In the Czech Republic, property tax, also known as “real estate tax” is levied on the value of the property and is paid annually to the local municipality. The rate of property tax varies depending on the municipality and the type of property. For example, the property tax rate for residential properties in the city of Prague is 0.4% of the property’s value.
Capital Gains Tax (CGT)
When a property is sold, the capital gains tax (CGT) is levied on the difference between the sale price and the acquisition cost. The CGT rate in Czech Republic is 15% for individuals and 19% for companies. However, there is an exemption for the CGT if the property is the main residence of the seller and has been held for at least two years.
In Czech Republic, inheritance tax is levied on the value of the property inherited. The tax rate varies depending on the relationship between the deceased and the inheritor, with a higher rate for non-relatives. For example, the inheritance tax rate for a child inheriting from a parent is 5%, while the rate for a non-relative inheriting from a deceased is 40%.
In Czech Republic, gift tax is levied on the value of the property gifted. The tax rate varies depending on the relationship between the giver and the receiver, with a higher rate for non-relatives. For example, the gift tax rate for a parent giving a gift to a child is 5%, while the rate for a non-relative giving a gift is 40%.
Tax on Property Income
In Czech Republic, if a property is rented out, the income generated from the rental is subject to income tax. The tax rate is the same as the individual’s income tax rate. For example, if the individual’s income tax rate is 15%, the rental income tax rate is also 15%.
Tax Advantages in Buying a House in Czech Republic
Mortgage Interest Deduction
In Czech Republic, mortgage interest paid on a property can be deducted from the individual’s income tax. This can provide significant tax savings for homeowners with mortgages.
Primary Residence Exemption
In Czech Republic, if a property is designated as the primary residence of the owner, the capital gains tax is not levied when the property is sold, as long as the property has been held for at least two years. This can provide significant tax savings for homeowners who sell their primary residence.
Tax Relief for First-Time Homebuyers
In Czech Republic, first-time homebuyers may be eligible for tax relief, such as a reduction in the property transfer tax, which is levied on the sale of a property. This can provide significant savings for first-time homebuyers.
Czech Republic has a VAT rate of 21% for new constructions or substantial renovations, and 6% for resale properties.