Since 2014, the tax on the acquisition of real estate has been governed by the by-law No. 340/2013 Coll. In practice, however, there were some flaws that resulted into uncertainty for taxpayers so that the by-law has been amended. The amendment was published in the Collection of Laws last year and has been in effect since 1 November 2016.
The new legislation applied to cases where ownership was acquired after 1 November 2016. The law states that the taxpayer is always the acquirer, and the guarantee for the tax payment was cancelled. Under the previous legislation, the tax was paid by the transferor unless the parties agreed otherwise. If the taxpayer was the transferor and failed to pay the tax, the transferee as a guarantor had to pay the tax instead, which represented considerable uncertainty to transferees.
In relation to the change in the taxpayer, the tax exemption was extended to self-governing territorial units. Furthermore, there was a modification of real estate: instead of the original 75%, 100% of the benchmark value or the determined price is used.
In the spring of 2017, this tax was discussed in the media in connection with the acquisition of a unit in a family house. Some taxpayers applied tax exemption in good faith, assuming that the law permitted it. Such a situation could be caused by a developer as well because the construction of family houses is not regulated as strictly as the construction of residential buildings.
In connection with the situation, a draft of an amendment was submitted to the Chamber of Deputies, extending the exemption to the acquisition of units in family houses. The amendment is now undergoing the approval process in the Chamber of Deputies. The exemption will be then applied to transfers for which the contract will be submitted to the Land Registry after the amendment is effective.
The latest major change in the tax on the acquisition of real estate is by the Supreme Administrative Court (hereinafter “SAC”), which decided about the tax base assessment at the end of July 2017. Currently, the procedure follows the explanatory memorandum that says that the agreed price is the total price including the VAT. The SAC ruled that the purpose of the tax on the acquisition of real estate, like previously for the tax on the transfer of real estate, is to tax the value of the transferred real estate and the proceeds from its sales. The value added tax is not a yield for the seller, and for this reason it should not be included into the tax base. The SAC ruling applies to the legislation before 31 October 2016, but we expect that it will also apply to the legislation after that date.
This fact makes it possible for taxpayers to submit a supplementary tax return and to reduce the tax base and thus also the resulting tax. Do not hesitate to approach us with any questions regarding the tax on the acquisition of real estate.
Author: Pavla Jánišová, Tax Consultant, e-mail: firstname.lastname@example.org, phone: +420 267 997 797