In the year 2024, a lot of changes await us in the field of construction, we could almost call it a "small revolution". In today's article, we will present to you in particular the news of Act No. 235/2004 Coll., on value added tax (hereinafter referred to as "the VAT Act") and Act No. 338/1992 Coll., on immovable property tax (hereinafter referred to as "Real Estate Tax Act") in connection with, among other things, Act No. 283/2021 Coll., Building Act (hereinafter referred to as "new construction law").

Definition of apartment and family house

The first change we will focus on is the definition of an apartment and family house (residential building) in connection with the VAT Act.

In § 48 paragraph 2 letter a) of the aforementioned Act states that for VAT purposes, a building for housing means the construction of an apartment building in accordance with the legal regulations governing the real estate cadastre. Amendment No. 284/2021 Coll. amends this provision so that it will now be understood as the construction of an apartment building according to the Building Act. The definition will thus be based on the new Building Act itself, specifically § 13 letter b), in which apartment building means a building for housing in which more than half of the floor area is used for housing.

The same is true for a family home. The provisions of § 48 paragraph 2 letter b) of the VAT Act now also refers to the legal regulations governing the real estate cadastre, but next year we will look at the definition of the construction of a family house in the new Building Act, where this definition is in § 13 letter C). Based on it family house means a residential building in which more than half of the floor area is used for living, and which has no more than three separate apartments, no more than two above-ground and one underground floor and an attic, or a third above-ground floor set back from the outer face of the perimeter wall of the building facing the street line by at least 2 metres.

The amendment also clarifies the definition living space, which for value added tax purposes means an apartment or other set of rooms, or one (formerly single) a living room that meets the requirements with its construction and technical layout and equipment (previously meet the requirements) for permanent housing and are for this purpose usage determined.

At the same time, the legislator also changed the definition buildings for social housing for VAT purposes, it will be understood in accordance with § 48 paragraph 5 letter and) construction of an apartment building according to the Building Act, in which there is no living space with a floor area exceeding 120 m². Nor the letter b) of the above-mentioned paragraph will not remain unchanged, it will now be about construction of a family house according to the Building Act, the floor area of ​​which does not exceed 350 m². The previous amendment of both provisions again referred to legal regulations governing the real estate cadastre. For the aforementioned purposes, a building for social housing also means a residential space for social housing, care homes for war veterans and others, this remains unchanged.

By changing the definition of residential construction and social housing construction for VAT purposes, the range of real estate that falls under the first reduced rate of tax for the provision of construction or assembly work carried out on a completed building will also change. In Amendment No. 284/2021 Coll., the legislator stated in the transitional provisions that the first reduced rate of tax will be applied to the provision of construction or assembly work carried out on a completed building, if it began before the date of entry into force of this Act, for a period of 2 years from the entry into force according to § 48 paragraph 1 of the VAT Act. However, it must be a family house according to § 48 paragraph 2 letter b) or § 48 paragraph 5 letter b) of the VAT Act, as amended before the effective date of this amendment, i.e. before 1 January 1.

Definition of building land and property tax

As another change, we will mention a new one definition of building land for the purposes of the Real Estate Tax Act. In the current legislation, according to § 6, paragraph 3, it is understood as a taxable building, an undeveloped plot of land intended for the construction of a taxable building, which has been announced or for which a building permit or common permit has been issued, by which the building is placed and authorized, or which will be carried out on the basis of a certificate an authorized inspector or on the basis of a public contract, within the scope of the land area in m² corresponding to the built-up area of ​​the above-ground part of the taxable building. The new legal regulation (new in § 1a paragraph 1 letter k) of the same Act) based on amendment No. 284/2021 Coll., will provide a much simpler definition of building land for the purposes of this Act, that is taxable building undeveloped plot of land designated according to a valid building permit under the Building Act to be built with a taxable building, to the extent of the land area in m² corresponding to the built-up area of ​​the above-ground part of the taxable building.

The last major real estate change is an increase in the property tax rate to approximately 1,8 times. For example, for the building of a residential building, the basic tax rate according to § 11 paragraph 1 letter a) will increase from CZK 2 per 1 m² to CZK 3,50. The tax revenue obtained in this way will go to municipalities, but they will receive less funding from shared taxes, which should have a positive effect on the state budget.

So what changes?

The changes will affect the following areas in particular:

• tax rates according to § 48 of the VAT Act - completed buildings for housing or completed buildings for social housing (reconstruction, repairs,...)
• tax rates according to § 49 of the VAT Act – construction or delivery of a building for social housing
• property taxes

For the sake of completeness, we add that the amendment also changes the conditions for exemption from VAT for the supply of immovable property according to Section 56 of the VAT Act and the conditions for exemption from VAT for the rental of immovable property according to Section 56a of the VAT Act.

záver

Since January 1, 1, quite a few changes in construction law have come into effect, including in definitions closely related to tax law. All the mentioned innovations are connected with the new construction law, the definitions mentioned above are directly based on it. 

Source: construction.cz

Mgr. Lucie Špičková, Attorney

Nikol Zlámalová, Paralegal