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Update on VAT on new builds in Czech – and a possible work around for investors
For a while now there has been some uncertainty around when the VAT rate on new build property in the Czech Republic will increase - and by how much, and on what kind of property.

The current rate is 5%, and the government is under pressure to bring this low rate in line with EU levels.

It was thought that the VAT rate would rise to 19% - but only on properties above a certain size (anything over 90 sqm originally being the generally agreed threshold; this threshold then changed to any property above 120 sqm).

Any property under this size would be classified as ‘social housing’ and be exempt from an increase.

The current situation – according to our inquiries – is still not 100% certain.

Czech still wants to apply this social housing category.

But, to do so, they need EU approval, and that still has not been given.

9% for all

The situation is further complicated by the fact that the Czech authorities now want to raise VAT on ALL new builds to 9% from January 1, 2008, and a provisional law to do this has been passed.

If the EU fails to approve the social housing category in time to allow the Czech authorities to implement the 9% rate by Jan 1 next year, it’s likely the whole question of a rise will be shelved for another year.

It is thought, though, that this is unlikely, and that the EU will approve the social housing provision and the Czech VAT rate will rise to 9% from next year on all new builds.

Eventually, the rate will have to rise to at least 19% in line with EU norms.

2009 boost

Our sources tell us that this rise is likely to be around 2010, meaning that the market will almost certainly receive a boost in 2009 as buyers rush to beat the deadline.

So, what about investors in Czech who are likely then to face the 4% VAT increase from next year?

For those with property due to complete in early 2008 – such as in the Old Brewery deal in Prague – there is a possible work around that should mean investors can avoid the extra 4%.

This is to make sure you have financing in place and payment is made before the property completes.

Josef Malir of Star Capital finance says the arrangement would be that final settlement would be paid into an escrow account before the January 1 deadline.

But for this provision borrowers can expect to pay a 2% additional charge on their mortgage repayments until the time of completion – basically because the lender doesn’t have a hold on the property, which is not completed yet.

It is simply a case of running the numbers to see whether this extra charge is worth it when set against the extra 4%.

If you calculate that the extra costs are worthwhile, the key is to set up a mortgage and make the arrangements for the escrow account now, ready for the probable VAT increase. Josef explains that the arrangements can be made, the escrow account set up, but no draw downs would take place before the VAT rise was 100% certain.


Effects on the market

How will this VAT change affect investments?

Property Secrets chief analyst, Simon Tweddle, who is based in Prague, believes that overall the initial small increase in the VAT rate having little negative effect on the property market in the Czech Republic.

‘For those with existing properties it is good news that new build properties will become a little more expensive as this price rise will inevitably filter into the secondary market.

‘For those with existing off-plan properties nearing completion or for those looking to purchase in the future it will simply mean that most properties will become 4% more expensive – and remember much of this price rise (80-90%) can be mortgaged anyway (subject to status, of course).

‘This is an annoying increase but it is likely to have the effect of raising the whole market - so, relative to the market, you are paying no more particularly over the long term. Also, buying costs in the Czech Republic are amongst the lowest in Europe.

‘Given the market in Prague alone is rising at 25% per annum currently and many second tier Czech cities are rising at 25-35% per annum a 4% increase will be easily absorbed by the market.’
POSTED BY ROBIN BOWMAN ON TUE 2ND OCTOBER AT 13:05 GMT
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UPDATE ON VAT ON NEW BUILDS IN CZECH – AND A POSSIBLE WORK AROUND FOR INVESTORS

Robin Thanks for that but can you say it again, I'm not sure I follow completely! I have a >120sqm unit completing in Central Park in mid 2008 and had made arrangements for some of the mortgage to be drawn down prior to end Dec 2007. This was in anticipation of a 14% rise in VAT (ie 5% to 19%)on units over 120sqm. Are you saying the 19% is not now on the cards for Jan 2008? You seem to be suggesting that it will be 5% for a while longer (if EU do not approve 'social housing exemption) or 9% (if they do approve). Am I understanding you correctly? I also have a question about the Escrow account but one thing at a time eh!
POSTED BY NICK ON TUE 2ND OCTOBER AT 18:14 Reply To Post
CZECH VAT

