The tax on property acquisition will be paid by the buyer, the Senate approved

Prague - The tax on the acquisition of real estate will now be paid by the buyer. The government amendment to the legal measure that provides for this was approved today by the Senate. It still needs to be signed by the president. The change will take effect in the autumn. The amendment does not change the tax rate.

The Senate Committee for Territorial Development proposed reducing the tax rate from four to three percent, but since the Senate approved the change to the legal measure, there was no vote on the amendments. Finance Minister Andrej Babiš (ANO) expressed disapproval of any proposal to change the rate. Senator Veronika Vrecionová (ODS) had prepared a proposal to reduce the tax to two or even just one percent. Ivo Valenta (for the Party of Entrepreneurs) wanted to abolish the tax on acquisition altogether.

Former constitutional judge and senator Eliška Wagnerová (for SZ) also raised concerns about the tax rate. "It is a very high taxation and for nothing," she said. However, she noted that the Constitutional Court concluded in 2009 that this tax is not unconstitutional. She pointed out that the state can relatively freely decide what to tax and how to tax it, but it must ensure that certain groups of citizens are not overburdened compared to others.

The government expects that the change in the taxpayer will provide greater clarity to the law and better tax collection. The current law allows both parties to the transaction to agree on who will pay the tax; generally, the seller pays it, and the buyer is in the position of a guarantor. The change in the law abolishes this guarantor institution. The tax rate of four percent remains unchanged. The change is to take effect on the first day of the third month after the announcement of the law in the collection, if it were to be published in August, the change would take place in November.

The tax on acquisition is already paid by the acquirer of real estate under the current legal regulation, in specific cases, such as auctions or adverse possession. Babiš assured during the discussion in the Chamber that banks would adapt to this change and would lend clients money to pay the tax. According to the Ministry of Finance, the law will continue to allow taxpayers to deduct from their income tax base the interest from mortgages or building savings, if they use the loan to pay not only for the property but also for the tax on acquisition.

The amendment also exempts municipalities, towns, and their associations from paying the tax on acquisition without further conditions. In this case, local governments will not even have to submit a tax return. The draft simplifies the determination of the tax base in the case of a swap of real estate. Another change concerns the exemption of the first paid acquisition of new buildings and units. This exemption will now only apply to buildings and units that are completed or in use, not to those that are under construction.