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Amendment to the Law on Valuation and its implementing decrees

5. 2. 2021Tomáš Podškubka

Last year saw an amendment to the Law on Asset Valuation (No. 151/1997 Coll.) and its implementing decrees, effective as of 1. 1. 2021. The main new development is a refinement of the procedure for estimating the open market value and implementation of the possibility to appraise market value.

The Law on Valuation deals with asset appraisal methods and services for the purposes of other legal regulations, i.e. when these legal regulations refer to the Law on Valuation. Typically, this refers to asset appraisal for the purposes of determining the tax base, be it property, income or value added taxes.

In the context of refining the method for estimating open market value, it has been specifically constructed that the open market value is determined from agreed price by comparison. The agreed prices (at least 3) have to be compared and they can be corrected by comparative analysis, whilst deviations caused by correction have to be substantiated. In practice, it was often very complicated to determine the open market value. This reason for this tends to be the singularity of the appraised subject or, as the case may be, that the given property was not traded in a given locality at a given time, and we should also add that there could have been situations when information on sale and especially price-forming matters may not have been available. For these situations, when there is a compelling reason why the open market value cannot be determined, the Amendment to the Law on Valuation supplements the possibility to estimate market value.

The market value concept (standard) has been used standardly and for a long time with reference to the definition stated in the International Valuation Standards (IVS). The market value is estimated on the basis of selecting one or more valuation methods (especially comparative, yield and expense/asset methods).

In a situation when another regulation refers to the Law on Valuation, valuation of market value is, from the perspective of priority, but the last possibility which is applied in situations when neither the ascertained nor open market value can be evaluated. If another legal regulation does not refer to the Law on Valuation, but works with the open market value (e.g. the Law on Value Added Tax) or with the concept of value (e.g. the Corporations Act or the Law on Transformations) which it does not further define, it follows from explanatory memorandum that it should be possible to apply the definition from the Law on Valuation.

From other changes in the amended Law on Valuation, the method for valuing objective burdens has also been refined and the new concept of immovable property faults has been implemented.

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