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Changes in the Czech tax law: new rules for the acquisition of immovable assets tax

Changes in the Czech tax law: new rules for the acquisition of immovable assets tax

The new rules are introduces by the Novelization of the statutory measure of Senate No. 340/2013 Coll., on the acquisition of immovable assets tax, which was published in the Czech Collection of Laws under No. 254/2016 Coll. and will become effective as of November 1, 2016.

The main purpose of the novelization is to give exact statutory definition of the taxpayer and to eliminate other ambiguous or imprecise provisions of this act.

The most important changes that are brought by the new law are the following:

  1. The change of the taxpayer and the cancelation of the statutory guarantor institute (Section 1 (1)). The new law clearly appoints the party acquiring the ownership title to the immovable assets (i.e. the buyer) as the statutory taxpayer and cancels the existing possibility for the contractual parties to agree on the transfer of the tax obligation from the buyer to the seller. The novelization also cancels the position of the buyer as the statutory guarantor of the seller for the due payment of the transfer tax.
  2. Fewer regulations for the acquisition of engineering underground structures (Section 2 (2)). In case of the acquisition of the ownership title to underground structures, the object of taxation shall be the acquisition of the ownership title to the building according to the Land Register Act, which is a part of this engineering underground structure and is situated in the Czech Republic. This acquisition must be realized against payment. Such a building is newly expressly regarded as immovable assets.
  3. Taxation in case of the prolongation of the period of the surface right (Section 3 (2)). Any prolongation of the period of the surface right (právo stavby) is newly expressly considered as the acquisition of the ownership title to the surface right and as such subject to taxation.
  4. New regulation regarding the exclusion of object of the taxation (Section 5 (b)). Pursuant to the new regulation the acquisition of the ownership title to immovable assets as part of the transformations process of legal entities should no longer be subject to taxation (except for the transfer of the assets to a shareholder of the company). On one hand the novelization extends the exclusion in case of transformations of all types of legal entities (not only transformations of business corporations as so far), but on the other hand it cancels the exemption from the tax in case of the transfer of the assets to a shareholder.
  5. Acquisition of ownership title to immovable assets by municipalities and regional administrative units is no longer subject to taxation (Section 6 (1) (c)).
  6. New concept of the taxation exemption with respect to newly constructed buildings and housing units (Section 7 (1)). First ownership title transfer, which is realized against payment, of newly constructed buildings and housing units (must be finished 5 years prior to sale) will not be subject to taxation. Unlike the existing legal regulation, the exemption will not apply to unfinished buildings or units that are not registered in the Land Register and therefore the control of its transfer by the financial authorities is very complicated.

However, the tax rate remains unchanged. It is still 4% of the purchase price or the value of the transferred immovable assets (whichever is higher).

By Michaela Fuchsová & Magda Stárková

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