With the abolition of property tax, it might seem that no tax obligations arise when selling and buying a flat or house. However, the opposite is true. Taxes still need to be thought about. Which ones apply to the seller and which ones do the buyer have to take care of? The answer can be found in the following article.
The very first tax we need to mention concerns the seller. This is income tax, sometimes inaccurately referred to as tax on the sale of immovable property, which is calculated on the profit, i.e. the difference between the sale price and the purchase price of the property. Expenses related to the sale (commission to the real estate agent, preparation of the sale and purchase contract, expert opinions) or reconstruction of the property (however, only such modifications that are directly related to the appreciation of the property, e.g. replacement of windows or insulation, are counted) are deducted from the sale price. If the purchase price, after adding the costs of reconstruction and sale, exceeds the sale price, the tax is of course not payable because no profit was made.
It should be taken into account that the personal income tax has two percentage rates. In addition to the basic rate of 15%, a higher rate of 23% will be added in 2021 for the part of the tax base that exceeds 36 times the average wage (for 2025 this limit is CZK 1,676,052).
Thus, if the seller collects not only the profit from the sale of the flat in a given year, but also an extraordinary remuneration from his employer, part of his tax base may “swing” to the higher rate.
A practical example: on 1 February 2025, Mr and Mrs Novák sold their flat for CZK 6,000,000. They bought the property six years ago for CZK 3,800,000 and invested CZK 400,000 in renovations. The profit is therefore CZK 1 800 000. Mrs Nováková’s husband also received an extraordinary remuneration of CZK 500 000 in addition to his salary. The sum of the income (profit from the sale + the husband’s salary) brought the couple above the limit; anything above the limit is therefore subject to the 23% rate.
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Before you start calculating how much tax you’ll pay on the sale of your property, see if any of the exemptions apply to you. In fact, a significant number of sellers are completely exempt from the tax. You don’t pay tax if you meet at least one of the following conditions:
However, all exemptions only apply to individuals. If the property is included in business property, the tax must be paid in any case. If you are an individual and meet any of the conditions for exemption, you do not have to include the income from the sale of the property in your tax return at all.
If the property being sold is part of the community property, the spouses can choose which of them will tax the sale proceeds. For purposes of the timing test, it is sufficient for either spouse to meet the condition.
In practice, the income is then often taxed on the spouse who, due to his/her other income, remains below the threshold for the second income tax rate and thus does not apply the 23% rate itself.
It should be remembered that under the Income Tax Act, an individual is obliged to notify the tax administrator of exempt income exceeding CZK 5 million. Exemption is typically the fulfilment of a “time test” or a two-year enjoyment condition.
However, if the seller sells multiple properties during the same year and the aggregate of his or her exempt income exceeds the statutory limit, he or she must disclose this fact to the tax authorities by the end of the tax filing deadline, even if he or she is not otherwise required to file a return. The penalty for failure to do so may be a penalty of up to 15% of the unreported income.
There are a lot of myths about tax. Some think that the property sales tax will be abolished in 2020. But that is not true, because it is confused with property tax. Read on to find out what has changed in practice with the abolition of the property tax and what it means.
If the seller is a VAT payer and is not subject to one of the exemptions, he/she must also pay VAT at the rate of 21% of the property price (or 12% in the case of so-called social flats and houses).
From 1 July 2025, the amendment to the VAT Act has reduced the original five-year time test to 23 months and only taxes the first supply of completed property. Any subsequent transfers after this period are no longer exempt.
The seller is subject to VAT and the object of the sale:
Have you bought a house or land and are about to file your property tax return? Find out how to calculate the tax with our article.
Even though you are not obliged to pay VAT, you can opt for voluntary taxation during the next transfer so that you do not lose the VAT deduction applied during construction or reconstruction. Now you need the consent of the VAT-paying buyer (or a person registered for tax in another Member State) to do this. In practice, this often results in two options when negotiating the price: with VAT and without VAT.
Practical example: a small developer completes a terraced house and sells it to its first VAT-paying client 14 months after completion. The client can claim a deduction. The developer wants to sell the second house after 26 months. In order to retain the right to deduct the second building, it agrees with the purchaser-taxpayer to tax the sale voluntarily, so that 21% VAT is added to the price but subsequently deducted by the purchaser.
As of 1 January 2025, an employee of the seller is considered a so-called connected person. Therefore, if a VAT-paying entrepreneur sells a property to his employee at a price lower than the “normal price” (i.e. the normal market value of the property at that place and time), he must calculate VAT on this normal price, not on the agreed price. The purpose of the regulation is to prevent the tax base from being lowered on purpose within a group with personal ties. It is therefore worthwhile for the seller to prove that the agreed price corresponds to market conditions – for example, by means of an expert’s report.
Another important new change is that the VAT Act now classifies as building land not only those plots of land on which a building is already under construction, but also those which are designated for development according to the zoning plan or on which preparatory work has been carried out (for example, the connection of utilities). Such land is usually subject to the basic rate of 21%, which can significantly increase the purchase price.
While the previous two taxes are paid on a one-off basis, property tax is an annual affair and applies to every property owner. It is therefore payable by the purchaser after the transfer of the property. The tax must be paid by anyone who owns any property on 1 January. Each owner declares himself or herself liable for the tax by filing a property tax return with the local tax office by 31 January of the year for which the tax is first payable. In subsequent years, it is not necessary to file the tax return again, but only to pay the tax itself.
However, the seller can opt out of the property tax so as not to pay the tax himself. In most cases, however, the tax office will find out that the property has been sold so that the new owner applies for the tax and files the tax return himself. The tax office will then de-register the former owner itself. However, if the seller does not want to rely on this, he or she can and should file a property tax disclaimer and support it with an extract from the Land Registry. Then he assumes no risk.
You can read more about how tofile your property tax return in our article.
At Affordable Lawyer, we protect the rights of sellers and buyers. We already know exactly which contracts need to be prepared and which obligations must not be forgotten. We will be happy to walk you through the entire process and make sure that everything goes smoothly from a legal point of view, without any mistakes that could lead to a significant delay in the sale or a significant financial loss.
The main tax liability of the seller is to pay income tax on the sale of the property, which is 15% of the difference between the sale price and the purchase price. Costs associated with the renovation and sale are also included in the calculation, but only those that have directly contributed to the increase in value of the property. There are exemptions that may exempt you from this tax. For example, the seller does not have to pay the tax if they have owned the property for at least 5 years or occupied the property for at least 2 years before the sale. Another exemption is to invest the proceeds of the sale to meet your own housing needs.
VAT payers apply a rate of 21% or 12% from 1 July 2025 and VAT is only payable on the first sale of a new build within 23 months of completion; older properties are exempt
Property tax is also payable annually by each property owner. The buyer is liable to pay this tax when selling the property, but the seller can file an opt-out to avoid any potential risks.
We provide comprehensive legal services related to the purchase or sale of real estate, including reservation agreements and escrow services. We can also assist with land registry and tax matters. We can handle everything within 48 hours, even when purchasing from a developer.
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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