What changes will the cancellation of property purchase tax bring in practice?
The Chamber of Deputies approved the cancellation of the 4% tax on the real estate purchase. In fact, it will save several hundred thousand of Czech crowns for the buyer and increase the apartments’ availability. As a result, it will have a positive impact on the real estate market as a whole. It is also worth noting that the new law will also apply to transactions made after December 2019.
We remind that if you finance the purchase of real estate with a mortgage, it becomes possible to reduce the tax base by the amount of paid interests.Before the new law, the maximum deduction amount was 300,000 CZK per year.Now the total amount that can be deducted from the tax base will be reduced to 150,000 Czech crowns.So, the total saved amount will exceed 4%.For example, we can illustrate the next situation:You buy an apartment for 2,500,000 CZK using a mortgage and immediately save 100,000 CZK on the tax.Then, during the next 30 years paying the loan, you can receive a total tax deduction in the amount of 155,000 CZK.As a result, you will save about 255 000 CZKfrom the total apartment price of 2 500 000 CZK, which is about 10%. The table clearly shows the possible variations of the tax deduction depending on the cost of the apartment and the maturity of the mortgage. Also,you can see there an amount of the canceled tax, which may be useful for you to make a decision about buying an apartmentas efficiently as possible.
