Information of the GFD on the Application of VAT to Real Estate

The Czech General Financial Directorate has issued new guidance on VAT for real estate, effective July 1, 2025, clarifying that a building plot’s intention for construction is primarily based on spatial planning, irrespective of the buyer’s intent, and detailing conditions under which a plot with foundations is considered a building plot.
The concept of a “functional unit” has been significantly narrowed, now primarily applying when a plot’s sale is an independent transaction (e.g., selling a plot to a building owner), and “substantial alteration” requires construction costs exceeding 30% of the property’s tax base, with changes in use or conditions as mandatory conditions.
New rules specify that only the first supply of real estate within 23 months of completion or substantial alteration is taxable; a reduced VAT rate applies to social housing buildings (defined by type or intended use with specific floor area limits and registration criteria), and for construction/installation works on such buildings or parts of mixed-use buildings designated for social housing.