VAT on the Supply of Real Estate and the Obligation to Become a VAT Payer

Based on the amendment to the Value Added Tax Act, significant changes have been made to the rules for taxing the sale of real estate starting from 2025.

VAT will newly apply only to the first supply of real estate after its completion, if it takes place within 23 months from the month of completion of the construction. After this period expires, the supply of real estate is exempt from VAT. In the case of a sale between VAT payers, they may agree that the sale will be taxed.

If a property subject to VAT is sold by an entrepreneur not yet registered as a VAT payer and this sale exceeds the statutory turnover threshold for mandatory registration, the obligation to become a VAT payer arises. The law newly sets the following thresholds:

• Threshold CZK 2,536,500 – upon exceeding this turnover, the entrepreneur becomes a VAT payer immediately after the day the threshold is exceeded.
• Threshold CZK 2,000,000 – upon exceeding this turnover, the entrepreneur becomes a VAT payer on the first day of the calendar year immediately following the year in which the threshold was exceeded, or immediately after the day following the day the turnover was exceeded, if this fact is stated in the registration application submitted to the tax authority.

Turnover does not include received advance payments, but only the final amount at the date of taxable supply. This significant change is valid from 1 July 2025.

Example:
An entrepreneur who is not yet a VAT payer and whose turnover for the current calendar year is CZK 1,200,000 sells a newly built family house for CZK 7 million. This constitutes a taxable supply, as the first transfer of the property takes place within 23 months of completion of the construction.

Date of sale: 15 October 2025 – on this date, the family house is handed over for use to the buyer.
The sale of the house results in exceeding the statutory turnover threshold for VAT registration.
Received advance payments are not included in the turnover, only the final sales price at the date of the taxable supply.

The entrepreneur is obliged to register for VAT. He becomes a VAT payer as of the following day, i.e., 16 October 2025, and not on the day of the sale itself. Therefore, the sale of the property is not subject to VAT.

It is important to emphasize that VAT liability does not arise on the day of the sale of the taxable property, but only on the following day. Recently, some articles have incorrectly stated that the entrepreneur becomes a VAT payer already on the day of the sale and must therefore charge VAT on the sale. However, such an interpretation is incorrect and inconsistent with the legislation. The seller becomes a VAT payer only as of the day following the sale of the property. It can be assumed that these misleading pieces of information are mainly spread by articles generated by artificial intelligence without proper professional review.

If you come across such an article, always check whether the author is a tax advisor specializing in VAT. Should you need assistance with similar transactions, do not hesitate to contact the PKF APOGEO Tax team.