When buying a property, the buyer must not forget the obligation to pay the real estate acquisition tax. It is often referred to by its former name as real estate transfer tax.
When buying a property, the buyer must not forget the obligation to pay the real estate acquisition tax. It is often referred to by its former name as real estate transfer tax.
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: Until 2019, property acquisition (transfer) tax was applicable. In 2020, an amendment to the law abolished this tax. The decisive date in this respect became 31 March 2020. The information below relates solely to events prior to this date. For more information, see the article Abolition of the real estate acquisition tax.
The law established a clear rule that the buyer was solely liable for the tax. The seller could not even be a guarantor and therefore the payment of the tax did not concern him in any way. Nor was it possible to contractually transfer the tax liability to the seller. The tax was therefore always payable only by the purchaser of the property.
Only so-called transfers for consideration, i.e. typically the purchase of a flat, house or land, were subject to property tax. However, it could also be, for example, an exchange of land. Conversely, transfers of real estate without consideration, most often by gift, were never subject to tax. The law also provided for certain exceptions where tax was not payable even if the transfer was for consideration. These were mainly the first sale of new houses or flats.
What about taxes in the case of a gift of real estate? You can read that in the next article.
The tax return had to be filed by the end of the third month after the registration of the new owner. If the Land Registry registered you as the new owner in January, then you had to file your tax return in April.
The Land Registry always notified the buyer in writing of the registration. The tax return was then filed with the tax office in whose district the property being bought was located. You also had to pay the tax itself within the deadline for filing the tax return. You had to watch the deadlines carefully, because if you failed to pay on time, you were liable to a fine and interest on late payment. This could have made the purchase of the property significantly more expensive if the tax obligations had not been met.
Nowadays, there is no need to fill in a property transfer tax form and no property acquisition tax is payable. Nevertheless, we occasionally encounter misinformation or outdated information on the internet that may give the impression that the tax is still payable. If you are buying a property, make sure you work with up-to-date information to avoid unnecessary stress.
You didn’t need a calculator to work out your property tax rate as the calculation was quite easy. Moreover, this article of ours works as such a real estate acquisition tax calculator. The rate was four per cent of the tax base, i.e. the price of the property you bought. In order to determine its amount, it was necessary to compare the agreed purchase price with the usual price in the locality. The tax was then calculated on the higher of the two. Thus, it was not possible to agree with the seller to include half the purchase price in the contract in order to save tax.
If the purchase price was more than 75% of the locally normal price, or as determined by an expert’s report, then the tax was paid on the purchase price. If the purchase price was lower, the tax would be calculated on the amount determined by an expert’s report or on the normal price.
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Today, even before the abolition of the real estate transfer tax, the vast majority of real estate transfers no longer require an expert’s report to be submitted with 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 is determined by price maps or tabulated values depending on the condition of the property.
If the buyer was not satisfied with this comparison, he could provide an expert’s report. The purchase price was then compared with 75 % of the price in the expert’s report. The tax was again paid on the higher amount. The cost of the expert’s report could also be deducted from the tax base. If, for example, the house being bought was in extremely poor condition and needed extensive renovation, it may have been more advantageous for the buyer to provide an expert’s report than to have the price compared according to the tables.
The preparation of the purchase agreement entails several pitfalls that can jeopardize or at least slow down the entire transfer. Learn what to look out for when determining the purchase price of a property.
The tax on the acquisition of immovable property (transfer tax) was abolished in 2020; the information in this article therefore relates to older cases until 31 March 2020. Until then, the tax was always paid by the purchaser and only applied to transfers for consideration, with the exception of, for example, the first sale of new buildings. The declaration had to be made by the end of the 3rd month after the entry in the Land Registry and the payment had to be made within the same time limit; the tax office responsible was the tax office of the property’s location and delays meant penalties and interest.
The rate was 4% of the tax base: the agreed purchase price was compared with the normal price (or an expert’s opinion) and the higher amount was used; if the purchase price was at least 75% of the normal price, the purchase price was used. For ordinary transfers, an expert’s report was not required (the tax office relied on price maps), but the buyer could voluntarily submit it and reduce the cost of the report from the tax base.
Today, you no longer pay acquisition tax. However, you have to take into account the administrative fee for the entry into the Land Registry, possible costs for the custody of the purchase price, legal defects checking, bank assessment and VAT for some new buildings.
Yes – typically property tax returns. It is filed after the first acquisition of the property by the statutory deadline in the following year. Thereafter, just pay the annual tax (unless there is a change).
The normal price is still used in a number of situations: for income tax purposes in sales, in inheritance, in the settlement of matrimonial property, in foreclosure or insolvency and often for bank valuations.
Primarily personal income tax – but often with exemptions (typically on proof of residence for a statutory period or after a longer period between acquisition and sale).
We prepared this article for the Lidové noviny series “Law & Housing”. See also other articles from the series:
Not sure how to do your taxes correctly so you don’t get it wrong? We can help you navigate the law, whether it’s dealing with a specific tax situation, preparing for an audit by the tax authority or defending yourself in court.
Ondřej is the attorney who came up with the idea of providing legal services online. He's been earning his living through legal services for more than 10 years. He especially likes to help clients who may have given up hope in solving their legal issues at work, for example with real estate transfers or copyright licenses.
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