Authors: David Krch, David Neveselý, Josef Žaloudek

Dear Clients and Business Partners,

Act No. 386/2020 Sb. (the “Amendment”) was promulgated in the Collection of Laws on 25 September 2020, which results in the cancelation of the real estate acquisition tax with retroactive effect for registrations of legal titles to real estate made by the Real Estate Registry from 1 December 2019.

The real estate acquisition tax is therefore cancelled for such real estate transfers for which applications for registration have been filed and respective registrations have been made by the Real Estate Registry since 1 December 2019 (i.e. the deadline for filing a tax return was after 31 March 2020). Such legal title registrations made by the Real Estate Registry since 1 December 2019 were subject to Extraordinary Measure No. 888 of the Ministry of Finance (the “Extraordinary Measure”), under which fines for late filing of real estate acquisition tax returns and late payment of such tax were forgiven. Taxpayers who have used the Extraordinary Measure no longer have to file a tax return or pay the real estate acquisition tax (if the Amendment applies to them). Taxpayers who have not used the Extraordinary Measure and filed a tax return and paid the real estate acquisition tax (if the Amendment applies to them) may apply for a real estate acquisition tax refund by submitting an application for a refund of the real estate acquisition tax overpayment.

The Amendment also includes accompanying amendments to Act No. 586/1992 Sb., on Income Taxes, among others:

• extension of the time test for the exemption of income from the sale of real estate that is not intended for housing purposes from personal income tax from the current 5 to 10 years, if the taxpayer acquires the sold real estate from 1 January 2021 (with certain exceptions when using funds from the sale of real estate to satisfy one’s own housing needs);
• reduction of the maximum applicable amount of the non-taxable part of the tax base in the form of interest on loans to finance housing needs from CZK 300,000 to CZK 150,000 for the procurement of housing needs after 1 January 2021.

The cancellation of the real estate acquisition tax also opens up space for new structures and mechanisms for the acquisition of real estate and the protection of property. If you own real estate and are interested in selling it, or if you are not sure about the tax implications of the sale that has already been made, do not hesitate to contact us.

Our experts will evaluate your specific situation and together we will find the most optimal solution.