Real Estate taxes in the Czech Republic
Koutris Efstratios, Monday, 27 January 2014
This article is part of a series of 8 articles about buying property in the Czech Republic. The other articles in the series cover the following topics:
Introduction
Despite the difficult financial times we live, Czech Republic still remains an extremely attractive destination for foreign investors. The tax administration system in Czech Republic has undergone several changes since 2011 which have a significant effect on the final payable amount of taxes. However, it needs to be clear that all individuals, either those who came to purchase an investment opportunity or corporate investors, who own properties or land in Czech Republic, are required to pay taxes on real estate. Hence, one of the most significant issues when dealing with real estates, is to know beforehand the amount of tax that the buyer or seller will need to pay for his property.
Real Estate Taxes
Real estate taxes are governed by the Act. No 338/1992 and can be essentially distinguished into building taxes and land taxes. The taxable period is based and calculated on a calendar year, and in case the amount exceeds 5000 CZK (approximately 200 euros) it can be payable in two equal instalments (respective deadlines are the 31st of May and 30th of November). In case this amount is less than 5000 CZK then it should be paid at once and not later than the 31st of May. It should be emphasized that in Czech Republic the real estate revenues (from the taxes) ultimately go to the local or regional municipality instead of the central government. In order to calculate the respective amount of tax that an individual needs to pay then we need to take into consideration four coefficients: the tax base, the tax rate (both land and building taxes), the coefficient of population, and the local coefficient.
Tax base
Tax base in most cases is determined by multiplying the actual area of land (m2) by 1, unless these properties are situated within commercial forests, ponds or fish farming industries. In these cases, the tax base is then multiplied by 3.80.
Tax rate
Building taxes
Each building that has been granted an occupancy permit, or in general any residential and non-residential premises that have been registered in the Land Registry, are subjected to CR taxation. Exceptions include buildings that are owned by the state, municipalities (building must be located within the cadastral municipality), churches, buildings owned by citizens’ groups and non-profit companies, structures that serve to improve the environment, and others which are specified in § 9 of the Act.
The following table summarizes the tax rates imposed depending on the type of property. For each additional floor the amount is increased by 0.75 CZK per m2.
Taxes on Land
All real estates that are located within the Czech Republic and are listed in the Land Registry are subjected to pay taxes on land. Properties that are exempt from paying such fees include those which are owned by state, by municipalities, cemeteries, public parks, sports fields, ponds, agricultural and forest lands or any other lands specified in § 4 of the Act. If it is a commercial forests and ponds and intensive fish farming industry, the price of land is determined by multiplying the actual area of land in the amount of CZK 3.80 per m2. The amount of tax depends on the type of the property as seen in the following table.
Coefficient of population
Furthermore, we have the coefficient of population which depends on the location of the property and it ranges from 1-5. This number is taken into consideration in the case of residential houses, apartments and other independent non-residential spaces.
(4.5 is the coefficient in Prague).
Local coefficient
Finally, each municipality may impose decrees for all properties throughout the local community and, hence issue an additional coefficient which is then applicable to all structures, with values of 2, 3, 4 or 5. This factor is then multiplied by the taxpayer's tax liability for different types of land.
Example
For an 85 m2 flat in Prague, without garage or associated land, the final amount of taxes will be calculated as:
(area in m2) * (tax base) * (tax rate) * (local coefficient) = 85 * 1 * 2 * 4.5 = 765 CZK per year.
Real Estate Transfer Tax
The real estate transfer tax is administered according to Act No. 357/1992 on inheritance tax, gift tax and real estate transfer tax on the agreed price (tax base) § 10 of the Act. In most cases it is the seller of the real estate who is liable to pay this tax, whereas the purchaser is the so- called guarantor. To calculate real estate transfer tax individuals are categorized into three groups according to the relationship between the transferor and the taxpayer. In general all three categories the tax is rated as 3 % of the tax base. It needs to be said that the transfer tax
This article is part of a series of 8 articles about buying property in the Czech Republic. The other articles in the series cover the following topics:
Introduction
Despite the difficult financial times we live, Czech Republic still remains an extremely attractive destination for foreign investors. The tax administration system in Czech Republic has undergone several changes since 2011 which have a significant effect on the final payable amount of taxes. However, it needs to be clear that all individuals, either those who came to purchase an investment opportunity or corporate investors, who own properties or land in Czech Republic, are required to pay taxes on real estate. Hence, one of the most significant issues when dealing with real estates, is to know beforehand the amount of tax that the buyer or seller will need to pay for his property.
Real Estate Taxes
Real estate taxes are governed by the Act. No 338/1992 and can be essentially distinguished into building taxes and land taxes. The taxable period is based and calculated on a calendar year, and in case the amount exceeds 5000 CZK (approximately 200 euros) it can be payable in two equal instalments (respective deadlines are the 31st of May and 30th of November). In case this amount is less than 5000 CZK then it should be paid at once and not later than the 31st of May. It should be emphasized that in Czech Republic the real estate revenues (from the taxes) ultimately go to the local or regional municipality instead of the central government. In order to calculate the respective amount of tax that an individual needs to pay then we need to take into consideration four coefficients: the tax base, the tax rate (both land and building taxes), the coefficient of population, and the local coefficient.
