As of 1 January 2021, Annex 3 to the VAT Act will be amended. Accordingly, a residential unit to be built or existing in a multi-unit residential building with a total net floor space not exceeding 150 square metres will fall under a 5% tax rate, except if it is located in a so-called ‘rust zone’. In the latter case – as we wrote in our previous newsletter – the legislation had already introduced a reduced rate on 22 July of this year in order to promote the renewal of interim, former industrial areas of cities. In addition, the 5% tax rate will be applicable to single-unit residential buildings (detached houses) with a total net floor space not exceeding 300 square metres. According to the VAT regulations, a residential property qualifies as “new” prior to the issuance of its first occupancy permit, or if the period between the date of the occupancy permit and the sale is shorter than two years.

The 5% tax rate shall be applied in case of transactions with a date of supply falling on or following 1 January 2021.

In line with the bill, the reduced rate in the aforementioned cases will be applicable until 31 December 2022. According to the transitory regulations, in case of transactions carried out between 1 January 2023 and 31 December 2026, the reduced rate may be applied if the building permit becomes binding by 31 December 2022 at the latest, or if the construction is reported to the authorities by this date in line with the rules of simplified reporting.

Exemption from duty due to transfer of property in connection with CSOK

Following 1 January 2021, the amendment of the Act on Duties will provide families with children taking part in the Family Housing Subsidy Program (‘CSOK’) exemption from duty as regards the purchase of both new and used residential properties irrespective of their market value.

If the requirements of CSOK are not fulfilled or its amount is voluntarily payed back within deadline, the buyer is obligated to pay duty on the basis of market value and at the rate applicable at that time. In order to make it possible that the duty on the acquisition of the property may be levied, the 5-year limitation period of the right to levy duty will start on the last day of the calendar year in which CSOK was paid back, or when the repayment was established by the authorities.

We remain at your disposal in case of any questions regarding these matters.