Czech lower house moves to eliminate 4% property acquisition tax

If passed into law, the change could save home buyers hundreds of thousands of crowns

Raymond Johnston

Written by Raymond Johnston
Published on 08.07.2020 14:33 (updated on 08.07.2020)

The abolition of the property acquisition tax was approved by a large majority of deputies in the Chamber of Deputies, the lower house of the Czech Parliament. A proposal to maintain the deductions on mortgage interest also passed, but with less support. The proposals now go to the Senate, and if approved there they must be signed by the president before taking effect.

Finance Minister Alena Schillerová (for ANO) said the property acquisition tax, which amounts to 4% of the acquisition price of an older house or apartment, was unfair, and the move to cancel it is good news.

The abolition of property acquisition tax will apply to all transfers where the deposit occurred as of December 2019. If the owner later decides to sell the property, they will not pay income tax on the transaction only if they have owned it for at least 10 years. Currently the term is five years. This is intended to help reduce the speculative acquisition of real estate.

The government proposal to abolish the property acquisition tax passed with support from the opposition. “I welcome the abolition of the property acquisition tax. It will motivate people to buy their own housing,” Deputy Jan Skopeček (ODS) said, according to daily Mladá fronta Dnes (MfD).

The government also wanted to eliminate the deductions for mortgage interest as of the end of 2021, but in a surprise move a proposal from Deputy Vojtěch Munzar (ODS) to keep the deduction passed the lower house. Munzar’s proposal set the maximum aggregate amount of interest that can be deducted to 150,000 CZK instead of the original 300,000 CZK.

The proposal to keep the mortgage deduction only passed thanks to support from the some members of the Communists (KSČM) and Social Democrats (ČSSD).

TOP 09 was among the opposition that parties favored eliminating the exemption.

Schillerová said that keeping the exemption made her a little sad, but she was not surprised. She favors ending many of the existing exceptions and has appealed to President Miloš Zeman for support in abolishing exemptions.

Supporters of the changes to the law say it would help level the situation between people who buy older real estate and those who buy housing in a new building, where they did not have to pay property tax.

For example, when buying an older apartment for 5 million CZK, the buyer will save 200,000 CZK in acquisition tax and will be able to deduct interest from the mortgage, but only up to 150,000 CZK, according to an analysis of the proposals by Seznamzpravy.cz.

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Eliminating the property acquisition tax is meant to help stimulate the Czech real estate market.