Real estate transfer tax
Written by: Halka Jaklová
Photo by: René Jakl
Would you like to know how and when you are obligated to pay taxes on real estate transfers?
According to Law No. 357/1992 Coll., transfer against payment for or change of ownership of real estate is subject to real estate transfer tax. The financial office in whose district the transferred real estate is located is the local relevant tax administrator for filing a return for this tax. In general, the real estate transfer taxpayer is the transferor (seller), who also files the tax return. However, there are cases set forth in the law for which the transferee is the payer. Besides transfers against payment for or change of ownership of real estate, trading of real estate is also subject to the real estate transfer tax. When real estate is traded, the mutual real estate transfers are considered as a single transfer, and the tax is paid on transfer of the real estate on which the transfer tax is higher, and both parties to the exchange contract pay the tax jointly.
The tax declaration must be submitted to the local relevant tax administrator not later than by the end of the third month following the month in which the transfer or exchange of the ownership occurs. For the purposes of this tax immovable property, apartments, and non-residential spaces are considered as real estate. Payers are obligated to calculate the real estate transfer tax themselves, to file the returns, and to pay the tax by the deadline for filing the return. As a rule the return must be accompanied by an authenticated duplicate copy of the contract or other document that confirms or verifies the owner of the real estate (e.g., a purchase contract, donation contract, exchange contract, agreement on the cancellation and settlement of undivided co-ownership of the real estate), and an expert appraisal of the price, determined as per a special legal regulation (Law No. 151/1997 Coll.). This involves the price on the date of the acquisition of the real estate, and in most cases of real estate transfer it is also the tax base. The tax is calculated at 3% of this base. In some cases the law stipulates that no expert appraisal must be submitted, e.g., when the transfer or change of ownership of the real estate that is tax-exempt. If the calculated tax is less than CZK 100 it is not paid, but the return must be filed anyway under the conditions set forth in the law. If the payer fails to file a return and fails to pay the tax, or does so late, i.e., after the deadline for the filing of the return, he can face a penalty in the form of interest on the delay (a monetary fine) or the tax can be increased by up to 10%.