Tax reform in 2008

There are quite a number of changes coming from the 1st January 2008 which property investors in the Czech Republic should be aware of, both on the VAT front (affecting purchase prices) as well as on the capital gains / personal income taxes.

Most discussed is the 'favoured' tax rate to overcome the EU requirement of increasing the VAT rate from the current rate of 5% to 19%, and will mean instead that most apartments and houses will only increase to the 9% VAT rate (i.e. an increase of 4%).

EU Tax reform

This 'favoured' rate will be applicable to 'social housing', and will not affect most buy-to-let units as it is defined as apartment units which are less than 120m2, and housing units which are less than 350 m2. Any units which are above these thresholds will incur the 19% VAT rate. The 'favoured' tax rate is expected to increase gradually over the next few years until it reaches the 19% rate.

With regards to personal income taxes (relevant to investors holding property via an EU card), the current progressive tax rate system of 12-32% is expected to be replaced with a flat rate of 15%. With regards to corporate tax (capital gains) rates, this is expected to reduce from the current level of 24% to 21% in 2008.

Further information is provided on VAT changes in the Expert Corner article, while further information on capital gains is covered in the CERES Group FAQs section.

Source: CERES Group Property Report, November 2007.

CERES Group is one of the most rapidly growing real estate ventures in the Czech Republic, bringing together all of the services required for an investor to purchase property within the region.

Click here to browse the company’s properties for sale now.

Click here to read more about the business.

© PropertyIndex.com 2007 | Last Updated: 05 December 2007