Tax base
Tax base in most cases is determined by multiplying the actual area of land (m2) by 1, unless these properties are situated within commercial forests, ponds or fish farming industries. In these cases, the tax base is then multiplied by 3.80.
Tax rate
Building taxes
Each building that has been granted an occupancy permit, or in general any residential and non-residential premises that have been registered in the Land Registry, are subjected to CR taxation. Exceptions include buildings that are owned by the state, municipalities (building must be located within the cadastral municipality), churches, buildings owned by citizens’ groups and non-profit companies, structures that serve to improve the environment, and others which are specified in § 9 of the Act.
The following table summarizes the tax rates imposed depending on the type of property. For each additional floor the amount is increased by 0.75 CZK per m2.
| Residential house, flat | 2 CZK / m2 built-up area | |
| Works for individual recreation and houses | 6 CZK / m2 built-up area | |
| Garage built separately from residential buildings or individual residential premises used as garages | 8 CZK / m2 built-up area or covered floor area | |
| Buildings used for agricultural production, forestry, and water management | 2 CZK / m2 built-up area or covered floor area | |
| Structures used in industry, construction, transportation, energy and other agricultural production | 10 CZK / m2 built-up area or covered floor area | |
| Buildings for other business activities | 10 CZK / m2 built-up area or covered floor area | |
| Other buildings | 6 CZK / m2 | |
| Apartments and other separate residential areas | 2 CZK / m2 treated floor area |
Taxes on Land
All real estates that are located within the Czech Republic and are listed in the Land Registry are subjected to pay taxes on land. Properties that are exempt from paying such fees include those which are owned by state, by municipalities, cemeteries, public parks, sports fields, ponds, agricultural and forest lands or any other lands specified in § 4 of the Act. If it is a commercial forests and ponds and intensive fish farming industry, the price of land is determined by multiplying the actual area of land in the amount of CZK 3.80 per m2. The amount of tax depends on the type of the property as seen in the following table.
| The tax rate by type of property | (in %) | |
|---|---|---|
| Arable land, hop gardens, vineyards, gardens, orchards | 0.75 | |
| grasslands, forests and lakes of intensive fish farming and industrial | 0.25 |
| The tax rate for other parcels | (in CZK) | |
|---|---|---|
| Paved area of land used for business activities, used for agricultural Production, forestry and water management. | 1,00 / m2 | |
| Paved area of land used for business serving the industrial, construction, transport, energy, other agricultural production and other business activities. | 5.00 / m2 | |
| Building plots | 2,00 / m2 | |
| Other areas, they are subject to tax (built-up areas and courtyards) | 0,20 / m2 |
Coefficient of population
Furthermore, we have the coefficient of population which depends on the location of the property and it ranges from 1-5. This number is taken into consideration in the case of residential houses, apartments and other independent non-residential spaces.
| Coefficient | Population (inhabitants) | |
|---|---|---|
| 1.0 | up to 1.000 | |
| 1.4 | 1.000 to 6.000 | |
| 1.6 | 6,000 to 10,000 | |
| 2.0 | 10,000 to 25,000 | |
| 2.5 | 25,000 to 50,000 | |
| 3.5 | 50 000 or more |
(4.5 is the coefficient in Prague).
Local coefficient
Finally, each municipality may impose decrees for all properties throughout the local community and, hence issue an additional coefficient which is then applicable to all structures, with values of 2, 3, 4 or 5. This factor is then multiplied by the taxpayer's tax liability for different types of land.
Example
For an 85 m2 flat in Prague, without garage or associated land, the final amount of taxes will be calculated as:
(area in m2) * (tax base) * (tax rate) * (local coefficient) = 85 * 1 * 2 * 4.5 = 765 CZK per year.
Real Estate Transfer Tax
The real estate transfer tax is administered according to Act No. 357/1992 on inheritance tax, gift tax and real estate transfer tax on the agreed price (tax base) § 10 of the Act. In most cases it is the seller of the real estate who is liable to pay this tax, whereas the purchaser is the so- called guarantor. To calculate real estate transfer tax individuals are categorized into three groups according to the relationship between the transferor and the taxpayer. In general all three categories the tax is rated as 3 % of the tax base. It needs to be said that the transfer tax
All types of property for sale in the Czech Republic by private sellers and estate agents. Find your perfect house or apartment in Bohemia, Moravia, Prague, Hradec Kralove, Ostrava or Plzen.
This article effectively describes in a brief, yet punctual way the course of events which ultimately rendered Czech Republic as a thriving environment
for Real Estate investments. Moreover, it will unfold the prerequisites that must be met by a foreigner in order to be eligible to buy a property,
followed by the essential steps that need to be followed in order to ensure that the purchase is secure.
More articles