Hi Nick Yes, it is confusing, I agree. However, the way you've understood it is correct, as far as our inquiries tell us - the 19% is likely to be delayed, probably until 2010. But the 9% will go ahead in Jan 2008. We'll keep following this issue though. Cheers
POSTED BY ROBIN BOWMAN ON TUE 2ND OCTOBER AT 19:59 Reply To Post
ESCROW

OK Robin thanks. So the Escrow account - how does that work? My plan was to draw down as much mortgage as the lender will allow in Dec 07 and pay to the developer thereby incurring only 5% VAT on that portion. The problem is that the developer will not give me any credit for the early payment and I incur interest several months early. Are you saying there is an alternative? If so how does it work?
POSTED BY NICK ON TUE 2ND OCTOBER AT 21:02 Reply To Post
CZ VAT

Nick, Furthermore you don't actually need to drawdown your mortgage til near the end of December, by which time the situation should be clearer. Also, fyi the rate you pay on your mortgage is likely to be about 7% during the drawdown period, so everyone will need to make a simple calculation as to which is best for them once the exact rules are decided. The bit about a higher rate for 120sqm+ units was a proposal to get around the EU stipulations, this now looks unlikely to be necessary. But as Robin says we'll be keeping an eye on this. Cheers Simon.
POSTED BY SIMON TWEDDLE ON WED 3RD OCTOBER AT 08:17 Reply To Post
VAT

Simon Thanks. The breakeven (paying extra 4% VAT v paying 7% on drawdown) is less than 7 months. That means the development would have to be bang on time to get any benefit from drawingdown mortgage to avoid the additional VAT. As we all know CEE developments do not complete on time so it looks like it is worth just swallowing the extra VAT (with a smile). At 19% (additional 14%) of course the breakeven would be vastly different. Nick
POSTED BY NICK ON WED 3RD OCTOBER AT 08:49 Reply To Post
CZ VAT

Nick, Agreed. If the rate increases to 9% then for those people who have bought in the Old Brewery then its definitely worth it. For those in the Central Park deal (or any development that completes in the after about the first 6 months of 2008) then its almost not worth it. The completion date will generally depend on how warm the winter is, if we get a bad winter here then things can be delayed (and vice versa). Either way people should speak to their broker and at least get the mortgage in place so that once we really know the exact rules people can make a decision about what is the best course of action. Regards, Simon.
POSTED BY SIMON TWEDDLE ON WED 3RD OCTOBER AT 08:59 Reply To Post
THANKS

Thanks Simon/Robin That's the clearest steer I have had on this - and I have asked several people in Czech about it! Nick
POSTED BY NICK ON WED 3RD OCTOBER AT 14:11 Reply To Post
INTERNAL OR EXTERNAL SQM?

Is the 90 sqm threshold based on the internal sqm or total including external areas? I bought into the golden brook deal with an apartment of the following sizes 69.60 internal 98.40 total. Am I now looking at a 19% increase in what I need to pay?


POSTED BY DAVID MEAGOR ON WED 3RD OCTOBER AT 11:32 Reply To Post
CZECH VAT

David In short - no, you're not looking at 19%. The 90 sqm plus size was the original criterion. That then went up to 120 sqm, as the blog post says. Now it appears almost certain that 9% will be charged on all units from Jan 1 2008 Cheers
POSTED BY ROBIN BOWMAN ON WED 3RD OCTOBER AT 11:40 Reply To Post
CZECH VAT

