Wondering when you need to file your tax return? Have you inherited a property? Whether you kept it or sold it outright, you'll want to know when property sales tax is due and how to fill out your tax return. That's what we're going to look at today.

Facts:

- Inheritance tax has been abolished since 2014.
- The property tax is abolished from 2020.
- Income and gains from the sale of property you have acquired by inheritance or otherwise are subject to income tax. This is 15 % and is dealt with annually as part of your tax return.
- There are situations where you pay nothing at all after the sale or transfer of the property, you will be exempt.

Do I have to pay any inheritance tax?

Inheritance tax has been abolished in our country since 2014. However, it should be noted that this tax has been absorbed by income tax and if you acquire real estate by inheritance, it is so-called gratuitous income according to Section 10 (2) of the Income Tax Act and you are exempt from the tax. However, if you are not in this list, then you must file INCOME TAX RETURN AND TAXABLE INCOME 15 %unless the conditions under which this obligation does not apply are met (e.g. income up to CZK 50,000).

You can submit your tax return either in person, by post, via a data box or electronically via the tax administration portal. This is a prescribed tax form, which is available at many websitesthat deal with this issue, including the financial administration's website, including the guidelines.

Costs of inheritance proceedings

As part of the succession procedure, a fee is paid to the Ministry of Justice for the notary who takes care of the individual acts. The amount of the fee is calculated according to the value of the inherited property. There are calculators that can work out the approximate amount. The values that are entered there are related to the value of the inherited property already mentioned and to the other costs that are associated with the preparation of documents for the court.

Another cost you will have to pay is the fee for processing the property valuation. I can quickly and reliably prepare it for you.

Sale of inheritance property and its taxation

The following facts determine whether we have to pay property sales tax or property transfer tax. If you decide to sell an inherited property as an heir, it depends on when you intend to bring it to the market. If you decide to sell the property after 10 years of holding it, the proceeds of the sale are exempt from income tax and you do not have to pay this tax.

If before the heir the real estate was held by the testator in the line of direct relationship (spouse, children, grandchildren, parents or grandparents), the time test is added up, in other words, the length of the testator's holding of the real estate is added to the length of the heir's holding of the real estate. An example is the sale of a property owned by a grandmother for 15 years, immediately after the probate proceedings were completed. In this case, the time test for the exemption of income from personal income tax is met because the grandmother (direct line) and the heir held the property for more than 10 years.

How much personal income tax will I pay on the sale of an inherited property if I sell it before ten years?

Personal income tax on income relating to the sale of inherited property is 15 % of the tax base. This consists of the difference between the sale price and the price of the property as determined according to an expert's report. In other words, if you made a profit on the sale of the property, you will have to hand over a portion to the state.

When is the tax on the sale of the property due? Let's take an example

If the appraisal price of the property was CZK 3 million and you sold the property for CZK 3.3 million, the personal income tax base will be calculated as CZK 3.3 million - CZK 3 million (the difference between the sale price and the appraisal price). This works out at CZK 300,000.

The 15% income tax is calculated on this 300,000 CZK base - it comes out to 45,000 CZK. You must then pay this tax unless the income is exempt. You can also deduct from the tax base the costs of acquiring, selling or investing in the property.

Deadline for paying the tax and filing the return

The standard deadline for filing a tax return is by 1 April. If this day falls on a weekend or holiday, it is automatically moved to the next working day. When submitting electronically the deadline is extended until May 2. Specific data for the year can be found at Financial administrations.

Will you use the funds from the sale of the property to buy your own home? Then you won't be taxed

In addition to the timing tests described above, there is another situation where you may not have to tax the income from the sale of the property. If you use the sale proceeds to buy a new property for your own home within one year of receiving the money from the sale, you will not pay tax. This is called meeting your own housing needs. So when you sell an inherited property or any other property you own, you can deduct the cost of buying a new property from your income.

Inheritance and its forms

Finally, it is good to note what forms of inheritance are known in our country. It may be that you do not even know how you came by your property. In practice, there are 2 forms of inheritance:

Wills
Inheritance under the law

The heirs are then divided into 5 classes according to their entitlement to the property:

Children and spouse of the testator - if the children of the testator do not inherit, then their descendants and the descendants of their descendants (i.e. the grandchildren and great-grandchildren of the testator) come next.
If there are no or no children of the deceased, the spouse (if they have been together in the household for more than 1 year) and the parents of the deceased equally come next.
In the event that neither children, nor spouse, nor parents inherit, siblings and possibly their children come to the fore.
If they do not inherit either of the above, the grandparents of the testator come next.
The last class includes great-grandparents.

The last 2 classes cannot be found much in practice, because usually the property is divided in the first or second class.

Tax is a complex topic. This article is not tax advice. Always consult a professional about your needs.

Are you dealing with the sale, lease, purchase or valuation of a property, contact me

I work primarily in the areas of Prague - Central Bohemia - Pilsen