Tax obligations sale of real estate 2021

Tax obligations on the sale of real estate in 2020 - 2021

Cancellation of acquisition tax

Act No. 386/2020 Coll., Of 15 September 2020 (entered into force on 26 September 2020) repealed Senate's statutory measure No. 340/2013 Coll., On real estate acquisition tax.

The obligation to pay real estate acquisition tax in the amount of 4% of the purchase price thus expired retroactively at the end of 2019.

Pursuant to Section 32 of the Senate Legislative Measure No. 340/2013 Coll. the buyer (taxpayer) was obliged to file a tax return for real estate acquisition tax no later than the end of the third calendar month following the calendar month in which the ownership of the real estate, construction right or trust fund was deposited in the real estate cadastre.

According to Art. II, transitional provisions of Act No. 386/2020 Coll. new applies:

1. If the deadline for filing a tax return expired before 31 March 2020, the statutory measure of the Senate No. 340 / shall apply to tax obligations for real estate acquisition tax incurred before the date of entry into force of this Act, as well as to rights and obligations related to them. 2013 Coll., As amended before the date of entry into force of this Act. The extension of the deadline for filing a tax return under the Tax Code is not taken into account.

2. If the deadline for filing a tax return expires on 31 March 2020, the tax liability for real estate acquisition tax arising before the date of entry into force of this Act shall cease on the date of entry into force of this Act. The extension of the deadline for filing a tax return under the Tax Code is not taken into account.

In other words, if the buyer acquired ownership of the property in December 2019 or later (the deposit (legal effects) of the ownership right in the real estate cadastre was registered by the end of 2019) and the deadline for filing the tax return expired on or after 31 March 2020, then he no longer has to pay real estate tax.

If the taxpayer has already paid the tax, he can apply for a refund to the Tax Office. Pursuant to Section 155 of Act No. 280/2009 Coll., The Tax Code (tax code) (refund, use and transfer of a refundable overpayment): “A tax entity is entitled to request the tax administrator to return a refundable overpayment”.

According to § 71 of the Tax Code:

(1) The submission may be made in writing, in paper form or electronically, or orally in the minutes; the submission can only be made electronically by a data message

a) signed in the manner in which another legal regulation combines the effects of a handwritten signature,

b) with the verified identity of the submitter in the manner in which it is possible to log in to his data box,

d) through the tax information box.

(2) A submission made in paper form or orally in the minutes must be signed by the person making the submission.

Income tax - sale of real estate

The tax on the acquisition of real estate, which has so far been paid by the buyer, was therefore abolished, but the seller retained the obligation to pay income tax.

Income from the sale of real estate is subject, like any other income, to taxation. Act No. 386/2020 Coll., Of 15 September 2020, also made some changes to Act No. 586/1992 Coll., On income taxes, in the obligation to pay income tax. The income tax exemption applies only to natural persons.

Living for at least 2 years

The 2-year time test includes real estate intended for permanent housing. Other real estate falls within the 10-year time test.

The following are exempt from tax:

- income from the sale of immovable property, if the seller has resided there for at least 2 years immediately before the sale,

- income from the sale of immovable property, if the seller resided in it immediately before the sale for less than 2 years and if he uses the funds obtained to procure his own housing needs (to exempt the spouses' income from their joint property, it is sufficient that the conditions for exemption only one of the spouses, unless the property to which the exemption relates is or has not been included in the commercial property of one of the spouses,

Ownership of real estate for at least 10 years / extension of the so-called time test for 10 years from 1.1.2021

Time test means the necessary period for which you must own the property for exemption from income tax.

- income from the sale of immovable property or from the settlement of co-ownership of immovable property not exempted according to the above rules, if the period between the acquisition of ownership of those immovable property and their sale or settlement of co-ownership of them exceeds 10 years,

- income from the sale of immovable property or from the settlement of co-ownership of immovable property not exempted according to the above, if the period between the acquisition of ownership of these immovable property and their sale or settlement of co-ownership does not exceed 10 years and if the taxpayer uses the acquired funds to procure own housing needs.

Share in a cooperative

Income from the transfer of rights and obligations associated with membership in a cooperative is exempt from the tax if, in connection with this transfer, the tenancy agreement for the apartment is canceled, if the taxpayer uses the obtained funds to satisfy his own housing needs.

Housing needs

The new § 4b of the Income Tax Act defines the so-called housing need as follows:

(1) Housing needs are understood for the purposes of income taxes

a) construction of a residential building, family house, unit, which does not include non-residential space other than a garage, cellar or storage room, and alteration of the building,

b) acquisition of land for consideration

1. provided that the construction of the housing needs referred to in letter a) is started on the land within 4 years from the moment of acquisition of the land, or

2. in connection with the acquisition of the housing needs referred to in point (c),

c) acquisition for consideration

1. apartment building,

2. family house,

3. under construction of an apartment house or family house,

4. a unit that does not include non-residential space other than a garage, cellar or storage room,

d) repayment of the deposit to a legal person by its member in order to obtain the right to rent or otherwise use the apartment or family house,

e) maintenance and alteration of the construction of an apartment building, family house, apartment for rent or use or a unit that does not include non-residential space other than a garage, cellar or storage room,

f) settlement of joint property of spouses or settlement of co-heirs in the event that the subject of settlement is the payment of a share associated with the acquisition of a unit that does not include non-residential space other than garage, cellar or chamber, family house or apartment building,

g) payment for the transfer of a share in a business corporation by its member made in connection with the transfer of the right to rent or otherwise use the apartment,

(h) repayment of a loan or borrowing used by the taxpayer to finance the housing needs referred to in points (a) to (g), provided that the conditions for those housing needs are met.