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HOLDING CZECH REAL ESTATE

Direct holding of real estate 

This section shows the most important tax implications of direct holding of real estate. First, the impacts for resident and non-resident individuals are explained. Thereafter the impact for resident and non-resident companies are described.

Resident individuals

Personal income tax

Income derived from the real estate such as rental income is subject to 15% individual income tax. 

Deductibility of costs, interest and depreciation

The buildings of hotels, stores and office buildings are depreciated for tax purposes for 50 years. Other buildings are depreciated for tax purpose for 30 years. The lands are not depreciated for tax purposes. The taxpayers may elect to depreciate assets using the straight-line or the accelerated depreciation method.

Generally, tax depreciation, interest, maintenance and operational costs (expenses incurred to generate, assure and maintain the taxable income) reduce the rental income if general and special legal conditions are met. 

Losses – carry back/forward

Generally, the tax losses can be carried forward for five subsequent periods. Rental losses can be offset against other income except an employment income.

Non-resident individuals

Non-resident individuals are treated in the same way as Resident individuals.

Resident companies

Corporate income tax

Business income including also rental income and capital gains are subject to 19% corporate income tax. 

Deductibility of costs, interest and depreciation

Generally, depreciation costs, interest costs, maintenance costs and operational costs (expenses incurred to generate, assure and maintain the taxable income) are deductible from rental income if general and special legal conditions are met.

The buildings of hotels, stores and office buildings are depreciated for tax purposes for 50 years. Other buildings are depreciated for tax purpose for 30 years. The lands are not depreciated for tax purposes. The taxpayers may elect to depreciate assets using the straight-line or the accelerated depreciation method. 

Anti-tax avoidance directive

The anti-tax avoidance directive (ATAD) has already included in the Czech tax legislation in minimalistic version of the general anti-avoidance rules.

Losses – carry back/forward

Generally, the tax losses can be carried forward for five subsequent periods. Rental losses can be offset against other generated income.

Non-resident companies

Rental income from non-residents companies are treated in the same way as Resident companies.

Indirect holding of real estate 

This section shows the most important tax implications of indirect holding of real estate. First, the impacts for resident and non-resident companies are explained. Thereafter the impact for resident and non-resident companies are described.

Resident individuals

Personal income tax

Capital income (dividends) is subjected to 15% withholding tax rate. 

Deductibility of costs, interest payments and depreciation

As distribution of dividends is qualified as capital income, no costs are deductible.

Non-resident individuals

Non-resident individuals are treated in same manner as resident individuals unless the rate is reduced under the applicable tax treaty.

Personal income tax

In case of Czech non-residents who are not resident in European union, European Economic Area or member of jurisdiction that has not concluded a tax treaty or an agreement for the exchange of information on tax issue with the Czech Republic the higher withholding tax in the amount 35% is applicable.

Resident companies

Corporate income tax

The corporation that directly generates rental income is subject to corporate income tax of 19%. Dividends paid to the shareholders are subject to 15% withholding tax rate. Under the EU Parent – Subsidiarity Directive, dividends paid by the Czech company to a parent company (as defined in the Czech tax law) located in the Czech Republic are exempted from withholding tax if the parent company maintains a holding of at least 10 % of the distributing company for an uninterrupted period of at least 12 months. The holding period may be fulfilled subsequent to the date of distribution of the dividend.

Anti-tax avoidance directive

The anti-tax avoidance directive has already included in the Czech tax legislation in minimalistic version of the general anti-avoidance rules. 

Non-resident companies.

Non-resident companies are treated in the same way as resident companies unless the rate is reduced under the applicable tax treaty. Under the EU Parent – Subsidiarity Directive, dividends paid by the Czech company to a parent company (as defined in the Czech tax law) located in the Czech Republic are exempted from withholding tax if the parent company maintains a holding of at least 10 % of the distributing company for an uninterrupted period of at least 12 months. The holding period may be fulfilled subsequent to the date of distribution of the dividend.

 

Contact persons

Jaroslav Sůsa

Senior Manager

+420 226 219 000

jaroslav.susa@rsm.cz

Kateřina Provodová

Head of Tax Czech Republic

+420 226 219 000

katerina.provodova@rsm.cz

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