GFŘ mění pravidla pro zdanění bytů na prodej postavených v brownfieldech

GFD changes rules for taxation of flats for sale built in brownfields

The Tax Administration has published information on the regime of the residual value of a building disposed of in connection with the acquisition of a new building reported as inventory. The full text of the information can be found HERE.

In accordance with the accounting rules, a building is accounted for as inventory when the business of the entity is dealing in immovable property and the building is acquired for the purpose of subsequent sale. If, when a building is acquired, another building is demolished, the residual value of the demolished building enters into the accounting valuation of the new building. In the past, this value was usually taken over for tax purposes, as there was no specific treatment in the tax law. 

The 2017 amendment to the Income Tax Act has newly established that the tax residual value of the liquidated building enters the acquisition price of a new building that is a fixed asset. However, a similar provision for cases where the newly acquired building is not a tangible asset but an inventory is still missing in the law.

Information from the GFD

In a published interpretation, the GFD expressed the opinion that the same regime as in the case of tangible assets applies when a building booked as inventory is disposed of. In practice, this means that in the tax return for the period in which the sale takes place, the taxpayer adjusts the accounting profit or loss by an amount corresponding to the difference between the tax and accounting residual value of the buildings disposed of as a result of the acquisition of a new building. Thus, there may be both an increase or a decrease in the tax base.

The GFD tries to overcome the lack of an explicit law provision by methodological interpretation. Therefore, the above procedure should not be applied retrospectively, but only for the tax period ending after the publication of this opinion - for most taxpayers, already for 2023.

However, it will be interesting to see whether the new interpretation of the GFD will be fully accepted in practice and how the administrative courts will subsequently rule in case of disputes.

If you have any questions, please contact the authors of the article or the EY team you are working with.

Authors:

David Kužela

Ivan Zhurkin