Taxeation of acquisition of a house, apartment, business premises or property in the Czech Republic
Tax framework for real estate acquisition in the Czech Republic
What should be considered when buying a house, apartment, commercial space or property?
1. TAXES ON THE PURCHASE OR SALE OF A REAL ESTATE IN CZECH REPUBLIC
1.1 Real estate tax
As soon as a property in the Czech Republic is acquired, so-called real estate tax is payable annually. The levy depends on the location and size of the property. For example, for a condominium of about 80-100 m2, about 50 EUR per year has to be paid in taxes.
1.2 Real estate transfer tax
So far the legislation has said that the purchase tax to be paid by the buyer is 4% of the purchase price or the usual market price - whichever is the higher and is payable within 3 months after receipt of the notification of the land registry office about the transfer of ownership to the competent Czech tax office.
The first transfer of ownership of a newly built (previously never inhabited or used) property from a legal entity involved in the construction industry or a city / municipality to the buyer at the Land Registry is not taxed.
This legislation was repealed on 15 September 2020 by Act No. 386/2020 Coll., repealing Senate statutory measure No. 240/2013 Coll. on real estate acquisition tax as amended and repealing other related legal regulations.
1.3 Income tax
Gains on the sale of a property in the Czech Republic are usually added to the total taxable income. The basis of calculation for capital income from real estate sales is the difference between the sales value minus the acquisition cost.
Standard tax rates for income taxes in the Czech Republic:
For individuals, the tax rate in the Czech Republic is 15% of the taxable amount (this applies to citizens of the Czech Republic, EU citizens and non-EU citizens with a long-term residence permit). Those whose income (in 2019) exceeds CZK 1,569,552 (EUR 61,000) annually pay out of this income an additional monthly tax of 7%.
For legal entities, the tax rate in the Czech Republic is 19% of the tax base. The basis for determining the profit from the sale of your property in the calculation of their income tax is the actual sale price of the property less the acquisition cost.
Tax exemption from income tax on the sale of real estate in the Czech Republic
Tax exemption concerns real estate in which the seller:
- lived just prior to the sale of the property and used the proceeds to purchase a new property by the end of next year;
- lived immediately before the sale of the property for at least 2 years;
- did not live in the property but had the property personally for at least 5 years (this also applies to other properties).
Taxation of income in the case of direct ownership of the Czech property
In the event that the property is owned by a German citizen or a German company, then the following rules apply to the taxation of the income from the sale proceeds and the rental income:
- revenues are taxed in the Czech Republic but are subject to further taxes in Germany because of the Double Taxation Agreement.
If the seller of the Czech property is subject to VAT, then a reduced VAT rate of 15% will apply to the transfer of an apartment up to 120 m2 and to a house up to 350 m2 from the total floor space. The transfer of other real estate or land is valued at the standard rate of 21% VAT.
The sale of buildings, flats and commercial buildings is exempt from VAT if the transfer takes place three years after acquisition or acceptance of the property.
If above conditions are not met, the standard rate of 21% of VAT will be applied to the transfer of a residential building, house or apartment. Exceptions apply to accommodations that serve social purposes.
If you need more information, please contact us at any time:
JUDr. Mojmír Ježek, Ph.D.
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