Newsletter (not only) for brokers
Changes to VAT on property from July 2025, Securing access to a unit, When law turns into extortion
Authors of the newsletter: JUDr. Lukáš Slanina, Mgr. Robert Dürrer, ARROWS (office@arws.cz, +420 245 007 740)
New in law: Changes to VAT on real estate from July 2025
If you are a VAT payer and deal in real estate, beware. On 1 July 2025 , an amendment to the VAT Act will come into force which will change the rules for the supply of immovable property. The definition of building land on which VAT is payable is newly clarified and the conditions for VAT exemption on the supply of completed buildings are also changed.
A. New definition of building land
Building land will be, inter alia, any land on which, according to the zoning plan or a decision of the building authority, construction may take place, even if no building work has yet been carried out on it. This means that more land transactions will be subject to VAT.
B. Changes to the rules on VAT exemption for completed buildings
VAT will now only apply to completed immovable property when it is first supplied after completion or substantial alteration (e.g. extensive renovation or extension), if the cost of the alteration exceeds 30% of the resale price.
The VAT exemption will not be available until 23 months after the end of the month in which the property is completed (e.g. approved) or substantially altered. Until now, the period of 5 years has been valid, which is being significantly reduced. If the property is sold before 23 months or is not completed, the sale will be subject to VAT.
Example: a developer (VAT payer) has approved a new building on 1 January 2026 and used it for his business. When he sells it to ABC (VAT payer) on 2 February 2028, the sale will be exempt from VAT because more than 23 months have passed since the approval .
If ABC resellsthe property immediately, this sale would also be exempt from VAT as it is no longer the first supply after completion of the building. The exception would be if it made a substantial changeto the property (e.g. a renovation over 30% of the value), which would start a new 23 month period.
Helpful advice: Ensuring access to the unit
Did you know that a necessary way can be established in favour of a residential or commercial unit? If the house in which the unit is located does not have access to a public way and the adjacent property owner refuses to allow passage or passage, the unit owner can petition the court to establish an easement to allow unobstructed access to the property.
This right also applies if the tenant of the unit needs access. The decision, on the other hand, does not affect the rights and obligations of other unit owners.
Tip for real estate agents: If you sell or manage units with restricted access, we recommend that clients consider the possibility of a court order establishing the necessary route. This will prevent future disputes with adjacent property owners.
Court Decisions: When a right turns into extortion
In our legal practice, we occasionally see abuses of the law - for example, when someone uses a lawsuit to force a property owner to sell on unfavorable terms Exactly what an elderly married couple who decided to sell their cottage through an estate agent experienced.
The buyer expressed an interest in the property but refused to sign a reservation contract or prove that he had secured financing for the purchase. When the sellers realised that the negotiations were going nowhere, they decided to look for another buyer. But that's when their problems began.
The buyer filed an action in court to supersede the will, demanding a purchase agreement. At the same time, he had a note of the lawsuit entered in the Land Registry, effectively blocking the sale of the property.
Shortly before the court hearing, the buyer personally visited the couple and told them that if they did not sell the cottage on his terms, he would drag them through the courts for the rest of their lives. All in all, he waged a legal war against the couple for several years, which had a serious impact on their mental health.
The court eventually ruled that such behavior was not only unethical, but criminal. The buyer was therefore sentenced to a suspended prison sentence and a fine.