Property Tax May Be Reduced, but Most Owners Will Pay More Next Year

Most people will see an increase in their property taxes next year, with some potentially paying thousands more. The government’s adjusted consolidation package anticipates raising the primary property tax rate to approximately 1.8 times its current level.

Although municipalities will have the option to reduce the tax by about a tenth, few are expected to do so, according to local government representatives.

For instance, this year, people paid 1,720 Czech crowns for a 70-square-meter apartment in a residential building in Prague’s Žižkov area. Next year, with the proposed increase in the basic tax rate, the amount is projected to rise to 3,010 CZK, as per calculations by the Financial Administration.

Ministry of Finance spokesperson Petra Vodstrčilová stated, “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 can keep the tax calculated from the basic rate or raise it using a local coefficient. Since 2009, local councils have been able to use a local coefficient ranging from 1.1 to 5 since 2021.

The option to apply a coefficient less than one (starting from 0.5) will be introduced, allowing local governments to offset the effects of the increased basic property tax rate, should they choose to do so, confirmed Vodstrčilová.

In some areas, people may pay up to ten percent less tax than before. According to František Lukl, chairman of the Association of Towns and Municipalities, even wealthier municipalities, which earn income from various sources like property rentals and capital gains, might opt for this approach, benefiting residents but potentially raising taxes for entrepreneurs.

However, Lukl believes that taxes will increase across the board in most municipalities by 1.8-fold. He pointed out that 90 percent of cities have a coefficient of one, meaning they haven’t previously worked with coefficients.

The decision is influenced by past inflation and energy costs, which have not compelled municipalities to burden residents with higher tax rates. But now, some cities are considering raising the rates, waiting to see if parliament approves the proposed 1.8-fold increase.

Jihlava, for instance, is contemplating changes to property taxes after thirteen years of no adjustment. A spokesperson for Jihlava’s city hall, Radovan Daněk, stated, “No decision has been made yet because it’s unclear what form the consolidation package will ultimately take. If the state’s proposal for a 1.8-fold increase goes through, we also consider not raising taxes ourselves.”

Třebíč, on the other hand, has decided to rely solely on the increased basic rate outlined in the consolidation package. “According to the consolidation package, we won’t be altering property taxes in any other way,” said Irini Martakidisová, a spokesperson for the city.

The core idea behind the proposed changes is to strengthen the right to self-governance, as per Lukáš Vlček, a member of the STAN movement. Whether a reduction in taxes will occur depends on the political decision of the respective municipal councils. 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. In such cases, the increase in property tax may not affect these lands significantly.

Compared to the original package proposal, state coefficients are no longer considered for property tax. However, the inflation coefficient remains in the new government structure for property taxes.