Property acquisitions more expensive for developers after April 2016?
Some two years ago, we informed you about changes the Senate adopted to amend the proposed bill (later a statutory measure of the Senate) on real estate acquisition tax. Part of the amendment fundamentally changes who is responsible for paying the tax. At the last minute, the Senate permitted application of the current regulation in exchange and purchase agreements under which the parties may choose the tax to be paid by the acquirer (purchaser). However, last week the Czech government adopted a proposed amendment that goes back to the original bill, under which the tax is to be paid only by the acquirer in all cases. This is despite the fact that according to information from the General Financial Directorate, the option to choose the acquirer as the taxpayer has been selected by only 16 out of 100 entities. The reasons for the Ministry of Finance’s proposal are as follows:
- It is an unsystematic provision because no tax law has ever permitted the option to select the taxpayer and, in addition, in most EU countries (except Poland and Slovenia) the tax is also paid by the acquirer;
- The object of the tax (i.e. tax on the acquisition of real estate) will now reflect reality;
- The ambiguous terms “purchase”, “exchange”, “purchase agreement”, and “exchange agreement” cause interpretation difficulties in assessing what type of acquisition of the title can be classified under these terms;
- The current rules applicable to the taxpayer are also complicated in an exchange, which is considered two transfers, while the acquirer may be selected as the taxpayer in one transfer and the transferor in the other transfer;
- The complicated issue of liability for unpaid tax will not apply;
- With the transferor appointed as the taxpayer, complications also arise in transfers of immovable property owned by the Czech Republic;
- The fact that the tax is paid by the transferor may cause difficulties in collecting it because the transferor no longer has the property in possession and, according to the Ministry, is not sufficiently motivated to pay the tax;
- It makes the tax administrator’s investigation for tax administration purposes difficult because tax administrators must look up the information about the taxpayer in the contract.