The European Union has made its long-awaited decision on new build VAT rates in the Czech Republic - the VAT rate can stay at 5%. But it will rise to 9% anyway on most properties.

Several countries that joined the EU in 2004 were granted special waivers allowing them to apply a lower rate of VAT on certain goods and services in order to smooth the transition to a higher standard rate.

One of these countries was the Czech Republic, which was allowed to charge a lower VAT rate of 5% on new build housing.

That transition period runs out on midnight, December 31, 2007. At this time, the VAT rate on new builds was due to switch to the upper Czech rate of 19%.

Now the European Commission's Economic and finance committee (at a meeting yesterday, Dec 4) has approved an extension of the 5% rate until the end of 2010 for 'social housing' - this is new builds below a certain size.