Change of the payer of property transfer tax

Czech Republic: Amendment to the Senate’s legislative measure concerning the property transfer tax takes effect as of 1 November 2016

A long-awaited amendment concerning the property transfer tax has become law upon its promulgation in the Collection of Laws on 5 August 2016 (Amendment No. 254/2016 Coll. to the Senate’s legislative measure No. 340/2013 Coll. concerning property transfer tax). The major change brought about by the amendment concerns the identity of the person who is to pay the property transfer tax. Newly, this will always be the acquirer of the title to the property (i.e., the buyer), and not the transferor (seller). The parties to a transfer of title may not deviate from this rule. The previous legal concept according to which the acquirer vouched for unpaid property transfer tax has thus become obsolete.

Another new rule stipulates that a transfer tax exemption may be utilized for the first transfer of title for consideration in the case of newly-built buildings and apartment units, though only in the case of completed (or already occupied) buildings and apartment units – which rules out certain buildings and units (that are still under construction). The latter are not yet entered in the cadastral record and could therefore be potentially transferred for consideration several times in a row, which is why the tax authorities have sought to forestall any potential misjudgment of whether the given acquisition of title was really the first acquisition, and close the door on the possibility of multiple tax-exempt transactions.

If the title to a property is acquired by way of a swap (and provided further that the acquisition is subject to property transfer tax in the first place, and that the acquisition value is not solely based on the price agreed between the parties), then the new rules stipulate that the tax reference value (i.e., the assessment base for property transfer tax) shall equal an amount corresponding to 100% of the so-called guidance level (or the value determined by an expert appraiser). In all other cases (i.e., usually, a purchase), the previous rule applies according to which the tax reference value is 75% of the said amount.

This new property tax arrangement will be applied to all purchase agreements for which the motion for conveyance is delivered to the cadastral office on 1 November 2016 or later. If the transfer of title is entered into the cadastral record based on a motion filed by the end of October, then the previous arrangement applies. The property tax rate remains unchanged at 4% of the assessment base.

Source: Amendment No. 254/2016 Coll. to the Senate’s legislative measure No. 340/2013 Coll. concerning property transfer tax


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