Who pays the property transfer tax and how

Chapters of the article

• Who pays tax today
• When to file your tax return by
• How the amount of tax is determined
• Is an expert opinion needed?

Until the end of 2016, this tax was overwhelmingly paid by the seller. Only if there was an agreement with the buyer did the buyer pay the tax.

Please note: In 2020, an amendment to the law abolished the real estate acquisition tax. The decisive date in this respect becomes 31 March 2020. The information below relates solely to events prior to that date. For more information, see the article Abolition of the real estate acquisition tax.

Who pays tax today

Currently, the law lays down a clear rule according to which the buyer is solely liable for the tax. The seller is not even a guarantor and is therefore in no way affected by the payment of the tax. Nor is it possible to contractually transfer the tax liability to the seller. The tax will therefore always be borne solely by the person who acquires the property.

Only so-called transfers for consideration are subject to property acquisition tax, i.e. typically when buying a flat, house or land. However, it can also be, for example, an exchange of land. Conversely, transfers of real estate without consideration, most often by gift, are never subject to tax. The law also provides for certain exceptions where you do not have to pay tax, even if the transfer is for consideration. This is mainly for the first sale of new houses or flats.

When to file your tax return by

Thetax return must be filed by the end of the third month after the new owner is registered. If the land registry registered you as the new owner in January, then you file your tax return in April.

The Land Registry will always notify the buyer in writing of the registration. The tax return is filed with the tax office in whose district the property being purchased is located. You must also pay the tax itself within the deadline for filing the tax return. You need to keep a close eye on the deadlines, because if you do not do it on time, you risk a penalty and interest on late payment. This could make the purchase of the property significantly more expensive if you do not comply with your tax obligations.

You can findthe tax return form on the tax authority’s website. Here you will also find instructions on how to complete the return.

How the amount of tax is determined

You won’t even need a calculator to work out the rate of tax on the acquisition of immovable property, as the calculation is quite simple. The rate is four per cent of the tax base, i.e. the price of the property you are buying. To determine the rate, you need to compare the agreed purchase price with the usual price in the area. The tax is then calculated on the higher of the two. Thus, it is not possible to agree with the seller to include half the purchase price in the contract in order to save on tax.

If the purchase price is more than 75% of the locally normal price, or as determined by an expert’s report, then it will be charged to the purchase price. If the purchase price is lower, the tax would be calculated on the amount determined by an expert’s report or on the normal price.

Is an expert opinion needed?

Today, in the vast majority of real estate transfers, an expert’s report is no longer required to accompany the tax return. In the case of ordinary transfers of flats, houses, cottages or garages for consideration, an expert’s report is not required. The tax office compares the agreed purchase price with the normal price, which it determines from price maps or tabulated values depending on the condition of the property.

If the buyer is not satisfied with this comparison, he can provide an expert’s report. The purchase price will then be compared with 75 % of the price in the expert’s report. The tax will again be paid on the higher amount. The cost of the expert’s report can also be deducted from the tax base. If, for example, the house being bought is in extremely poor condition and needs extensive renovation, it may be more advantageous for the buyer to provide an expert’s report than to have the price compared according to the tables.

We prepared this article for the Lidové noviny series “Law & Housing”. See also other articles from the series:

1. What to watch out for when buying a property
2. How to get a mortgage
3. What to check before buying a property
4. Who pays the property transfer tax and how?
5. What should be included in the property purchase contract
6. The most common mistakes when drafting a proposal to the Land Registry
7. Buying a property from a developer
8. Keeping the purchase price when buying a property
9. The difference between a condominium and a freehold
10. What is an annuity?
11. How to properly gift a property
12. What is the purpose of an easement or servitude?
13. Making a will and settling an estate
14. What is a collation
15. What shouldn’t be missing from a lease agreement
16. When rent increases can be made
17. Termination of the lease
18. Agreement to end the tenancy
19. How to draw up a work contract with a tradesman
20. Hidden defects and cancellation of a works contract
21. When do you need planning permission to renovate a property?
22. Home Rules
23. What does serving on a condominium board entail?
24. Why not underestimate the bylaws in a condominium
25. Common areas in a block of flats
26. What is involved in refurbishing a block of flats
27. Can a condominium or housing association go into debt?
28. How to renovate a house or cottage
29. What to watch out for when dealing with a construction “company”?
30. Building a house on a “green field”
31. How to remove land from the agricultural fund