With the entry into force of Act No. 386/2020 Coll., repealing Senate statutory measure No. 340/2013 Coll., on the Tax on the Acquisition of Immovable Property, the tax on the acquisition of immovable property was cancelled and changes were made to Act No. 586/1992 Coll. on Income Tax (hereinafter referred to as "ITA"). The change in the ITA significantly reduces the limit for claiming interest on a loan to finance housing needs. From the original amount of CZK 300,000 the limit has been reduced to CZK 150,000.

The new legislation applies to credits acquired by the taxpayer on or after 1 January 2021. On the other hand, if the taxpayer obtained the loan before 1 January 2021, the limit of CZK 300,000 may be applied even after the amendment to the Income Tax Act becomes effective.

Within the framework of the Coordination Committee with the Chamber of Tax Advisors of the Czech Republic, a paper was issued to remove unclear areas arising from document No. 570/27.01.21. It is primarily a clarification of how to deal with situations that arise in public administration proceedings due to inaction or the issuance of a negative decision and its subsequent rejection by an appellate authority.

In particular, in proceedings under Act No. 183/2006 Coll., on Spatial Planning and Building Regulations (Building Act), delays in the building procedure may occur, resulting in a de facto delay in the issuance of a building permit. This may result in the fact that if the building permit is issued after 31 December 2020 for proceedings commenced before that date, the taxpayer will be affected both by the impossibility of starting construction and by the application of the lower limit of the non-taxable part of the tax base according to Section 15(3) and (4) of the ITA. The proposed solution would be the possibility for the taxpayer to lodge a complaint for protection against inaction of the administrative authority pursuant to Section 80 of Act No. 500/2004 Coll., Administrative Procedure Code, which would entitle the taxpayer to use the wording of Section 15 (3) and (4) of the ITA effective until 31 December 2020. Unfortunately, the General Financial Directorate (hereinafter "GFD") rejected this solution.

Another problem may arise in a situation where the proposal for entry into the Land Register is affected by a defect in the submission, which may or may not be removable. In the event of irremediable defects in the submission, the application for registration will be rejected and a completely new application must be submitted. Here again, the taxpayer may be penalised twice, in terms of delaying the registration of the ownership right and applying a lower limit of the non-taxable part of the tax base pursuant to Section 15(3) and (4) of the ITA.

According to the proposed solution, the taxpayer could be entitled to use the wording of Section 15(3) and (4) of the ITA effective until 31 December 2020 in the event that there were irremovable defects in the submission during the registration procedure, which resulted in a postponement of the moment of registration of the ownership right in the cadastral register, however, if the submission was made as legally and formally defective, the registration would be made before 31 December 2020 and the taxpayer could use the higher limit of CZK 300,000. The GFD agrees to this proposal only if there are avoidable defects in the submission. It believes the situation is different in the case of irremovable defects, as they lead to the termination of the proceedings.