New tax regime relating to acquisition of real estate by natural persons
Authors: JUDr. Martin Šubrt, Ph.D., LL.M., Mgr. Martin Dolnák, Mgr. Simona Mlýnek Štursová
By the Act repealing real estate purchase tax coming into effect, the tax on purchased property was repealed as of September 26, 2020, with retrospective effect, for cases where the title to a property was entered in the Land Register as of December 2019 or later. Taxpayers who paid real estate purchase tax in this period are now entitled to a refund, which they may request from their local tax administrator.
Changes related to the acquisition of real estate will take effect from 2021 in the field of personal income tax as well. If a taxpayer acquires ownership of property, title to which is entered in the Land Register with effect from January 1, 2021, he/she may deduct the interestpaid from their personal income tax base, up to a maximum of CZK 150,000, for the taxation period. Until December 31, 2020, the taxpayer had the right to deduct twice the amount of this sum from personal income tax, i.e. CZK 300,000, for the taxation period. In this context, it is important to emphasize that in order to determine the application of the correct regime of the Act on Personal Income Tax, it is not definitive whether the credit contract comes into force or the credit is used by the end of the 2020 taxation period, but in the Act this is specifically governed by the moment when the application to enter the title to a property in the Land Register is submitted, on the basis of which the Real Estate Department will finally register the title. Thus, if a taxpayer submits an application for title registration after January 1, 2021, he/she will be subject to the lower limit for the deduction of interest from personal income tax, amounting to CZK 150,000 for the taxation period.