On 25 September 2020, the Act No. 386/2020 Coll. abolished real estate transfer tax. Under this Act, real estate transfer tax is abolished for all transfer transfers of real estate for which the deadline to file the tax return elapsed on 31 March 2020 or later. Under the old law, taxpayers were required to file a tax return until the end of the third month following the month in which the ownership right was recorded in a real estate cadaster or in which the ownership right was actually transferred, for real estate that was not subject to registration in a real estate cadaster. In substance, the real estate transfer tax was thus abolished for all transfers of real estate recorded in the real estate cadaster in December 2019 or later.
The above cases were provisionally subject to an obligation to file a tax return and pay the tax until 31 December 2020, based on a decision of the Minister of Finance due to the extraordinary situation with Covid-19. Therefore, who has not filed the tax return and/or has nott paid the tax yet no longer has any relating tax obligations and need not care about the tax at all anymore.
Taxpayers who have already paid the tax can request a tax refund. A tax refund request is filed with the locally competent tax office (i.e. tax office in the assigned area of the real estate that was subject to the transfer) and there is no prescribed form. If the taxpayer does not have any underpayments relating to other taxes, the tax refund shall be paid back within 30 days of filing the request.
Income Tax Act amendments
Act No. 386/2020 Coll, which abolished the real estate transfer tax, also amended the following provisions of the Income Taxes Act:
- Real estate acquired after 1 January 2021 are subject to a longer test period to achieve income tax exemption for individuals upon further resale. The test is extended from 5 to 10 years, as long as the seller uses the proceeds to acquire new property to live in. The test to achieve exemption for real estate where the seller had a dwelling remains the same and is set at 2 years.
- For mortgages and loans from construction savings accounts concluded as of 1 January 2021, the maximum annual deduction of interest from taxable income is reduced from the current CZK 300 thousand to CZK 150 thousand.