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- Real estate transfer tax
- Would you like to know how and when you are obligated to pay taxes on real estate transfers? Read / hide details
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%.
Author: The Prague Tribune - Launch of Czech real estate funds builds hopes of investment boom
- Czech banks are preparing for a boom in financial investment by small savers in the post-Communist country, where certain unscrupulous practices during the first steps towards a capitalist economy caused many to distrust the market. Read / hide details
Banks are readying themselves to launch real estate funds in the hope they will help convert conservative, risk-averse, but increasingly rich Czechs into financial market investors.
They face a legacy of suspicion stemming from the "wild East" era of the early 1990s when many Czechs saw the value of their investments evaporate as scores of companies were asset stripped from within or subject to dubious management buyouts.
Ceska Sporitelna, the country's biggest bank, expects to launch its real estate fund -- the value of which is pegged the performance of a property portfolio -- early next year after licencing procedures are completed. The fund will target the general public, manager Philip Kubricht said, adding that real estate funds have the potential to overcome latent suspicion of market-based investments. And Sporitelna is unlikely to be alone. One of its main rivals, CSOB, told AFP it was looking to launch such funds and so is Raiffeisen bank.
General manager of the Czech association of funds and asset management, Martin Hanzlik, shared the optimism over the new funds. "Czechs understand more about real estate than equities," he told AFP. "We expect a boom next year with real estate funds and private equity funds," he added, referring to a new type of select, high risk fund targeting the wealthy that was also made possible by recent legal changes. Current Czech investment habits are cautious. "If you look at the data, only about 20 percent of people invest their money, the rest leave it at home or lying on bank accounts or do not have it in the first place," Sporitelna's Kubricht explained.
Even without the new funds, Czech commercial real estate is hot property. Real estate investment increased by 25.0 percent to 655 million euros (835.9 million dollars) in the first half of this year compared with 2005, according to a November 1 report by the Prague office of real estate company, CB Richard Ellis.
Sporitelna said its studies confirmed the local potential of real estate funds, which are already the most popular type of financial investment in neighbouring Germany and Austria. Fund development has hitherto been undramatic. Domestic and foreign funds operating in the country have around 265 billion koruna (9.44 billion euros, 12.0 billion dollars) under management Hanzlik said. "Last year the market grew around 25 percent," he added. The most popular funds are those where low risk state bonds account for around 90 percent of the investment, he added. "Czechs like risk but like to be protected from it at the same time. They do not mind losing profit but not the investment," Hanzlik said. With around 60 percent of household savings deposited in bank accounts, compared with a "normal" figure of around round 20-25 percent, Czechs "still need to learn how to invest," he explained.
The investment habit is growing elsewhere, albeit hesitantly. Around 35 percent of Czechs contribute to private pension funds, tempted in part by a monthly state payment of 150 koruna to everyone paying in more than 500 koruna. But the amounts are often small. Average annual contributions amount to 6,000 koruna (210 euros) with a total 120 billion koruna under management, said vice president of the Association of Pension Funds, Jan Divis, said. "The sector is still quite young but the overall trend is positive," he added, pointing to a 10 percent annual rise in investors.
There are also signs that Czechs are warming to shares as well, according to the chief executive of the Prague Stock Exchange, Petr Koblic.
What used to be mainly a market for foreign institutional investors is now attracting an ever growing number of ordinary Czechs, especially after a surge in share values last year.
"The market began to really change last year and this. About 20 percent of the estimated market is executed by local retail clients with around 20,000-25,000 actively trading on the market," Koblic said at a recent seminar. In 2004, retail investors accounted for 10.8 percent of transactions on the exchange, its spokesman said.
Author: AFP, Sat Nov 18, 11:09 PM ET - The EU citizens can buy real estates in the Czech Republic
- According to the passed Amendment of Act the EU citizens with the „residence permit card for citizen of a member state of the European Community“ can buy real estates. Read / hide details
On the 2nd of June 2004 came out in the Collection of laws under no. 340/2004 Coll. Amendment of Act no. 219/1995 Coll., on foreign currency, which besides other newly governs the acquisition of real estates by foreigners in the territory of the Czech Republic.
Up to now could by the real estates in the CR only individuals under a permanent residence permit in the CR and legal entities based in the territory of the Czech Republic.
According to the passed Amendment of Act the EU citizens with the “residence permit card for citizen of a member state of the European Community” can buy real estates (with the exception of timber land and agriculture land). It means that if the citizens of EC have temporary residence granted (residence for period of time longer then 3 months) or permanent residence granted in the CR they can buy real estates in the Czech Republic.
For the other foreigners (from the “third countries” - without permanent residence in CR) the situation remains within the same way. These persons can obtain the real estates only in especial cases, regulated by the law.
The Amendment of Act was brought into effect on the 1st of May 2004.