The answer to this may be obvious - but if a drawdown were made on SCF's basis, would the money be held on deposit while it was held in escrow? And if so, to whom would the interest go and what sort of rate might be achieved over the 6 months between December 2007 and the date of completion, say June 2008?
POSTED BY ALISON ON WED 3RD OCTOBER AT 15:41 Reply To Post
INTEREST

Hi Alison I don't think the answer to that is obvious at all - and it's a good question as, obviously, interest would be something to throw into the equation. Simon may have a different view, but I'd suggest that this kind of detail would need to be discussed with your broker. cheers


POSTED BY ROBIN BOWMAN ON WED 3RD OCTOBER AT 16:03 Reply To Post
CZ VAT

Alison, Typically this would be the escrow account of the developer. Because the developer has taken receipt of the money and to avoid the buyer paying the higher rate of VAT the developer actually has to pay the 5% VAT to the government, even though he can't get hold of the money in escrow until completion of the property. So i suspect only big developers will be able to cashflow this (which for ING in Old Brewery should be no problem). Furthermore, escrow accounts normally cost money to set up so the developer really is not going to be making any money from this in any interest accrued. Regards, Simon.
POSTED BY SIMON TWEDDLE ON WED 3RD OCTOBER AT 16:16 Reply To Post
CZECH VAT

Good points, Simon, especially that the developer has to pay the 5% VAT rate in advance (ie before Jan 1 2008) - otherwise it's going to be 9%! Cheers
POSTED BY ROBIN BOWMAN ON WED 3RD OCTOBER AT 16:28 Reply To Post
CZECH VAT

Robin and Simon - Thank you both very much for your comments. All very helpful. I don't know if this helps but as to Central Park the developer's letter of 23.9.07 on topics including this one says that their financing bank, HVB Czech Republic and their mortgage adviser Hyposervis have arranged for us to be able to pay the 5% VAT this year using a mortgage loan. I have no reason to think that they will do any better than Josef Malir at SCF but it seems to me that it is worth one person asking this question for all of us and posting the answer here - that it better than their getting enquiries from thirty or forty individuals. (I suspect that JM will find that his position is vindicated.) I can't do it myself yet though; getting several months of income all tidily into one account is still a work in progress.


POSTED BY ALISON ON WED 3RD OCTOBER AT 21:11 Reply To Post
HVB

Alison I have already enquired to HVB via Hyposervis and the answer is that they will consider an early drawdown. I dont know at what rate though. The rate for the loan proper is in the region of 4.2%-4.5% I think. As I understand it they will need to carry out a valuation as at the drawdown date (obviously they do it prior to this but that's the general idea) and will base the loan available on the valuation at that date. Of course that will be less than the final valuation because it is incomplete so you can only drawdown part of the final loan. However, I note that the completion date has slipped already. The PS Prospectus says June 2008 but a recent CPP letter (dated Aug 2007) says Autumn 2008. That really does mean it is better to pay the extra VAT than to drawdown the loan and pay some additional months interest. Nick
POSTED BY NICK ON WED 3RD OCTOBER AT 21:43 Reply To Post
CZECH VAT

Thank you very much. I quite see that say 9 months of interest at whatever rate HVB/Hyposervis are likely to charge (even if a bit less than 7%) would probably be more than the extra 4% VAT. a) As to the later completion date, thank you for the info. I must get hold of a copy of that CPP letter. b) I may be interested in revaluation nearer the completion date but it is early days yet. (Can we liaise for bulk revaluations?) Thank you all for your help.


