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Taxes on real estate acquisition

The contracts on the transfer of ownership of real property (e.g., sales contract, a contract of exchange), are subject to the tax on civil law transactions. The rate of this tax is 2% of property value.

The obligation to pay this tax is generally imposed on the purchaser of the real property. It is only in the case of the contract of property exchange that this obligation is incumbent on both parties to the contract.
A notary is the payer of the tax on civil law transactions, which means that he is obliged to calculate tax and collect it from the contracting party liable to pay the tax. After collecting the tax, the notary is obliged to pay it in due time to the tax authority. Accordingly, the parties to the contract do not have to worry about the formalities relating to the payment of tax on civil law transactions, because these formalities are carried out by the notary, and he bears liability for it.

If at least one of the parties to a contract that transfers ownership of real property is taxed by the tax on goods and services (VAT), then such contract is subject to value added tax, and not to the tax on civil law transactions. VAT payers are mostly legal persons and natural persons, conducting an economic activity, namely businesses.
The transfer of ownership of real property may be taxed (depending on the designation of the real property) with tax rate of 23%, 8% of VAT, or it may also be exempt from VAT. For example:

  • the rate of 23% covers the transfer of ownership of undeveloped real property but intended for development,
  • the rate of 8% covers the transfer of ownership of single-family detached houses and residential buildings,
  • tax-free transfer of ownership covers the transfer of undeveloped real property and not intended for development (e.g. agricultural, forest, recreational),
  • tax exemption also covers sales of developed real property or parts thereof, provided that the sale takes place after 2 years from first occupation of the building.