Building Savings in Banks Won’t Happen

The Czech government has announced that it will reduce support for building savings contracts by 50% from January 2022 and that banks will not be allowed to offer them.

The Ministry of Finance had previously proposed that banks could apply to offer building savings contracts, but that proposal has been abandoned. The Ministry had argued that allowing more providers would increase competition and “make building savings more cost-effective.”

According to a spokesperson for one of the five building savings associations, “the possibility that all banks could offer building savings is not currently on the agenda.”

However, there will be some changes to the law, especially about energy-saving measures in homes and flats. The loans will be available for these measures, including insulation, window replacement, and boiler replacement.

Building savings offer relatively favorable loans that are expected to be provided in the future for energy-saving measures, such as insulation, window replacement, and boiler replacement. “However, loans will still be available for other modernizations of homes,” said the spokesperson for the building savings association.

Previously, ministers had announced that building savings associations would participate in providing subsidies from the New Green Savings program, which are designed, for example, to purchase photovoltaic panels or heat pumps. In practice, applicants will be able to apply for a subsidy at the branch and also use for a loan for further financing. Details are being clarified by the Ministry of Finance, the Ministry of the Environment, and the building savings associations.

Building savings associations have provided loans of CZK 14.3 billion from the beginning of this year until the end of May, almost 60% less than the previous year. In 2020, loans totaling CZK 56.7 billion were provided.

Last year, the state paid out CZK 4.1 billion to support building savings. The government plans to reduce state contributions to building savings from ten to five percent, up to a limit of CZK 1,000 per year, and abolish the explicit exemption of this support from income tax.

However, clients of building savings associations will not necessarily have to pay tax on state support. It will be classified as other income according to the Income Tax Act. According to the explanatory memorandum, they will be exempt if it does not exceed CZK 50,000 per tax period with other income of this type.

In the first five months of this year, savings associations concluded 205,376 building savings contracts, seven percent less than the previous year. However, the target amount increased by 4.4 percent to CZK 118.7 billion. Savings associations have a total of 3.1 million building savings contracts.