Changes to the property tax from 2024. Who files a new return?

The recently adopted tax consolidation package brings a number of innovations. Find out the main changes to the real estate tax, who has to file a new tax return and how to do it.

What's changing from 2024?

Adjustments to the paved area rules

One of the modified areas is the so-called paved area. Until now, taxation of paved area was only linked to land of the type other area or built-up area and courtyard - and now this link to a specific type of land has been removed. What does this mean in practice?

• Paved areas are now to be taxed on all land.
• If you own a plot of land with paved area other than the previously taxable other areas and built-up areas and courtyards, be sure to file a tax return by 31 January 2024.

In addition, the definition of when a paved area is a parcel of land or part of a parcel of land that is used for business or that a business has classified as business property under the Income Tax Act and whose surface is paved with a building under the Building Act without a vertical support structure has been modified. It then includes the surface of a swimming pool, tank or siding, unless these are taxable structures.

Building land is also land where a building is already standing

The rules have also changed in relation to building land, where it will now include land where a building is already standing but where construction of another taxable building is also taking place.

This means a situation where, for example, a family house is already standing on a plot with one parcel number and another one is being built next to it, without dividing the land. Until now, only undeveloped land was considered to be under construction.

The tax will change annually by the inflation coefficient

Another important change is the introduction of an inflation coefficient, which will periodically adjust the property tax by inflation for the previous period.

For 2024, the coefficient is set at 1. The Ministry of Finance will announce its subsequent changes by 30 June of the calendar year preceding the tax year (e.g. by 30 June 2025 it will announce the coefficient for the 2026 tax rates).

Increase in property tax rates

In addition to the adjustments to the definitions and the introduction of the coefficient, there is a significant increase in real estate tax rates. There is no need to file a tax return in connection with this change; the tax authorities should reflect the rate adjustments automatically in your payment assessment.

Real estate tax return rules

The deadline for filing the return is 31 January 2024. You file it in advance, i.e. for the year 2024, according to the data or the status in the Land Registry as of 1 January 2024. It applies to you if there has been a change in your property in the previous year that triggers the obligation to file the return (see examples below).

If you own properties in more than one cadastral area (e.g. one in Pilsen and one in Jihlava) and you have to file a return, submit it to the local tax authorities for each property separately.

Tax is not payable within one tax office if the total tax liability does not exceed CZK 50.

Before filing your return, we recommend that you check whether the municipality has issued a binding exemption ordinance for specific immovable property (e.g., in the case of other areas with a use type of barren land, waterlogged area, boundary, hillside, green space or other area located within the municipality's territory), which falls under its jurisdiction.

When do you have to file a property tax return?

Typical changes that trigger the obligation to file a tax return include:

• Purchase of a property;
• sale of a property (inform the tax authorities by notification when the tax liability ceases);
• building approval;
• obtaining a building permit;
• change of a building (extension, demolition);
• change of the area or type of land in the cadastre, e.g. due to digitisation.

Due to the amendment of the law, there is a new obligation to file a tax return for these properties and situations:

• Building land. A new building plot can also be created on land where a building is already standing. In such a situation, a tax return must be filed.
• Garage. This is now defined as any taxable structure with the use of a garage, regardless of the actual use. So if you have previously taxed your garage as an accessory to the main building or as an other building, file a tax return.
• A building or unit with no known owner. Such buildings are taxed by their occupier, who must therefore also file a tax return.
• Paved area. Until now, a paved area (e.g., a paved parking lot) was taxable only on land registered in the land registry as other area or built-up area and yard. Now, paved area will be taxable on any type of land (e.g. grassland or arable land). Therefore, if you own a paved area that was not taxed as such because of the type of land it was on, you must file a tax return and tax that paved area according to its acreage.

When do you not file a property tax return?

In contrast, further amendments to the Real Estate Tax Act are not a reason to file a new return (the tax authorities would take them into account automatically). These include in particular:

• Increase in tax rates;
• changes in coefficients;
• introduction of rates for land other area with the use type other area with the code Q and for land other area with the use type barren land, waterlogged area, border, hillside or green area with the code W;
• modifications of exemptions (units of transmission, transmission or distribution system or heat distribution equipment are exempted according to the Energy Act).

Due to the many changes and interpretive issues, the IRS has issued a handout detailing all of these changes and supporting examples.