Czech Government Abolished Property Acquisition Tax; what does it mean for property purchasers?

18/05/2020

Abolishment of the real estate transfer tax have been officially announced by the Government of the Czech Republic. This decision might be crucial for those who have been hesitating to purchase the property.

This tax was levied in respect of the acquisition of the immovable property located in the Czech Republic. This means that buyer had been subject to the 4 % tax rate of the tax base. Tax base was usually purchase price of the property you were buying.

The reason Czech Government decide to abolish the tax is to help the economy in times of crisis. When purchasers are not obliged to pay the tax, they can spend the money on something else. For example they can buy more expensive property or they use the money as a down payment for the mortgage loan.

Let's suppose that the purchase price of the apartment in Prague is CZK 5,300,000. Before the abolishment you would have to pay the tax which means extra CZK 212,000. In case you pay the purchase price with the borrowed money from the bank, you would be asked by the bank to have another CZK 530,000 as a down payment for the mortgage loan. To sum it up, to buy a CZK 5,300,000 property in Czech Republic you needed at least CZK 742,000 from your own savings.

Nowadays you need only 10%, i.e. CZK 530,000 which means more people can afford to buy their own apartment or house. What if you already have the abovementioned CZK 742,000? You can use the sum as a down payment for the mortgage loan and bank might borrow you additional CZK 6,678,000, therefore you can purchase a property for market price up to the CZK 7,420,000. If you are looking for best mortgage loan to buy your property, don't hesitate to contact us!