The Czech government has recently approved a draft amendment that should change the way in which real estate transfer tax is paid. Currently the tax is paid by the seller. The buyer acts as a statutory guarantor for the fulfilment of the seller’s tax obligation. If the proposed legislation passes through the parliament the buyer will become the payer of the tax and the statutory guarantee will be abolished so that neither of the parties will act as a guarantor. Additionally, it will not be possible for the buyer and seller to decide between themselves who pays the tax as is possible under the current legislation.

The proposed changes should simplify real estate asset deals by removing the possible risk to the buyer of having to step in and pay the tax if the seller does not fulfil its duty.

It is not expected that the changes will have a significant impact on the real estate prices. Even though the buyers will probably try to push down the nominal purchase prices in order to alleviate the additional tax costs, the trend on the market (especially on the residential property market where the majority of deals are being done as asset deals) will most likely prevent them from achieving any significant discounts.