European Commission (EC) will most probably extend the exception, which allows lower 5% VAT rate for residential construction. Current exception ends at the end of the year and it should be extended to 2010. EC should vote about lower VAT for Czech residential development on July 4. Note that in the beginning of the 2007 the government approved so called “social housing”. This category refers to lower VAT and it includes apartments up to 120 sqm and houses up to 350 sqm.
We see news as positive for developers, but we do not expect any material impact for today’s trading. The final rate of lower VAT is not clear as government currently discusses financial reforms. There is possibility that lower VAT will be slightly increased to 9% form 5%.