The initial idea is therefore that the real estate tax will be increased, especially for these second, third, fourth flats. However, this approach has a large number of opponents. Most of these flats are used as investment flats and are used for rent to their owners.
“If the owners of these flats are overburdened with taxes, it can be expected that this increase in the cost of holding the flat will be reflected in the rent. Ultimately, they will pass the increased tax on the tenants of the apartment. The increase in the tax on second flats will discourage very few potential bidders from buying them and will therefore not lead to a reduction in their prices, ”explains Michal Jelínek, partner of the V4 Group.
Thus, one of the main arguments of the supporters of the taxation of second flats is that the number of people who buy investment flats is growing, and as a result the price of flats is rising and mortgage rates are rising. “First of all, I don’t think that’s the main reason. Of course, the law of supply and demand is relentless in the case of real estate in our country, and reality is now being broadcast live. Here, it would be more appropriate to focus on the state of the building law in our country. In other words, if someone in Brno is willing to pay you almost a hundred thousand per square meter, don’t take it. However, anyone who knows at least a little bit about the law on real estate tax suspects that the proposal for such a concept of taxation is a hair’s breadth. Reality must always be taken into account, and thanks to the current real estate tax calculation system, it could be a big and unnecessary extra money burden for many people, ”describes Vlastimil Bijota, partner of DaVinci Investments.
“So if we have and want to consider increasing property taxes on a certain level, let’s think conceptually and not transfer it more or less to people who want to go to their cottages. Personally, after the past months, I would not even choose to adjust the commercial coefficient in the case of real estate used for business. Therefore, if we are looking for sources of income, I think that there are a lot of inefficiently solved even outside the real estate segment, “notes Bijota.
Tax support for the purchase of own housing
Another way to discourage the purchase of investment apartments using tax instruments is to reduce or eliminate tax subsidies in the form of deductible items – mortgage interest.
“For taxpayers who have a mortgage from banks or a loan from building societies, the Income Tax Act offers to deduct interest on a housing loan from the tax base. The total amount of interest by which the tax base of all loans to taxpayers in the same jointly managed household can be reduced may not exceed CZK 300,000. The limit of 300,000 crowns applies to tax returns for the year 2020, for 2021 the limit of 150,000 crowns already applies. When paying interest for only part of the year, the amount applied may not exceed one twelfth of this maximum amount for each month of interest payment, “specifies Markéta Szotkowská, a tax specialist from the V4 Group.
If there are several participants in a loan agreement to finance housing needs, the deduction can be claimed by either only one of them or each of them, in equal parts. If the real estate which is the subject of the loan agreement is also used for the activity from which the income from the independent activity arises, or for the lease, the deduction of interest can be applied only in a proportional amount.
‘The tax base may be reduced only during the tax period during which the taxpayer owned or used the object, for his own permanent residence or the permanent residence of the other spouse, descendants, parents or grandparents of both spouses and in the case of construction, alteration or purchase he used the buildings under construction for his permanent housing or the housing of his loved ones, “adds Markéta Szotkowská, a tax specialist from the V4 Group.
In order to claim interest on a loan for housing needs, it is necessary to submit various documents for the tax return, depending on the nature of the specific loan or housing need. In some cases, the tax administrator requires the submission of a loan agreement, confirmation of a building society or bank about the amount of interest paid, statement of title, lease agreement, proof of permanent residence address, proof of settlement of joint property of spouses or co-heirs, notification of construction, consent to use constructions (approval decisions), etc.
It is therefore quite clear from the list of conditions that not all interest on a mortgage can be declared a non-taxable part of the tax base. However, if the apartment that is the subject of the mortgage loan is further leased and income tax is duly paid from this rental income, it is perfectly common practice to include interest in expenses for achieving, securing and maintaining income. Simply put, if no flat-rate expenditure is applied, interest can be included in expenditure and leased against rental income. The same effect will therefore be achieved as when declaring interest as a non-taxable part of the tax base. A possible restriction or refusal of this tax support would thus be reflected only in individuals who purchase apartments, will not use them for their own permanent housing or the housing of their closest relatives, nor will they rent apartments.
Real estate prices have skyrocketed in recent years:
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