POSTED BY ALISON ON WED 3RD OCTOBER AT 22:17 Reply To Post
CPP LETTER AUG 07

Alison Text of the letter below Nick Central Park Praha August 2007 The following update will brief you about the most important progress milestones of the Central Park Praha project. The first phase residences will be completed in the Spring 2008, the second phase in the Autumn 2008 The last floor of the first phase has been completed. The construction is proceeding at a rapid rate, facilitated by this year‘s mild winter. The residential towers are clearly dominating the local skyline and the works are now concentrating on the interior finishes. The excavation of the foundation for the second phase buildings has been completed, including the pile foundation. The concrete base, along with waterproof insulation, has been implemented throughout the building. Even thought the construction speed is our priority, we would not compromise the high standards of each residence, thorough control and attention to every detail. We will make sure that your residence will be in perfect condition for you to move in. The originally announced dates have been postponed to optimally coordinate the individual construction phases and maximize the quality of living for all the residents, especially the residents in the Phase 1. The First Phase will be completed in January 2008. That means you can move in within the next 60 days. Milestones of the construction project management Construction optimisation The construction has been tight in into 2 parallel phases. The first phase will be completed in January 2008 and the first residents will move in at the end of March. By that time the shell of the entire development will be finished. That means dramatic drop in noise levels, dust, heavy machines traffic and general improvement of overall aesthetics. Cooling systems All residences are prepared for installation of the VRV III cooling system; modern technology which quickly cools the interiors by 6°C compared to the outside temperature. Those who don’t have the cooling system included in their apartment package , can take advantage of a limited offer of an installation at a reduced price. Please contact your client representative to learn about your individual solution. Brussels will decide about the low VAT for residential development in the Czech Republic this fall Czech Republic officially requested the EU to extend the exception on low VAT at 5% on the residential development by the year 2010. European Commission recommended accepting this request , however the Ministers of Finance will make the final decision this fall. Czech MPs are debating the public finances reform and a vote will be passed on possible VAT rise from 5% to 9% from 2008. Please keep in mind that you can draw on mortgage financing already this year, on part of your residence, which is already built. To take advantage of this flexibility, please contact Hyposervis, our mortgage agent. Renting out your residence We are finalising a programme of a worry-free rental of your investment property. Segment of Central Park Praha will operate serviced apartments. You can become part of this operation and enjoy a stable guaranteed return. You will also be able to take advantage of our special offer to furnish the apartment at contract prices. Both offers are being now finalised and we will inform you in September about the particulars of the programme. Yours, Klára Pojerová Marcela Maximová Client Relations Manager CPP Development,s.r.o. Václavské Náměstí 832/19 110 00 Praha 1 T: +420 221 199 132 F: +420 221 199 222 M: +420 739 601 113 mmaximova@cppd.cz www.centralparkpraha.cz


POSTED BY NICK ON WED 3RD OCTOBER AT 22:45 Reply To Post
CZECH VAT AND COMPLETION DATES

Nick You are seriously efficient! Thank you yet again. Alison


POSTED BY ALISON ON THU 4TH OCTOBER AT 08:33 Reply To Post
CENTRAL PARK

Alison. Glad to be of service Ma'am! Have you been out to see Central Park? It is extra-ordinary. I've been a two or three times recently and have been amazed at progress on site. It really is going to be something very special. The concept is unique for Prague, I think. The location is excellent without being top-dollar in cost terms. That area of Zizkov is likely to become a premium area once CPP is complete and the Goods Yard nearby is redeveloped. Already there are cafes, restaurants and boutique-type shops nearby. You can be in the centre of Prague in 10 mins by tram. I've walked it a few times and its only about half an hour (and thats me meandering though the streets looking for another bargain property!). We plan to let our CPP apartment for the duration of the 3 year rental guarantee and then (finance permitting) use it ourselves as a second home. I think CPP is the best development that PS has promoted so far. It remains to be seen, of course, whether it will be the best investment.
POSTED BY NICK ON FRI 5TH OCTOBER AT 10:18 Reply To Post
PRAGUE

Avenium and Old Brewery are also similar distances but I think all those last 3-4 Prague investments by PS have fantastic potential and we were a bit spoilt for choice! In the end I went for Avenium, but I think they will all do very well- I went for Avenium because I was most familiar with the particular district and also had just enough resources!
POSTED BY CHARLES ON FRI 5TH OCTOBER AT 23:48 Reply To Post
19% VAT STILL ON?

