Case law sets boundaries for determining local real estate tax coefficients

The first court decisions (e.g., 1 Afs 82/2025-33 (Lovosice)) confirmed that municipalities could adopt these measures as early as 2024 even though the relevant enabling provision did not take effect until 1 January 2025. The Supreme Administrative Court concluded that this procedure was not unlawful provided that the measure was actually applied only to the 2025 taxable period. This conclusion was subsequently reflected in a number of other disputes (e.g., 5 Afs 237/2025-46 (Opatovice)).

The case law to date also shows that courts exercise considerable restraint when reviewing these measures. They have repeatedly emphasised that determining a local coefficient falls within a municipality’s independent competence and that it is not for the courts to replace political decisions of municipal councils with their own assessment.

However, municipal autonomy is not unlimited. In several decisions (e.g., 22 Afs 257/2025-71 (Řepov) and 7 Afs 232/2025-41 (Cheb)), the administrative courts emphasised that a higher tax burden must be based on objective and reviewable criteria making it possible to verify that it is neither discriminatory nor based on arbitrary criteria. A municipality must therefore be able to explain not only the objective it pursued but also why it selected the particular real estate to which the higher local coefficient applies.
 

Mere reference to the existence of externalities is insufficient

The courts generally accept reasoning based, e.g., on the existence of negative externalities. In particular, they regard increased traffic, emissions, noise, dust, greater demands on infrastructure and adverse effects on the landscape as legitimate grounds. However, the case law shows that merely referring to the existence of negative externalities is insufficient. A municipality should identify objective and reviewable criteria on the basis of which it subjected selected real estate to a higher local coefficient.

Accordingly, where it was not clear from the measure why certain real estate had been selected, the courts abolished the measure—e.g., 21 Afs 203/2025-38 (Zápy) and 66 A 10/2026-79 (Veselí nad Moravou).

The courts took a particularly strict approach where a measure effectively applied only to a very limited group of owners or even to a single entity—e.g., 4 Afs 214/2025-42 (Hronov). In such cases, the court imposed substantially higher requirements on the quality of the reasoning to prevent the risk of a selective and discriminatory approach.

Another noteworthy conclusion from the case law to date is that the courts generally do not require detailed reasons for the level of the coefficient selected. As long as a municipality remains within the statutory range of 0.5 to 5, the level is primarily a political decision of the municipal council for which the municipality’s elected representatives are accountable. The review therefore focuses primarily on whether the municipality selected the real estate subject to the coefficient in a lawful and non-discriminatory manner.

The case law to date therefore provides municipalities with useful guidance. Although they retain considerable discretion in applying local coefficients, they must define and clearly justify the objective criteria used to identify the real estate concerned. Measures that fail to provide such justification risk being abolished by the courts.