All you need to know about real estate tax in Czech Republic

Post date: Feb 21, 2017 11:5:50 AM

All you need to know about real estate tax in Czech Republic 

Owners of any piece of privately-owned real estate in Czech Republic have duty to pay every year real estate tax. This property tax has one major difference from other types of taxes levied in Czech Republic – it must be paid in advance (always for upcoming year). So what exactly is this real estate tax in Czech Republic about? How is it calculated? And how it impacts finances of real estate owner?

I. Real estate tax model in Czech Republic

Real estate tax belongs to the group of so called property taxes. Generally speaking, property taxes are taxes that are levied by municipality or state on possessions. In Czech Republic the most important property taxes are levied on different types of privately-owned real estate (f. e. lots, flats, houses) and heritages. In particular, subjects of Czech real estate tax are lots (lands) registered in Czech real estate cadastre, completed or occupied buildings, apartments (flats) and other engineer constructions as defined in Act about the Cadastre of Real Estate (Cadastral Act). Real estate tax is assessed locally by Czech municipalities and its purpose is to raise operating revenue for particular city or town where real estate is located. But do not confuse real estate tax with another property tax - real estate transfer tax which equals to 4% of property`s value and is paid by buyer after he purchases a real estate.

II. Real estate tax in Czech Republic - how much do I have to pay?

Property taxes are almost always based on the value of a possession. Real estate tax is not an exception. How is real estate tax calculated? If your real estate property is located in an attractive area close to downtown, you will pay higher tax. But you can stay calm since Czech real estate tax is certainly not a budget`s destroyer – its amount usually oscillates in hundreds of Czech korunas (CZK).

Real estate tax amount is result of multiplying your real estate`s area by particular tax rates and coefficients. Here are basic steps to calculate approximate amount of your real estate tax:

1) Identify properly size of your real estate property – this is your tax base.

Your real estate's size is a tax base from which real estate tax is calculated. In case that you are owner of an apartment which also includes balcony, loggia, terrace or cellar, make sure that you don` t include this areas into apartment` s total square meter for the purpose of tax base`s determination (see more further in chapter Specific questions regarding real estate taxation in Czech Republic).

2) Multiply tax base by particular tax rate.

Once you identified your real estate`s size you also determined a tax base of real estate tax. Now you need to multiply area of your real estate by particular tax rate. Real estate tax rates are assessed by Czech Tax law according to type of real estate. For example tax rate for apartment in Czech Republic is currently 2 CZK per square meter. Minimal tax rate for house in Czech Republic is also 2 CZK per square meter. However to this rate also rate 0,75 for each house`s floor above ground must be added.

For example your house has 1 floor above ground. Your tax rate will be 2+0,75=2,75 per sq. m.

3) Apply municipality coefficient set by Czech Tax law.

In case that your subject of real estate tax is a house, apartment, non-residential apartment (f. e. office) or a building lot, you need to apply special municipality coefficient set up by the Czech Tax law and sometimes also local municipal tax rules (sometimes there are 2 coefficients). Amount you got from step 2 must be multiplied by this coefficient or coefficients. Figure of the coefficient depends on the town where your real estate is located and its population. For instance municipality coefficient in Prague is currently 5, in Pilsen 3,5.

4) If subject of real estate tax is an apartment, apply also coefficient for real estates with common premises.

If you own an apartment you have to multiply figure you got from steps 2 and 3 also by coefficient currently equal to 1,2. This coefficient substitutes your shares of common premises in the building where your apartment is located (f. e. building`s corridors, halls, stairs, etc.).

Example of calculating real estate tax of apartment in Czech Republic:

For example, if you own an apartment in Prague with area 50 m2, your tax base is 50. Multiply this amount by (i) tax rate for apartment – currently 2 CZK per sq. m., (ii) municipality coefficient – currently 5 in Prague and (iii) coefficient of common premises – currently 1,2. Calculation: 50x2x5x1,2 = 600CZK. Your real estate tax is 600 Czech korunas.

III. Tax return for real estate tax

Good news is that you don`t need to fill tax reports for your real estate property every single year. You have duty to submit tax return only once – in year which follows after year when you were registered as new real estate owner in Czech real estate cadastre. Deadline for submitting tax return is always the end of January.

Example: Let’s say you concluded a purchase contract to purchase an apartment in February, 2017. Assuming that you will be registered in cadastre as a new owner in April 2017 you would have duty to fill tax return next year – till 31st of January 2018.

In years which follow after year when you submitted your first tax return you don` t need to fill other tax returns. Financial office will only notify you every year to pay particular amount of real estate tax (in amount calculated in your tax return). The only case when you have to fill tax return again is when you make a significant changes to your real estate since this affects your real estate tax amount (for example you sell your flat, increase area of your house, etc.).

IV. Specific questions regarding real estate taxation in Czech Republic

I own more than one real estate property in Czech Republic. Where do I have to submit tax return?

In general tax return must be submitted to a competent financial office according to a place where your real estate is located. If you own more real estate properties in the same financial district you can include them in one cumulative tax return which you submit to competent financial office in financial district where your properties are located. However if you own real estate properties located in different financial districts you have to draft tax returns for each real estate separately and submit them to competent financial offices in financial districts where your real estate properties are located.

I own property with my spouse in undivided co-ownership of spouses. Do we have to submit 2 tax returns?

No, in such a case only one of you submits a tax return. The one who submits a tax return will represent both of you in this matter.

Do I have to include area of balcony, loggia or cellar into a tax base?

Balcony, loggia and cellar are according to the Tax law considered as accessory premises of a real estate. Therefore you shouldn`t include their areas into a tax base in your tax return.

Do I have to fill separate tax return for garage?

If your garage was in purchase contract defined as your right to use a certain space of building as a parking lot, you shouldn`t submit separate tax return for garage. Other situation is if your garage was purchased as separate non-residential premise. In this case you have to include garage in tax return together with your apartment.

I inherited a real estate. When do I have to submit tax return?

Have you inherited a house or an apartment in Czech Republic? In such a case you have to firstly find out whether inheritance procedure subject of which is this property, was finished by final decision. You have duty to submit tax return in the year which follows after year when your inheritance decision become final. Mind that if you inherit a property in Czech Republic, you won` t become new registered owner in Czech real estate cadastre automatically. You have to submit an application to real estate cadastre together with a final inheritance decision of Czech notary public or court.

Do you have other inquiries regarding real estate taxation in Czech Republic? Or you are considering investing into real estates in Czech Republic? Do you already own a real estate in Czech Republic and have some question related to its property management? Our team of consultants is ready to help you with all these inquiries. Contact us here.

Note: this article has only informative character and cannot be considered as tax or legal advice. In this article some taxation rules were simplified so that approximate calculation can be done by reader. In reality however calculation of real estate tax can include more steps.