The abolition of the property acquisition tax is finally here!

The abolition of the property acquisition tax is finally here!

On 26 September 2020, Act No. 386/2020 Coll. on real estate acquisition tax, which repeals the Senate's statutory measure No. 340/2013 Coll. of 2013. The Chamber of Deputies finally approved the Senate amendment, which was also signed by President Miloš Zeman. Above all, the law brings relief from the payment of a 4% tax and should therefore be a welcome change for the entire real estate market. For example, are you now looking for a property for sale in Prague and you are not sure about the current situation? Learn what's new for you.


A difficult journey to a dream destination

The Minister of Finance Alena Schillerová (for ANO) announced the abolition of the tax in March this year. However, the coalition partner of the ČSSD, but also, for example, representatives of the National Economic Council of the Government (NERV) had reservations, so the discussion and approval lasted until the autumn. According to Minister Schillerová, the abolition of the tax was to revive the real estate market as soon as possible, especially during the then first wave of the coronavirus pandemic.

"Unfortunately, the wait and uncertainty were reflected in the freezing of sales. From the end of March, buyers have been waiting to see if the tax will be abolished and they will be able to save a considerable amount of money. As many as 80% of interested parties postponed the signing of the purchase contract and registration in the cadastre. However, the demand returned to more or less normal after the announcement of the tax abolition, "confirms Jiří Kučera, director of the Luxent-Exclusive Properties real estate agency. 

 

What will the abolition of the real estate acquisition tax bring?

Buyers are now no longer required to pay 4% of the purchase price of the property and file a tax return for property acquisition tax. They will also be exempted from the tax retrospectively, in the event that they made a contribution to the real estate cadastre after 1 December 2019. It will be refunded to those who have already paid the tax on request.

The possibility to deduct interest on a housing loan from the income tax base remained in force. The deduction limit has been adjusted – for contracts concluded from 1 January 2021, it will be halved from the original CZK 300,000. "For many interested in purchasing an exclusive real estate, more expensive housing with a large mortgage and a high-interest payment, the purchase will pay off later this year. They will not pay the acquisition tax and they will have a higher limit for deductions, “advises Jiří Kučera.

Attention! If you are planning to buy an apartment in a new development project in Prague, for example, you do not have to worry about the property acquisition tax. This did not apply to new buildings under 5 years of age.


When you do not have to pay income tax on the sale of real estate

As for the so-called time test for the exemption of income from the sale of immovable property, it is extended from the current five years to ten. This applies to non-residential properties that are deposited in the cadastre after 1 January 2021. Payment of this tax before the expiry of the 10-year period will be avoided if you use the proceeds from the sale to procure housing needs. Income from the sale remains exempt from tax for real estate in which the owner has a permanent residence or otherwise proven residence for at least 2 years.

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