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Real estate transfer tax after 1 January 2014

Czech Republic:As of 1 January 2014, important changes will take place in the area of property taxes, as the Act on Inheritance, Gift, and Conveyance Tax makes way for the new Real Estate Transfer Tax Act (Act No. 340/2013 Coll.).

As under the old rules so under the new rules, the transferor is the taxpayer (in the case of real property purchases or swaps); the transferee is held responsible as a guarantor for the payment. However, the parties to a purchase or swap may agree that the transferee should act as the taxpayer. In all other cases (such as e.g. contributions-in-kind or acquisitions by way of an auction in foreclosures), the transferee is the taxpayer by default.

The subject matter of tax is the transfer of real property for consideration (as before), but also includes the transfer of surface rights (as a new concept of Czech civil law: "právo stavby") and the security transfer of rights. As before, the tax will not apply to company transformations, so as to preserve their tax neutrality.

The scope of the various exemptions from the tax has also changed: while the acquisition of new buildings remains exempt, and the acquisition of real estate under a financial leasing arrangement will newly be exempt, the previous exemption for contributions-in-kind of real estate to a company's capital stock will by contrast be abolished.

The new regime also changes the rules for determining the tax assessment base. For certain types of transfer (estimated by some to include 80% of all transfers), expert appraisals will no longer be necessary, as the assessment base will newly be determined based on a comparison of the contractually agreed price and the "tax reference value" (i.e., whichever is higher shall be used as the assessment base). The tax reference value is in turn defined as being equal to 75% of what is known as the "guidance level". An implementation ordinance will set out how to calculate the guidance level, which reflects standard market prices for real estate at the given time and place, taking into account the property's type, location, purpose of usage, condition, age, furnishings, and structural/technical parameters. The plan is to create a publicly accessible online calculator tool which generates the guidance level based on a given set of input figures. It is reasonable to assume that the tax reference value will generally be lower than the purchase price agreed upon by the parties.

In those cases in which the tax is thus stipulated based upon the guidance level, the taxpayer shall make an advance payment on their overall tax burden in the amount of 4% of the contractual price. The supplementary payment (if any) will then have to be paid based upon a payment summons, within the additional time period for payment set out in such summons.

Finally, filing the real estate transfer tax return itself is being made easier, in that the annex(es) to be included with the form need no longer be certified - a plain copy suffices. The statutory time period for filing the return remains the same as before.

Radka Šlancarová, tax advisor