The most relevant changes that will affect the real estate tax in the following tax periods are described below.
Definition of paved plot
In the current law, a paved plot of land is defined as:
- land or a part of it in m2 registered in the cadastre of real estate as land type “other plot” or a “built-up plot” and “courtyard”
- land, the surface of which is paved by a construction according to the Construction Act, without a vertical support structure
- land that is used for or in relation to a business; these three conditions must be met at the same time
In our opinion, the amendment to the Real Estate Tax Act changes the definition of a paved plot of land.
According to the amendment to the Real Estate Tax Act, a paved plot of land is now understood as:
- land or part of it, which is used for the purpose of business or which the entrepreneur has included in business assets according to the law regulating income taxes
- land or part of it, the surface of which is paved with a construction according to the Building Regulation without a vertical load-bearing structure; the two conditions must be met simultaneously
Based on the information above, we assume that a paved plot of land is also land registered in the Land Registry with a land type other than other plot or built-up plot and courtyard. If the paved plot of the land is only a part of the land, that part and the remaining part of the land are considered as two separate plots of land for the purposes of real estate tax.
Increase in rates and their coming into effect
According to the amendment to the Real Estate Tax Act, the increase in land tax rates and the increase in tax rates on buildings and units are 1.8 times the current rates. The individual provisions on the increase in rates come into force on 1 January 2024.
Changes in exemptions
The amendment also brings changes in exemptions for land tax as well as for tax on buildings and units. The changes consist mostly of legislative technical adjustments, e.g. changes in wording.
Implementation of the inflation coefficient and new modification of the local coefficient
The part of the amendment also includes a complex modification of the coefficients.
Inflation Coefficient
The calculation of the real estate tax will now also reflect the growth of inflation by an inflation coefficient based on the growth of the price level compared to May 2023. Its growth is limited to a maximum annual increase of one fifth of its current value. In the event of deflation, no reduction will be made. The Ministry of Finance will announce the increase in the inflation coefficient in the Collection of Laws and International Treaties by 30 June of the calendar year directly preceding the tax year. The inflation coefficient for the tax year 2024 is fixed at 1.00.
Local Coefficient
The amendment includes two versions relating to the local coefficient; one will be effective from 1 January 2024 and the other from 1 January 2025. In both cases, a change is made to the lower limit of the local coefficient; the municipality can now reduce the tax up to 0.5.
The above changes may result in an increase in the tax liability for 2024 tax period by almost twice as much, and in the case of combination with possible modifications of the coefficients by individual municipalities, the tax liability for 2024 could in extreme cases increase up to four times compared to 2023.
In case of your interest, we will be pleased to prepare a calculation of the real estate tax for the year 2024.