Property owners in the Czech Republic are bracing for a significant increase in property taxes next year, with some potentially facing thousands of Czech crowns in additional costs. The government’s adjusted consolidation package includes plans to raise the primary property tax rate to nearly 1.8 times its current level, which is expected to impact most property owners across the country.

Currently, municipalities have the option to reduce property taxes by about a tenth, but local government representatives suggest that few are likely to do so. As a result, the proposed increase in the basic tax rate could result in substantial hikes for property owners.

For example, individuals who paid 1,720 Czech crowns for a 70-square-meter apartment in Prague’s Žižkov area this year could see that amount rise to 3,010 CZK next year, according to calculations by the Financial Administration.

The Ministry of Finance spokesperson, Petra Vodstrčilová, explained, “Current property tax rates for 2024 will increase to approximately 1.8 times their current value. This increase applies to all immovable property, provided it is not exempt from tax or the subject of tax.”

Municipalities have the authority to determine whether they will apply a local coefficient to the tax rate. While some areas may see a reduction of up to ten percent in property taxes, it’s expected that most municipalities will opt for the 1.8-fold increase.

The decision by municipalities is influenced by factors like past inflation and energy costs, which have not pressured them to raise tax rates in recent years. Now, with the proposed increase in the basic property tax rate, some cities are considering adjustments while waiting for parliamentary approval of the consolidation package.

Jihlava is contemplating property tax changes after thirteen years without adjustments, but the decision hinges on the final form of the consolidation package. Třebíč, on the other hand, has chosen to rely solely on the increased basic rate outlined in the package.

The core aim behind these proposed changes is to reinforce the right to self-governance, allowing municipalities to make decisions about tax rates. Municipalities will also gain the authority to implement local coefficients ranging from 0.5 to 1.5 for agricultural land, such as arable fields, vineyards, hop fields, or gardens, potentially mitigating the impact of the property tax increase on these types of lands.

While state coefficients are no longer considered for property tax, the inflation coefficient remains a part of the new government structure for property taxes. The adjustment of property tax rates is expected to have wide-ranging implications for property owners and the overall fiscal landscape in the Czech Republic.

Article by Prague Forum