A change of the payer of the immovable property acquisition tax (the payer of this tax is now the acquirer – buyer) has raised questions about the correct accounting and tax assessment of the expense that this tax represents.
From the tax point of view (pursuant to Section 24 (2) (ch) of the Income Tax Act), the immovable property acquisition tax, if it has been paid and is not included in the valuation of property, is a tax expense.
From the perspective of accounting regulations (pursuant to Section 25 (5) of Act No. 563/1991 Coll., on accounting), the entry price is the purchase price at which the property was acquired, including the costs related to its acquisition. The acquisition tax is therefore considered to be part of the valuation of the acquired property and is expensed in the form of tax depreciation.
The aim of the meeting of the Coordination Committee of the Chamber of Tax Advisers of the Czech Republic at the end of last year was to ascertain and specify whether the acquisition tax represents a one-off expense for achieving, securing and maintaining taxable income (tax expense) at the moment of payment or whether it becomes part of the entry price of the acquired immovable property.
The Committee meeting concluded that in the event of a tax liability arising on the grounds of the acquisition of title to immovable property for consideration it is undisputed that the expense of the immovable property acquisition tax has a causal link with the acquisition of tangible fixed assets and, until the moment laid down in Section 7 (11) of Regulation No. 500/2002 Coll., is part of its valuation by the purchase price pursuant to Section 25 (1) (a) of the Accounting Act.
For the sake of completeness, it should be added that the taxpayer is obliged to file a tax return for immovable property acquisition tax no later than the end of the third calendar month following the calendar month:
- in which title to the immovable property or the right to build or administer a trust was entered in the Land Registry,
- in which title to the immovable property not entered in the Land Registry was acquired,
- in which the conditions for acquiring title to the auctioned immovable property were met.
Minutes of the meeting of the Coordination Committee of the Chamber of Tax Advisers of the Czech Republic of 14 November 2018 Act No. 586/1992 Coll., on income taxes Act No. 563/1991 Coll., on accounting