The government has prepared a bill abolishing the real property acquisition tax, which currently amounts to 4% of the total purchase price, with effect from 1 January 2021. According to the transitional provision, the real property acquisition tax should already not be paid for those transfers where registration was allowed by the land registry office starting on 1 December 2019, i.e. the statutory period for filing a tax return and paying tax was from 31 March 2020 onwards. Those who filed a tax return for this tax after 1 December 2019 and paid the tax will be refunded by the tax administrator. However, the bill on the abolition of the acquisition tax also brings the following changes:
Abolition of the deduction of interest on housing loan agreements as a non-taxable part of tax
According to the bill, only those natural persons who will no longer pay the acquisition tax, but will acquire real property by 31 December 2021 at the latest, may claim this interest, which can reduce the tax base for the tax period by up to CZK 300,000. The natural persons who entered into loan agreements before 1 December 2019 and paid the acquisition tax or those who did not pay the tax due to exemption from it (for example, for new buildings) remain in the original regime of the possibility of reducing the tax base by interest paid on housing loans. The aforementioned tax benefits will not apply to those who will acquire real property after 31 December 2021.
Time test for the exemption of income from the sale of real property
For real property acquired after 1 January 2021 not intended for the acquirer’s own living, the period for exemption of their sale from personal income tax is extended from 5 to 15 years according to the bill. The period of 2 years for exemption for the real property where the natural person had a residence immediately before the sale, as well as the possibility of exemption if the sale took place within 2 years and if the proceeds were used for the purposes of further housing, continue to apply.
