Are you not affected by the change in VAT on the rental of residential real estate from 2021? (No. 964)

We would like to warn VAT payers that in connection with the amendment to the VAT Act (No. 80/2019 Coll.), there is a restraint on the application of VAT on the lease of immovable properties, with effect from January 1, 2021.

Pursuant to the provisions of Section 56a of the Act, it will not be possible to apply the tax on the lease of immovable property “voluntarily” from 2021 onwards. This means that, when renting real estate to a VAT payer for his economic activities, it will no longer be possible to opt for taxation if the real estate (or part of it) is intended mainly for permanent dwelling. It will be compulsory to apply a tax exemption without the entitlement to VAT deduction when accounting for rent.

From 2021, this change will have a major impact on the current application of the VAT deduction (prohibition of tax deduction or reduced tax deduction).

VAT payers, who are no longer allowed to apply VAT to the rent of residential real properties due to the new legal regulation, will also have to deal with the fact whether they will not be obliged to adjust the input tax deduction gradually from 2021 and to what extent, if the tax deduction was applied by the end of 2020, when acquiring the listed real estate, including its technical improvement.

Therefore, we recommend revising the rental contracts relating to the specified immovable assets, for which VAT is currently applied.

publikováno 20.11.2020