Current developments in the application of value added tax to construction work

28. 6. 2023

The amendment to the Value Added Tax Act, which relates to the Building Act, changes the legal definition of the terms “family house” and “apartment building.” The amendment comes into effect July 1, 2023, extending the definition of these terms. In this context, the General Financial Directorate of the Czech Republic has amended its information regarding the application of the Value Added Tax Act to immovable property.

Until now, issues regarding VAT on immovable property were based on the legal definitions set out in cadastral regulations. From July 1, 2023, the legal definitions according to the new Building Act will be used in this regard.

The fundamental change concerns the definition of the terms “family house” and “apartment building.” The definition according to the new Building Act in effect from July 1, 2023 will no longer contain the condition that the building’s initial construction and legal purpose was for habitation.

This change not only will be reflected in the setting of the correct amount of VAT for construction work on already completed housing buildings and for social housing, but also in connection with the construction of social housing. In addition, the changes will also affect the possible exemption from value added tax on the supply of immovable property, as well as to its rental.

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