NEWS
Changes to VAT on real estate from July 2025
Changes to VAT on real estate from July 2025
From 1 July 2025, major changes to the rules on the application of VAT on immovable property will come into force. This amendment brings new definitions and rules that will significantly affect the tax liability on the sale and transfer of real estate.
New definition of building land
One of the main changes is the extension of the definition of building land. Now, construction land is not only intended for construction according to the zoning plan but also land on which construction work is underway or directly intended for future construction. This means that more land will now fall under the category of VATable land. This change is expected to lead to more frequent application of VAT on land sales.
Changes to the VAT exemption for supplies of buildings
The new rules also change the conditions for VAT exemption on sales of buildings. From July 2025, VAT exemption will only apply to sales of completed buildings that take place after 23 months from completion. For example, if a building completed in February 2025 is not sold until April 2027, the sale will be exempt from VAT. However, an exception is made for buildings that have undergone substantial alterations, such as renovations exceeding 30% of their sale price.
Impact on VAT rates for residential buildings
For the purposes of applying the reduced VAT rate to buildings intended for housing or social housing, the size of the building remains the key factor. Flats up to 120 m² and family houses up to 350 m² will continue to be subject to the reduced VAT rate. However, the standard rate of 21% applies to larger properties. Subsequent renovations of completed buildings will be subject to a reduced rate of 12%.
Preparing for the changes
The amendment to the VAT Act brings stricter rules that will affect many entrepreneurs and investors in the real estate sector. "The changes will require careful planning and early preparation. We advise our clients on the tax changes so that they can respond effectively to the new rules," says Filip Veselý of MORITZ & BAKER.
If you are in the real estate business, it is crucial to keep track of these legislative changes and ensure that your projects comply with the new rules. MORITZ & BAKER is ready to assist its clients in dealing with their tax obligations efficiently.
