Czech Republic abolishes property acquisition tax

Czech Republic

Czech Republic abolishes property acquisition tax

Abolishment of the property acquisition tax in the Czech Republic became final on 18 September when Czech President Milos Zeman signed this bill into law after its approval by the nation's Chamber of Deputies and Senate.

The final version of the law corresponds to the draft originally approved by the Chamber of Deputies that we reported on in July with only minor technical comments raised in the Senate.

The key aspects of the law are as follows:

Real property acquisition tax

Previously, tax in the amount of 4% of the purchase price was payable by the purchaser and applicable to all transfers of real estate by way of asset deals. This real property acquisition tax has now been abolished retroactively from 1 December 2019. This means that no acquisition tax is payable for any real estate transfers registered with the land registry after 1 December 2019 and buyers who paid this tax after that date can claim their money back.

Income tax from the proceeds of real estate sales

Previously, proceeds from the sale of real estate in the Czech Republic by private individuals were subject to personal income tax unless a private individual as a seller had owned the property for five years prior to the sale. The new law prolongs this period from five to ten years for real property acquired after 1 January 2021. A similar income-tax exemption for the sale of real estate used for the owner’s own residential purposes, and which has been held for more than two years, remains unaffected.

Cap on tax deductions for residential mortgages

Previously, loan interest on residential mortgages could be deducted from personal income tax up to a maximum of CZK 300,000 per annum. The new law reduces this limit to CZK 150,000 per annum, and only for mortgages taken after 1 January 2021. The new cap does not apply to the refinancing of loans taken out before this date.

For more information on this law, Czech real estate law and Czech economic incentives, contact your regular CMS advisor or local CMS experts.