxpayer, for example, on the day following the second day after exceeding the second turnover from domestic transactions (approx. CZK 2.5 million). This situation, for example, allowed a new developer to sell the first property without VAT, exceed the turnover limit and at the same time manage to sell more properties in the interim period before actually becoming a taxpayer. This is already very difficult to do under the new conditions.
TAX REFUNDS ON OUTSTANDING LIABILITIES
There will be a new obligation to reimburse the VAT deduction in the case of an unpaid liability by the end of the sixth month after the due month. This new provision will apply to liabilities arising from 1 January 2025. We may see its application for the first time in the VAT return for July 2025. Delays in payment of liabilities, for example due to cash flow, are very common, especially for connected persons, and this will no longer be recommended.
Other tax changes
DETERMINATION OF THE REAL ESTATE TAX COEFFICIENTIncreases in the real estate tax coefficient were previously only possible through municipal ordinances, which could apply to the entire municipality, parts of the municipality, certain groups of properties (e.g. industrial buildings) or individual properties. However, it will now only be possible to set a different coefficient for individual properties by means of a municipal ordinance, which must be adopted by 30 June of the year preceding the tax year. Otherwise, the coefficient cannot be changed and the municipalities must maintain the current level. For the 2025 tax year, municipalities had to send the already issued general regulation to the Tax Administration by 30 June 2024, which many municipalities probably did not manage to do.
In the long term, municipalities can use this change to dialogue with property owners and business operators to encourage them to reduce the impact of their operations on the surrounding area. Ultimately, this could be a tool to cultivate existing relationships. Owners of industrial halls, complexes and similar business properties are encouraged to monitor the official boards of the municipalities where their property is located and actively engage in the process of taking action.
ABOLITION OF THE GUARANTEED WAGE AND INTRODUCTION OF A NEW MECHANISM FOR INDEXATION OF THE MINIMUM WAGE
As of 1 January 2025, an amendment to the Labour Code came into force, abolishing the guaranteed wage. Until then, the minimum wage in the private sector had been determined in eight levels according to the difficulty of the work. Since January, the minimum wage has been the only legal limit for remuneration.
In the public sector, there is a system of guaranteed wages, the so-called guaranteed salary. This new system will have only four levels, taking into account the skill requirements of the positions. The lowest level of guaranteed salary will be equal to the minimum wage, while the highest will be 1.6 times this amount.
Another change is the introduction of an automatic minimum wage indexation mechanism. Its amount will be derived from a forecast of the average gross wage in the national economy, multiplied by a coefficient set by the government for a two-year period. This mechanism ensures that the minimum wage is more responsive to economic developments. On the other hand, a sudden increase in the average wage may pose a challenge for smaller firms, which could face unplanned cost increases.
This expert text is part of the Trend Report 2025 publication released by the Association for Real Estate Market Development (ARTN) on 24 March 2025.
Autoři: Jiří Sedláček, Petr Linx, Ivan Kovář