Real estate acquisition tax
Tax on real estate acquisition finally abolished
The government approved the abolition of the 4% real estate acquisition tax back on April 30, 2020, but it did not enter into force until September 25, 2020. The positively perceived abolition of the tax is associated with changes in the Income Tax Act, which, on the contrary, are to the detriment of taxpayers.
Real estate acquisition tax
Until now, the purchase of real estate was subject to a real estate acquisition tax, which was paid by the buyer. The tax rate was 4% and was most often calculated from the agreed contract price, thus increasing the price of the real estate sold.
The abolition of the tax is conceived in a somewhat unconventional way as concerns the time period, because on the basis of transitional provisions it already applies to real estate for which the change of ownership in the real estate cadastre was made on December 1, 2019 and later.
Transfers of real estate from December 2019 to August 2020 were covered by the general pardon of the Minister of Finance for filing a return for real estate acquisition tax and paying this tax. Whoever used this pardon does not have to take any further steps. However, those who have paid the tax can now claim a tax refund, in the form of a request for a refund of the tax overpayment.
Extension of the deadline for exemption of income from the sale of real estate
The amendment extends the time test for the exemption of income from the sale of real estate, not intended for one’s own use, from 5 to 10 years (the original ministerial proposal provided for an extension to 15 years). The extension should apply to sales of real estate acquired after January 1, 2021. The extension of the time limit will thus affect, in addition to real estate held as an investment, in particular the sale of recreational facilities or real estate held for housing purposes by members of the extended family.
The exemption will be maintained even if the deadline is not met, if the seller uses the funds obtained from the sale to procure their own housing needs.
For real estate acquired before January 1, 2021, the current five-year exemption period shall apply to their sale.
Deduction of interest from mortgages
The amendment also comes with a reduction in the maximum amount for deducting interest on newly concluded mortgage loans and other loans to finance housing needs (e.g. loans from building savings) for real estate acquired from January 1, 2021 from CZK 300 thousand to CZK 150 thousand per year.
Interest on already concluded contracts, as well as those newly concluded, which will only refinance the existing mortgage loan, will still be possible for taxpayers to deduct from the tax base in the original limit of CZK 300 thousand per year.
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