VAT TREATMENT OF PROPERTY SALES AFTER THE END OF THE 5% VAT RATE

From 1 January 2020, the reduced tax rate of 5% applicable to the flats to be constructed or existing in a multi-unit residential building with a total net floor space not exceeding 150 square meters and to the single-unit residential building with a total net floor space not exceeding 300 square meters will be terminated and the general VAT rate of 27% will be applicable for the sales of such residential properties.

At the end of September 2018, the National Tax and Customs Office published a summary relating to the changes of the value added tax treatment of the residential properties. According to the summary, in principle, the tax rate effective at the time of performance shall be applicable to the establishment of the VAT. The summary distinguishes three cases on the basis of the date of performance subject to the method of sale of the residential building. For example, in case of the actual handover to the customer of a property made by constructing and installing works and to be registered in the real estate register (whether or not the customer has provided all or any part of the materials necessary for construction), the date of the performance is the date indicated in the protocol documenting the entire handover of the property. The summary determines two further cases for the date of performance of property sales.

The summary also clarifies that in case of partial performance, the instalments performed until 31 December 2019 are subject to the VAT tax rate of 5% and the instalments paid after this date are subject to the tax rate of 27%. Similarly, the advance payment received or credited prior to 1 January 2020 will fall under the tax rate of 5%. In addition, the buyer may also pay the full amount of the purchase price to the seller as advance payment regardless of the completion level of the new residential building.