I received an email from Central Park this week(from Marcela Maximová,Client Relations Manager dated 17 Oct 07)that suggests that the 19% VAT is still to be charged from 1.1.08 on new builds over 120sqm in size. The email says "Dear Sir, I would like to draw your attention to the fact that in accordance with approved public finance reforms the rate of VAT for new residential developments will increase as of 1. 1. 2008 from the current rate of 5% to 9%; for apartments of over 120 sq m the new rate is 19%." The email goes on to discuss the method of prepayment outlined in Robin's article which CPP has arranged with HVB via Hyopservis. The email was only received by me this week but I wonder whether it is the same text as the letter some other people say they received a few weeks ago. Can anyone throw any more light on the current situation? 9% or 19% is a very big difference and affects how I would proceed with prepayment or otherwise.


POSTED BY NICK ON FRI 19TH OCTOBER AT 06:26 Reply To Post
VAT RISE

A further question on this. Poland is going through sinilar VAT questions, and current thinking is that higher VAT will be payable only on the square meters above the 120m threshold - so on an apartment of 130m/2, the lower rate will be charged on 120m2, and the higher rate on the final 10m2 over this threshold. As Czech and Poland are some what in step on these changes, I wonder if the same thinking is true in Czech? Also, if this is still the case in Poland. The whole situation, in both countries, is still unclear it seems. Anyone go any definitive light to shed?
POSTED BY M ON FRI 19TH OCTOBER AT 06:36 Reply To Post
VAT

The EU is still deciding on exceptions to the VAT rate for both Czech and Poland. No change from the current situation are proposed - it's only in Czech where the rate is likely to rise to 9%. The EU hopes to decide before the end of the year whether it will allow Czech and Poland to charge less than the upper rate, but it's bny no means certain they will do so. If they don't, the liklihood is that the Czech rate will remain the same as now and not rise to 9%. Here's what the EU press office says: 'The Commission has proposed to prolong until 2010 the derogations you mention. 'The Council (composed of the 27 Ministers of Finance of the Member States of the EU) has started examining this proposal, which needs, to come into force, to be adopted by unanimity. An adoption before the end of this year is hoped, but there is no decision taken at this stage of the negociations.' For anyone who wants to wade through the EU jargon, the recommendation to temporarily grant the lower VAT rates for Czech and Poland is in this document... remember the rise to 9% is an internal decision by the Czech government. http: / /ec .europa .eu /taxation _customs /resources /documents /taxation /vat /how _vat _works /rates /COM(2007)381 _en .pdf
POSTED BY ROBIN BOWMAN ON FRI 19TH OCTOBER AT 07:25 Reply To Post
CZECH VAT - ANOTHER TWIST!

Hi All Anyone following the twists and turns in the Czech VAT story should check out the Finance Watch blog http: / /www .propertysecrets .net /blogs /financewatch/ cheers
POSTED BY ROBIN BOWMAN ON FRI 26TH OCTOBER AT 12:05 Reply To Post
CZECH TAX

They're almost as decisive as Brown and Darling!
POSTED BY HUW ON FRI 26TH OCTOBER AT 15:33 Reply To Post
VAT

Talk about going to the wire. Its only 2 months til the end of the year and still no decision on VAT. The difference in VAT might cost me nearly £40,000 so its of no little interest. I am setting up an early drawdown from just in case. Robin. Please post news as you get it. Thanks Nick
POSTED BY NICK ON FRI 26TH OCTOBER AT 18:33 Reply To Post
VAT

Nick I think that's probably wise - at least to have the facility in place. We'll post any new info as soon as we get it. cheers
POSTED BY ROBIN BOWMAN ON FRI 26TH OCTOBER AT 19:27 Reply To Post
CZECH VAT

