Relief for exemption conditional on the expenditure of income on the provision of housing

On Wednesday, 17 April 2024, a clarifying amendment to the Income Tax Act was approved in the 3rd reading, where one of the topics discussed was the exemption of income realised from the sale of immovable property from personal income tax, provided that the funds obtained are used for one's own housing needs.

At present, the condition for using this exemption is to comply with the obligation to notify the tax authorities of this fact by the end of the deadline for filing the tax return for the year in which the sale of the property took place. This leads to frequent situations where, in particular, taxpayers from the general public omit to make this notification and consequently cannot use the income exemption. Yet, property sales often involve millions of dollars in taxable amounts.

Under the pending amendment to the Income Tax Act, the possibility of claiming the exemption would no longer be subject to the taxpayer's notification obligation. Thus, in the event of late notification of exempt income, the taxpayer would not be restricted in claiming the exemption, but would only face a penalty for failure to comply with the obligation of a non-monetary nature under Section 247a of the Tax Code.

We will continue to monitor further developments under the pending amendment to the ITA. Please do not hesitate to contact us if you have any questions regarding the possibility of applying the income tax exemption.

Author: Anna Barešová