Czech Republic: Changes to application of VAT to real property

Changes to definition of family houses and apartment buildings

Changes to definition of family houses and apartment buildings

In connection with the amendment to the “Construction Act,” an amendment to the value added tax (VAT) law changes the definition of family houses and apartment buildings, to have a broader definition from 1 July 2023. Accordingly, the General Financial Directorate (GFD) is updating its information on the application of the VAT law to real property.

Until now, real property definitions derived from the definitions set out in the cadastral regulations, but from the beginning of July, they will be based on the new Construction Act. The most important change is the definition of an apartment building and a single-family house, as the new definition no longer explicitly includes the condition of the building being designated for housing under the construction law.

This change will primarily affect the determination of the correct VAT rate for construction work on a completed building for housing and social housing or for the construction and delivery of a building for social housing. It will also affect the fulfilment of the conditions for exemption from VAT of the delivery or lease of real property.

Although this is only a change of terminology, certain related and controversial issues are currently being discussed by the professional public with the financial administration. For this reason, the GFD decided to update its information, aiming to incorporate not only the current amendment but also other developments that have occurred since the previous methodology was issued in 2016, in particular selected case law.

What’s next?

The information update is still in a draft state and being discussed further. The most interesting topics include a change to the threshold for a “substantial change,” a summary of case law on the issue of leases and related services, and a refinement of the definition of single-family houses and apartment buildings.

Given the amendment’s expected effective date of 1 July 2023, final wording of the GFD’s information is expected before this date.

Read a June 2023 report prepared by the KPMG member firm in the Czech Republic



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