The abolition of the real estate transfer tax heading to the Senate

The Chamber of Deputies approved the Government's bill, thanks to which the real estate transfer tax will be abolished. The Government and the Ministry of Finance believe that such step will relive the real estate market and, in the long run, seek to take advantage of their own housing, and – according to the press release of the Ministry of Finance - limits the manipulation space for so-called speculators.

Real estate transfer tax rate is currently 4 % and is payable within three months as of the acquisition of the real estate.

The Government's bill abolishes the real estate transfer tax, namely with retroactive effect. The tax will not affect anyone for whom the input in the real estate cadastre was performed in December 2019 and later. Anyone who has already paid the tax is entitled to recovery of tax overpayment incurred in this respect. Along with tax, also the obligation to submit the real estate transfer tax return shall be abolished.

The bill further regulates the extension of the time test for tax exemption of individuals’ income from the sale of real estate used for purposes other than own housing from 5 to 10 years. The extension of the time test will be effective for real estates acquired after 1 January 2021. For real estate used for own residential use, the time test period remains to be 2 years.

Quid pro quo?

However, the bill as approved by the Government also introduced the abolition of mortgage interests on as a non-taxable part of the tax base as of 2021. However, thanks to the parliamentary amendment, this possibility remains, only for new mortgages received from 1 January 2022, the limit for deduction is decreased from the original CZK 300,000 to CZK 150,000. The limit of CZK 300,000 shall still apply to real estates purchased before this date, even in the case of later refinancing.