Property tax in SJM and income from renting or selling. How to save?

What is SJM (community property)

The community of property (SJM) is a statutory property regime that is established automatically on the date of marriage. This means that once you get married, everything you acquire or earn together becomes part of your community property.

For example, if you buy a new laptop after you get married, it will be part of the community property. The same goes for any salary you receive for work done after you get married – that too is already the property of both spouses.

What all belongs to the community property?

In general, everything that the spouses acquire during the marriage belongs to the community property. Typical items include:

• Wages, business income, rents, and other regular and one-time income,
• Movable and immovable property (e.g. house, flat, car, household goods),
• Savings, investments, securities,
• Debts, if acquired to provide for family needs (e.g. home mortgage).

What does not belong in the SJM?

The law specifically excludes certain items from community property:

• Property acquired by gift or inheritance, unless otherwise specified by the donor or testator,
• Items serving exclusively the personal needs of one of the spouses (e.g. clothes, jewellery),
• Property acquired before the marriage,
• Compensation for non-pecuniary damage (e.g. compensation for pain or personal injury).

SJM property tax return

Property is often part of the community property, whether it is a cottage, a building plot or an apartment. All such properties are subject to tax and newly acquired properties must be declared for tax. So how does this work in the case of tax on a property that is part of a SJM?

The real estate tax return is always filed by one spouse only. It doesn’t matter which one it is – no power of attorney or express authorization by the other spouse is required. A filing by one spouse is fully sufficient for the tax office.

From the point of view of the tax authorities, the spouses owning the property in the SJM are treated as one taxable entity. The spouse who files the return is considered by the authority to be the joint representative of both taxpayers. From a practical point of view, it is advisable for the same spouse to file the tax return at all times – especially for the sake of record-keeping, continuity and clarity in subsequent years.

Importantly, the estate tax return is not filed annually. This obligation arises only if you have acquired (bought, inherited, received, etc.) or sold part of the real estate in the region in the previous calendar year, or made improvements that affect the amount of tax (e.g., added another floor to the house). The return must then be filed no later than 31 January of the following year, at the relevant tax office according to the location of the real estate.

Payment of real estate tax in SJM

Only one spouse – usually the one who filed the tax return – pays the real estate tax on a property held in community of property. However, if the tax is not paid on time or at all, the tax office can recover it from the other spouse, even though he or she did not file the return. In the context of community property, the spouses are jointly liable for the tax liability and the other spouse acts as a guarantor in such a case.

Payment is made either in one lump sum by 31 May or in two instalments (by 31 May and 30 November) if the tax exceeds CZK 5,000. There are several ways to pay the real estate tax. The most common is a bank transfer with details from a bank draft or a data box. If you do not have a data box, you can use a postal money order sent by the authorities. You can also pay the tax via SIPO (with prior registration) or in cash at the tax office.

Income tax on income from jointly owned property

The next chapter concerning taxes and real estate in SJM is income from this property. These may arise in the event of a lease or sale and need to be taxed. Let’s take a look at how to do this:

Income tax on rental income from SJM property

If you have a property in SJM, then only one spouse is taxed on the rental income. So it’s up to you to agree which one of you puts the income on your tax return – there’s no need to split it between the spouses. But the important thing is that only one spouse is taxed on any rental income you have. So there must not be a situation where, for example, the husband is taxed on the rental income in January and the wife for the rest of the year.

Rental income is taxed as ordinary income of an individual at 15%. You can determine rental income based on:

• flat-rate expenses at 30%, or
• actual expenses – for example, depreciation of the property, maintenance and repairs, insurance, mortgage interest, estate agent fees or transport

Which spouse should tax the rental income? That depends on the income. If one of the spouses has no taxable income of his/her own or very little income (e.g. he/she is on parental allowance, unemployed or on a disability pension), it is preferable for him/her to tax the rental income. The reason is simple: thanks to the basic taxpayer’s allowance of CZK 30,840, the tax may be zero or significantly lower as a result.

Income tax on the sale of SJM property

You can also receive income if you decide to sell the SJM property. If you sell a property that is part of the matrimonial property, you are subject to income tax on the sale of the property, just like other individuals. This is not a separate type of tax, but a classic 15% personal income tax, which is calculated on the profit – that is, the difference between the sale price and the price at which you bought the property (including the verifiable expenses for the sale and renovation).

Again, only one of the spouses is taxed on the income from the sale of a property that belongs to the spouses’ joint property. It is not necessary for each spouse to declare their half. It is up to you to decide which of you to list on your tax return as the person who taxes the sale proceeds.

In many cases, you are exempt from income tax on the sale of the property. However, you must meet one of these three conditions:

1. You have owned the property for at least 5 years (if you acquired ownership before December 31, 2020) or 10 years (acquired after January 1, 2021).
2. You have occupied the property for at least 2 years – it is sufficient that at least one spouse has lived there.
3. You use the money from the sale to buy, build, renovate or pay off your mortgage.

An exception applies if the property was part of a business property. In this case, you will not qualify for the exemption under any circumstances. Even if the property was part of the community of property – in this case, the test is whether at least one spouse had it as part of the business property.

Summary

The community property (SJM) is created automatically upon marriage and includes most of the property and income acquired during the marriage, including real estate. Exceptions include property acquired by gift or inheritance or personal effects.

Only one of the spouses files a property tax return for the property held in the community property and automatically acts for the other spouse. The return is only filed for changes, such as the purchase, sale or alteration of the property, by 31 January of the following year. The tax is then again paid by one spouse, but both are liable. Payment can be made by bank transfer, bank draft, SIPO or cash, either in one lump sum by 31 May or in two instalments.

Only one spouse is taxed on the income from the rental or sale of the property in the SJM. In the case of rent, flat-rate or real expenses can be claimed, and it is preferable that the lower income earner is taxed. For a sale, only the gain is taxed and often an exemption can be used – for example, if you own the property long-term, live in the property or use the money for your own home. The exception is property classified as business property – in which case the exemption does not apply.