From July 2025, the Czech Republic Will Change the Rules for Paying VAT on the Sale of Real Estate

Starting July 1, 2025, the Czech Republic will introduce changes to the rules for collecting VAT on real estate transactions, including the payment of VAT on the sale and transfer of real estate, as well as the definition of land for development, which will be subject to VAT. The amendments will also affect the rules for VAT exemptions related to the construction of buildings.

The amendments to the VAT law, which introduced several changes from January 1, 2025 (such as new thresholds for VAT registration, deadlines for filing tax deduction applications, and conditions for issuing corrective tax documents), have been implemented. However, the entry into force of some key changes, particularly those related to the taxation of land and buildings, has been postponed until July 2025.

One of the key changes is the clarification of the definition of land for development, which will be subject to VAT upon purchase. Going forward, any plot of land on which a building can be constructed – based on zoning documentation, demarcation of the development area, or a decision by the construction management authority – will be considered land for construction. Additionally, land on or near a construction site where work will be carried out for the future development of the area will also qualify as land for construction.

“Currently, the definition of building plots creates issues not only for VAT payers but also for tax administrators,” says Kristina Shlehoferová, a tax consultant at Havel & Partners. “As a result, we can expect an increase in the number of cases where sellers apply VAT when selling land.”

However, the amended law also significantly alters the rules regarding VAT exemptions for the supply of buildings. Once the amendment comes into force, VAT will only be applied to the first sale of a building, and only if the sale occurs before the 23rd month following the completion of construction. After this period, the sale of buildings will be exempt from VAT. Typically, a building is considered completed once it has received approval for use. The rules for voluntary taxation of real estate remain unchanged.

However, as Kristina Shlehoferová notes, there is an exception to the VAT exemption rule for completed buildings that have undergone substantial reconstruction before delivery. 

“Substantial reconstruction refers to any construction work aimed at changing the building’s use or occupancy conditions, if the cost of the work exceeds 30% of the sale price (excluding VAT),” explains the tax consultant. This means that the sale of reconstructed buildings is generally subject to VAT.

For the purposes of applying the reduced VAT rate, the definition of buildings intended for housing, including social housing, has undergone significant changes. The determination of whether a building is a family home or an apartment building will now depend on its registration in the territorial identification register.

“Without delving into the details, it can be stated that the construction and sale of buildings for social housing will still be subject to a reduced VAT rate, for example, apartments up to 120 m² or family homes up to 350 m². However, once construction or installation work is completed, for the reduced rate to apply, it is sufficient for the building to be intended for housing,” says Shlehoferová. 

In other words, the construction and commissioning of an apartment of 180 m² will continue to be subject to VAT at the standard rate of 21%. Subsequent renovation of this apartment after construction is complete will be taxed at the reduced rate of 12%.

If you need assistance with tax calculation and payment, feel free to consult the specialists at 360WEDO. We will analyze your situation and advise you on the most optimal ways to pay your taxes in accordance with the law.

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