Hi All Anyone who has been following the Czech VAT saga will be interested to know that the European Commission's committee dealing with this matter -the ECOFIN council - meets on December 4 to reach a decision. If Czech is to be given permission to hold its VAT rate on new builds below the maximum rate, the decision of the committee will have to be unanimous. We will report the result as soon as there is a decision. cheers
POSTED BY ROBIN BOWMAN ON TUE 27TH NOVEMBER AT 12:52 Reply To Post
CZECH VAT - DECISION 4 DEC 07

Dear Robin I gather that you are living not in the UK but in a country with tel nos 0039 (possibly Italy). My impression is that you are, for PS, in charge of keeping an eye on the Czech VAT situation. Please could you confirm this?* (If not, is anyone else?) I also understand that it is to be decided on Dec 4th whether the VAT rate for Czech new builds is to be increased with effect from 1st Jan 2008, not from 5% to 19% as presently set up, but from 5% to another figure, possibly 9%. (Please would you confirm this as well?)* This clearly makes a phenomenal difference to the £ involved (and I am wondering why no one is putting it under "My investments" and sending out hard copy letters to tell everyone). For clarity, I have had no standard letters from anyone since August when CPP sent me their glossy brochure, although when I asked I got the one saying completion is now Autum 2008. There is also of course the current currency slide of £ vs Czk to be taken into account in doing one's calculations. Please, could you tell me: 1. How will you know (from whom and when) what decision has been made by the European Commission on December 4th and how you will communicate it to me (and, presumably, others) so that I can decide which of my lined up ducks to shoot by making an advance payment?* 2. What is the procedure for making such an advance payment? Do the PS lawyers know about it (and what to do?) now or just CPP? (If the latter, presumably you will be telling the lawyers as well so that we can all make sure that we are protected in respect of any advance payments made?)* I recall that Star Capital is aware of it already... Please, could you reply to the 4 bits marked*? (If PS are not paying you, you are doing wonderfully.) Thank you very much. Alison


POSTED BY ALISON ON WED 28TH NOVEMBER AT 10:58 Reply To Post
CZECH VAT

With the Spirit Wharf deal coming up soon, lets hope they don't surprise us and change it to 19%!
POSTED BY DOUG ON WED 28TH NOVEMBER AT 11:17 Reply To Post
VAT

Alison

I think most of your questions have actually been answered already, either on the forum or in Czech VAT articles.

However, for clarity...

We are monitoring the Czech VAT situation and we are passing on any info we have as soon as we receive it. The situation with regard to a decision is far from satisfactory, but this is really out of our hands.

OK, the situation, as far as we understand it, is that VAT for all new builds will rise to 9% from Jan 08. The rate should be the higher Czech VAT rate of 19% but the government has applied to the EU for dispensation to delay this rise. There is still a possibility, it now seems, that the higher rate of 19% will be charged for larger units (over 120 sq m, which was the original Czech plan. So, 9% for units under 120 sqm and 19% for those bigger.

A decision on whether the Czech gov will be allowed to charge the lower VAT rate of 9% will be taken by the relevant EU committee that meets on Dec 4 - see my last post. When the decision has been taken - and it has to be unanimous - we will write an article on it and post it immediately as well as draw attention to it on the forums.

Payments made prior to Jan 1, 2008 will not, as I understand it, be affected. For more info on the possible work around, please see this blog http: / /www .propertysecrets .net /blogs /financewatch /post -41 .html

I hope this helps. We will post all new info as we get it.




