In the Czech Republic, each purchase of real estate is subject to a transfer tax, currently at the rate of 4% of the value of the transferred property.

For years, this tax used to be paid by the sellers. However, as of November 1, 2016, the tax obligation has been shifted to the buyers.

The first step towards this change was taken in 2014, when the sellers and buyers obtained a right to agree that the tax would be paid by the buyer instead of the seller. Regardless of whether the tax was paid by the seller or the buyer, the other party served as the guarantor of its due payment. The standard practice, therefore, was to deposit the respective amount into an escrow account together with (the rest of) the purchase price, which was then sent directly to the tax authorities. This protected the guarantors of the tax obligation.

From now on, only the buyers will be responsible for the tax payment. If they fail to discharge their obligation, the tax authorities will no longer be entitled to go after the seller. It will thus be no longer necessary to deposit the tax amount into the escrow.

Although, logically, this change should lower the prices of properties by 4%, it is unlikely that the sellers will now revise their published price offers. It is now up to the buyer to demand a 4% discount from the offered prices, to keep current price levels.