A change in the VAT exemption applicable to the transfer of land
In January 1, 2016, an amendment to Act no. 235/2004 Coll., providing for value added tax, has come into effect. The tax significantly changes the definition of a building plot. An extension of the definition of a building plot under Section 56 ss. 2 of the (amended) VAT law may result in a situation in which the transfer of a building plot, which was exempt from VAT under the preceding regulation, will no longer be exempt after the adoption of the amendment. Therefore, it is necessary to check whether or not the plot under transfer does not fall under the new broader definition of a building plot, which is not exempt from VAT.
According to Section 56 ss. 2 of the VAT Act, a building plot is now considered a plot on which a building structure is to be built, firmly connected to the ground, and which is or has been the subject matter of any construction works or administrative acts performed for the purpose of making a building structure, or where construction works are or have been carried out in the surroundings thereof for the purpose of making the building structure, or a building structure firmly connected to the ground which may be made according to a building permit or consent for the execution of the reported building structure.
Therefore, work around the plot, not right on it, is now rendered sufficient to consider the plot as a building plot according to VAT law. In our opinion, acts or procedures preceding the building permit must be considered as administrative acts aiming at the completion of a building structure. Please do not hesitate to contact us should you have any questions regarding the interpretation of the new definition of a building plot.