Many have certainly witnessed that the New Civil Code (Act No. 89/2012 Coll., hereinafter “NCC”) has entered into effect on 1 January 2014, leading to significant changes in the area of personal rights. However, not everyone has noticed that the real property transfer tax has also changed.

The name of the tax itself is the easiest noticeable change, now called “tax for the acquisition of real property”.

1. You don’t need an expert opinion

The tax rate remains the same, i.e. 4% of the tax base. However, what has changed is the way the tax base is calculated, and the change is in fact a major one.

Before 2014, the tax base was calculated by comparing the negotiated purchase price with the estimated price. The estimated price required the acquisition of an expert opinion. The higher of these two was set as the tax base.

It will no longer be necessary to compare the purchase price and the estimated price. Instead, it will be possible to compare the purchase price with a so-called indicative value. The indicative value is basically the usual price, determined by the tax office based on the type, position, purpose, state, age, equipment and construction-technical parameters of the real property. This information will have to be entered in the appropriate annexes of the tax declaration. Since only 75% of the indicative value will be used to determine the tax base, it is probable that, when negotiating a lower purchase price, the resulting tax will be lower than previously. This process will be applicable in the case of the transfer of

• apartments;
• family houses;
• cottages, cabins and holiday buildings;
• garages;
• plots which form a functional unit together with the buildings specified above;
• plots which contain the buildings specified above;
• plots without permanent growth which do not contain any buildings and which do not have a right of construction.

However, it is still possible to use the “old way” if one desires – i.e. it is still possible to provide an expert opinion, if the taxpayer wishes. It will newly be possible to deduct the cost of an expert opinion from the tax base. The tax base will then be equal to 75% of the price obtained from the expert opinion, unless the purchase price exceeds this.

2. Who pays the tax?

The tax for the acquisition of real property is still the seller in most cases, even though it was originally intended to transfer this obligation to the buyer. However, this remains unchanged and hence the tax is still paid by the seller, whereas the buyer is a guarantor.

Newly it is however possible to contractually arrange that the tax will be paid by the buyer. Such a provision will also apply to tax administrators.

3. Deadline for tax declarations

The deadline for submitting a tax declaration remains the same and the taxpayer must thus submit a tax declaration at the latest by the end of the third month following the month where the appropriate right was entered in the real property cadastre.

4. Advance payment

If a taxpayer chooses to use the new method for calculating the tax, i.e. without presenting an expert opinion, then within the deadline for submission of a tax declaration they will pay 4% of the agreed upon purchase price as advance payment for tax. The tax office will then issue a payment order specifying the tax amount after determining the tax base. Subsequently, the taxpayer will either be returned overpaid tax, or will be asked to pay the remainder of the tax.

5. Conclusion

From what has been stated above, it is clear that the real property transfer tax has undergone significant changes far exceeding its mere renaming to “tax for the acquisition of real property”.

In practice, the possibility of avoiding an expert opinion is certainly welcome. It may also be expected that taxpayers will start considering which of the two admissible options will be better for them.

For taxpayers, the possibility of deducting the costs of an expert opinion from the tax base represents a welcome change. Some will also make use of the option of arranging that the tax will be paid by the buyer instead of the seller. In some cases, the sale of real property will not even require an attorney’s or banking custody, previously used to ensure the proper performance of the seller’s tax obligations.

For more information, please contact K&A partner, Mgr. Jiří Kučera, e-mail: jkucera@kuceralegal.cz; tel.: +420604242241.