POSTED BY ROBIN BOWMAN ON WED 28TH NOVEMBER AT 11:24 Reply To Post
CZECH VAT - DECISION 4 DEC 07

Dear Robin Thank you. Please, even greater clarity: 1. I see that you are the Editorial Editor; please could you confirm that you are looking after the matter for PS rather than in your private capacity?* and 2. What is a realistic timetable for your posting info on the decision of the relevant European committee? (My holiday planned 7-14 Dec.) 2. Has anyone included the PS recommended Czech lawyers in the loops yet and have they a standard response? This may well be in the forum or Czech VAT articles but it is hard to search for.* I don't want to waste their time if they are already set up for protecting advance payments. Thanks again. Alison
POSTED BY ALISON ON WED 28TH NOVEMBER AT 11:55 Reply To Post
VAT

Hi Alison Yes, I, along with others, are monitoring the situation. Realistic timetable? I'm afraid I can't tell you how long the committee ill take to make a decision. As soon as one is reached, we will post the info. Regarding your second point about Czech lawyers, I'm not quite sure what you mean. I think the workaround in the blog I mentioned is something that may apply to an individual's circumstances. I don't believe a standard response is especially helpful at this point until we have the EU decision. cheers
POSTED BY ROBIN BOWMAN ON WED 28TH NOVEMBER AT 12:19 Reply To Post
LAWYERS

Robin I assume Alison means is Hoskovec (for Central Park)lined up to protect any advance payments that investors make. I've just about got my mortgage ready for a December drawdown if required. I havent contacted Hoskovec though so it would be helpful to know if PS has discussed with them the possibility that clients might want to make advance payments. Nick
POSTED BY NICK ON WED 28TH NOVEMBER AT 12:54 Reply To Post
LAWYERS

Hi Nick OK, I'm with you. This is not my area, but I will make sure you get a response to this question. cheers


POSTED BY ROBIN BOWMAN ON WED 28TH NOVEMBER AT 13:01 Reply To Post
VAT

Hi Nick I understand your concern around the possibility of the VAT increase which at the moment for units is 5% can could potentially rise to 9%. The issue for such developments as to whether it is cost effective to pay for the unit early prior to the VAT increase or to wait until the final payment is due. We can obviously approach the developer concerning this, but there are various things you need to take into account. If the developer allows you pay early and the bank is agreeable to this then you will start paying mortgage payments up to 6 months early. If you estimate your interest rate on your mortgage at maybe 6% and you then have to pay 6 months of mortgage repayments compared to waiting the 6 months and paying the increase of VAT if this happens. This is something that will need to weighed up by each individual client and what is best for them. I would suggest contacting your mortgage broker or bank and discussing this further. I hope this does offer some clarification. Kindest regards Debbie
POSTED BY DEBORAH LE GOFF ON WED 28TH NOVEMBER AT 14:53 Reply To Post
VAT

Debbie Thanks for that but I am now upto that stage. I have calculated that in my case it is worth the added months interest only if the VAT rate goes up to 19% (my CPP unit is >120sqm). It seems that 19% is still a possibility. I have therefore, through my broker, arranged an early drawdown on the mortage. That is all but complete and we await the decision of the European Commission on 4 Dec before we take any further action. My question, and it think it was one of Alison's questions too if I read her right, was whether or not Hoskovec (the lawyers acting for PS clients in the CPP purchase) have been forewarned by PS that clients may wish to make advance payments to the developer to avoid the extra VAT. Clearly Hoskovec will need to ensure that the payments are made properly and that clients money is protected. Can you advise on this? Thanks Nick
POSTED BY NICK ON WED 28TH NOVEMBER AT 16:08 Reply To Post
NEW VAT

It was one of my questions, of course! What is the answer, please, Robin? Alison


POSTED BY ALISON ON WED 28TH NOVEMBER AT 16:58 Reply To Post
VAT

Hi Nick The lawyers are aware that some clients may wish to make early payments. If you have any difficulty with this please let me know. Kindest regards Debbie
POSTED BY DEBORAH LE GOFF ON THU 29TH NOVEMBER AT 12:48 Reply To Post
CZECH VAT - FINAL DECISION!

