The government approved paying the property acquisition tax only by the buyer

Prague - From next year, the property transfer tax should be paid only by the buyer. This is proposed in the amendment to the Senate's legal measure on the tax on the acquisition of real estate, which was approved by the government today. This information is available on the government’s website. According to the current regulation, the law gives the seller the option to agree with the buyer on who will ultimately be the taxpayer. The proposal can be found on the government’s website. Developers approached by ČTK criticize further tax changes.
    The previous government of Petr Nečas (ODS) had already proposed that only the buyer should pay the tax. However, the Senate approved a legal measure last October that allowed the current state.
    “A clear definition of the acquirer as the taxpayer of the tax not only corresponds to the concept of the majority of European countries, but also eliminates problems that may arise in practice due to the option of selecting the taxpayer, for example when exchanging real estate or acquiring property from the Czech Republic's assets,” states the introductory report to the law.
    Currently, according to the law, in cases of acquisition of ownership rights by purchase or exchange, the seller is the taxpayer unless agreed otherwise with the buyer in the contract that the buyer will pay the tax. The buyer is only liable in justified cases of execution, expropriation, possession, or acquisition of property at public auction. The proposal also abolishes the institution of tax guarantor.
    The Ministry of Finance also proposes to simplify the determination of the tax base in the case of the exchange of real estate. Another change pertains to the exemption from tax of the first paid acquisition of new buildings and units. This exemption will now only apply to completed or used buildings and units, not to those under construction.
    Another change is the expansion of the subject of the property transfer tax to include cases of contractual extension of building rights. “Given that the Civil Code regulates the possibility of extending the duration of building rights and does not regulate the minimum duration of building rights, it cannot be excluded in practice that there will be attempts at undesirable tax optimization, which this change aims to prevent in the future,” stated the Ministry of Finance.
    The amendment also changes the concept of taxing the acquisition of engineering networks and exempts the acquisition of real estate by territorial self-governing units in the public interest from tax.
    According to Evžen Korec, the CEO and Chairman of the Board of Ekospol, this is another example of Czech legislative chaos, where tax laws are allegedly changed in a completely unsystematic manner. According to Korec, the change of the taxpayer for this tax interferes with existing contracts and the legal environment. “In pre-emptive contracts for land, which are often made for many years in advance, a specific price is stated and it is assumed that the property transfer tax will be paid by the seller. Newly, there is a risk that due to the change of the taxpayer, land prices could increase by four percent, which is the tax rate. Developers will have to factor this increase into the prices of new apartments as well. I estimate that this could cause an increase in the prices of new apartments by tens of thousands of crowns,” claims Korec.
    On the other hand, the Chairman of the Board of Central Group, Dušan Kunovský, does not expect an increase in prices of new apartments, but also criticizes the change in the tax area. “Currently, we are observing much more significant and important pressures on the price increase in the market for new apartments, stemming mainly from rising construction costs and also from increasingly rising costs of preparing new buildings due to the prevailing legislative chaos. The supply of already prepared and approved projects is quickly diminishing due to record construction, and new projects are only approved very complicatedly. In the future, this declining supply of new apartments could have catastrophic impacts on the availability of new housing and could also cause a sudden increase in apartment prices,” warns Kunovský.
    Central Group felt the practical impact of unexpected tax changes already at the beginning of last year when it temporarily suspended the sale of family houses due to unclear issues regarding the hastily approved change concerning VAT on land.