The property acquisition tax will be paid by the buyer from November 1

Prague - Starting November 1, buyers will pay the property acquisition tax instead of sellers. The change has already been published in the Collection of Laws. Until then, the taxpayer is primarily the transferor of ownership rights to the property, and the acquirer is the guarantor. From November, the obligation to guarantee the tax will cease. The tax rate remains unchanged despite some senators wanting to reduce it from the current four percent.

According to the currently applicable legislation, the property acquisition tax in cases of purchase or exchange was the only tax where the contractual parties could choose who would be its taxpayer. If the parties did not agree, the transferor paid the tax. “If an application for the registration of rights from a purchase or exchange contract is submitted to the land registry by October 31, 2016, and unless otherwise agreed, the taxpayer is primarily the transferor of ownership rights to the property, and the acquirer is the guarantor,” stated Linda Paterová from the General Financial Directorate in a press release.

The amendment was signed by the president at the end of July and was published in the Collection of Laws on August 5. The change comes into effect on the first day of the third month following the announcement of the law in the Collection of Laws. The government hopes that the change in taxpayer identity will bring greater clarity to the law and better tax collection.

The acquisition tax is already paid by the acquirer of the property under the current legal framework, in specified cases such as auctions or adverse possession. Finance Minister Andrej Babiš (ANO) assured lawmakers during the discussion of the change that banks would adjust to this change and would lend to clients for tax payment as well. According to the Ministry of Finance, the law will still allow taxpayers to deduct mortgage or building savings interest from their income tax base if they use the loan not only to pay for the property but also to pay the acquisition tax.

The amendment also exempts regions, municipalities, and their associations from paying the acquisition tax. In this case, local governments will not even have to file a tax return. The proposal simplifies the determination of the tax base in the case of exchanges of real estate. Another change concerns the exemption of the first paid acquisition of new buildings and units. This exemption will now apply only to completed or used buildings and units, not to those under construction.