Hi All For anyone who has missed the main article on the PS site today and FinanceWatch, please note the VAT issue is now clear. See http: / /www .propertysecrets .net /article /czech _vat _rise _czech _vat _rates _on _new _builds _to _rise _in _2008 _what _does _it _mean _for _investors /1871 .html
POSTED BY ROBIN BOWMAN ON WED 5TH DECEMBER AT 09:40 Reply To Post
120M ?

My understanding is that for the exemption to apply all apartments within a development must not exceed 120m, but is this built up area only or does it include share of common parts.
POSTED BY ANDY ON WED 5TH DECEMBER AT 09:47 Reply To Post
FLOOR SPACE

Andy Yes, the limit is 120 sqm. This is described as the 'floor space' of the apartment, so I'd take that to exclude common parts. But we'll check.


POSTED BY ROBIN BOWMAN ON WED 5TH DECEMBER AT 09:52 Reply To Post
120M ?

Thanks Robin. Appologies, I have also just noticed that some apartments in my development have large gardens, that if included would exceed the 120m threshold.
POSTED BY ANDY ON WED 5TH DECEMBER AT 10:04 Reply To Post
VAT

I agree this is still not clear as the article states "It appears too that developers will be able to take advantage of this lower 9% rate only if the block they are building only contains flats below the 120 sqm threshold." Which suggests that if there is a single unit over 120 m2 - then they can't take advantage of the 9% rate on any units. Central Park I am sure has units over 120m2 which would mean social housing definition doesn't apply and therefore higher rate applies to all units. Is this correct or am i misunderstanding this?
POSTED BY JAMES ON WED 5TH DECEMBER AT 12:34 Reply To Post
CZECH VAT

Hi James This is a question we're looking into also. cheers
POSTED BY ROBIN BOWMAN ON WED 5TH DECEMBER AT 13:07 Reply To Post
CZECH VAT

Hi We have now confirmed with official Czech government sources - the 120 sqm applies to internal space only NOT shared areas. The 19% rate will apply if only one unit exceeds 120 sqm in a block. cheers
POSTED BY ROBIN BOWMAN ON WED 5TH DECEMBER AT 15:03 Reply To Post
VAT

So you are saying that if in Central Park development there is one unit over 120m2 every unit whatever size will have to pay 19% Vat ie 14% more?
POSTED BY JAMES ON WED 5TH DECEMBER AT 17:15 Reply To Post
CZECH VAT

Hi James This is what we have been told after asking EUROSKOP.CZ - the official Czech Gov website on all EU matters. We spoke to Nadia Zajicova. If one unit is bigger than 120sqm then the 19% applies.


POSTED BY ROBIN BOWMAN ON THU 6TH DECEMBER AT 16:22 Reply To Post
OTHER DEVELOPMENTS


POSTED BY DAVE M ON THU 6TH DECEMBER AT 16:34 Reply To Post
OTHER UNITS

Hi Dave We're making inquiries with the developers about this question as a matter of urgency. cheers
POSTED BY ROBIN BOWMAN ON THU 6TH DECEMBER AT 17:18 Reply To Post
CZECH VAT - UPDATE

For all those following the Czech VAT saga... We have now confirmed from official Czech sources the following: a) 19% VAT applies to all units above 120 sqm BUT only internal space is used to calculate the apartment's size - balconies, terraces, shared gardens or any shared external areas are NOT counted. b) If one unit in a development is above 120 sqm this will NOT , after all, mean that those in the same development that are below this size will also be charged at 19%. Units under 120 sqm will be charged at 9% VAT. Hope this helps
POSTED BY ROBIN BOWMAN ON MON 10TH DECEMBER AT 13:51 Reply To Post
VAT

Thanks for confirming that- I was hoping that would be the case; i was getting a bit concerned about my unit in Central Park.
POSTED BY JAMES ON MON 10TH DECEMBER AT 13:56 Reply To Post
VAT

Thanks Robin - A reasonable result in the end.


POSTED BY BRETT S ON MON 10TH DECEMBER AT 15:59 Reply To Post
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