Direct sale of Real Estate
Resident individuals
Capital gains
Generally, capital gains on real estate are subject to 15% personal income tax as part of a taxpayer’s annual income. Acquisition, repairment and improvements costs and costs connected with the sale property can be tax deductible if the conditions stipulated by the Czech tax legislation are met.
Capital gains derived from the sale of real estate can be exempt from taxation if an individual has held the real estate as a non-business asset for longer than 2 years in case that the individual has primary residence in the property immediately before the sale at least 2 years. If the property was used for less than two years, the exemption is granted only if the gain will be used for the taxpayer´s housing. In case that the taxpayer does not have residence there the holding period for exemption is extended to 5 years.
Losses
Loss derived from the sale of real estate that is not part of business assets cannot be offset against gain derived from other sales. If the real estate is part of the individual’s business assets, the capital gain loss can be offset against other taxable income except the employment income.
Value added tax
Transfer of land is VAT exempt except for building plots and land which forms a functional unit with a building. The transfer of buildings within 5 years after their acquisition or the issuance of use of permit are subject to 15%/21 % VAT (the lower rate is applicable to transfer of residential properties). Transfers of real estate 5 years after their acquisition are exempt from VAT.
In case of an exempt supply the seller may opt for VAT-able supply upon buyer’s agreement. Reverse charge applies in such a case (i.e. VAT is applied by the purchaser).
Non-resident individual
Non-resident individuals are treated in the same way as resident individuals as income from the property located in the Czech Republic is treated as income from the source of Czech Republic. However, tax treaty must be considered.
Resident company
Capital gains
Capital gain from the sale of Czech real estate is subject to Czech corporate income tax as business income. Business income is taxed with rate of 19%. The tax base is calculated as income from the sale of real estate reduced by the tax net book value of real estate.
Value added tax
Transfer of land is VAT exempt except for building plots and land which forms a functional unit with a building. The transfer of buildings within 5 years after their acquisition or the issuance of use of permit are subject to 15%/21 % VAT (the lower rate is applicable to transfer of residential properties). Transfers of real estate 5 years after their acquisition are exempt from VAT.
In case of an exempt supply the seller may opt for VAT-able supply upon buyer’s agreement. Reverse charge applies in such a case (i.e. VAT is applied by the purchaser).
Non-resident company
Non-resident companies are treated in the same way as resident companies as income generated from immovable property is taxed in Czech Republic. However, tax treaty must be considered.
Indirect Sale
Resident individuals
Capital gains
Individuals who sells the shares of the Czech company generate capital income that is subjected to 15% personal income tax rate.
Capital gains from the sale of shares can be also exempt from Czech personal income tax if an individual has held the shares as a non-business asset for an uninterrupted period of more than three years in case of shares in joint stock company or 5 years in case of sale of ordinary share (in Czech “kmenový list”) or shares in limited liability company. This rule applies to shares acquired after 31 December 2013. For shares acquired on or before that date, the prior rule applies.
In addition to the above, income from the sale of any shares is exempt if the total income does not exceed CZK 100,000 during the taxable period. If the income from the sale of shares exceeds the limit, whole amount can be subject to tax.
Basis of tax
The tax base being calculated as the income from the sale of shares reduced by the purchase price of the shares and charges related to its acquisition.
Losses
Losses from the sale of shares by individuals cannot be deducted from rental income and other income. If the shares are part of business assets, the losses can be offset against other taxable income except the employment income.
Non-resident individual
Non-resident companies are treated in the same way as resident companies as income from the sale of shares in the company located in the Czech Republic is treated as income from the source of the Czech Republic. However, applicable tax treaty rules must be considered.
Resident company
Capital gains
Generally, the capital gain from the sale of the Czech real estate company is subject to Czech corporate income tax unless the conditions for tax exemption in accordance with EU Parent – Subsidiarity Directive is met. The main condition for exemption from tax is that the parent company maintains a holding of at least 10 % in the subsidiary for an uninterrupted period of at least 12 months and have an appropriate legal form. Business profits are taxable with 19% tax rate. Tax loss from the selling of the shares in limited liability company is not tax deductible.
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.
Non-resident company
Non-resident company are treated in the same way as resident companies as income from the sale of shares in the company located in the Czech Republic is treated as income from the source in the Czech Republic. However, tax treaty and EU Parent – Subsidiary directive must be considered.
Direct Transfer Intra Concern
(Czech Real Estate to Czech Company)
Resident Company
Capital gains
Capital gains from the sale of the Czech real estate is subject to 19% corporate income tax. The tax base is calculated as income from the sale of real estate reduced by the tax net book value of real estate.
VAT
Transfer of land is VAT exempt except for building plots and land which forms a functional unit with a building. The transfer of buildings within 5 years after their acquisition or the issuance of use of permit are subject to 15%/21 % VAT (the lower rate is applicable to transfer of residential properties). Transfers of real estate 5 years after their acquisition are exempt from VAT.
In case of an exempt supply the seller may opt for VAT-able supply upon buyer’s agreement. Reverse charge applies in such a case (i.e. VAT is applied by the purchaser).
Non-resident company
Capital gains
Non-resident companies are treated in the same way as resident companies because of income generated from the sale immovable property is taxable in Czech Republic. The tax treaty must be considered.
VAT
Non-resident companies are treated in the same way as resident companies.
Indirect Transfer Intra Concern
(Czech Real Estate to Czech Company)
Resident company
Capital gains
Generally, the capital gain from the sale of the Czech real estate company is subject to Czech corporate income tax unless the conditions for tax exemption is met. Business profits are taxable with 19% tax rate. Tax loss from the selling of the shares in limited liability company is not tax deductible.
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
VAT
Transfer of shares is exempted from VAT.
Non-resident company
Capital gains
Non-resident companies are treated in the same way as resident companies because of income generated from immovable property is taxable in Czech Republic. The tax treaty must be considered.
VAT
Non-resident companies are treated in the same way as resident companies.
Direct Transfer Intra Concern
(Czech Real Estate to Foreign Company (third country))
Resident company
Capital gains
Capital gains from the sale of the Czech real estate is subject to 19% corporate income tax. The tax base is calculated as income from the sale of real estate reduced by the tax net book value of real estate.
VAT
Transfer of land is VAT exempt except for building plots and land which forms a functional unit with a building. The transfer of buildings within 5 years after their acquisition or the issuance of use of permit are subject to 15%/21 % VAT (the lower rate is applicable to transfer of residential properties). Transfers of real estate 5 years after their acquisition are exempt from VAT.
In case of an exempt supply the seller may opt for VAT-able supply upon buyer’s agreement. Reverse charge applies in such a case (i.e. VAT is applied by the purchaser).
Non-resident company
Capital gains
Capital gains from the sale of the Czech real estate is subject to 19% corporate income tax. The tax base is calculated as income from the sale of real estate reduced by the tax net book value of real estate.
VAT
Transfer of land is VAT exempt except for building plots and land which forms a functional unit with a building. The transfer of buildings within 5 years after their acquisition or the issuance of use of permit are subject to 15%/21 % VAT (the lower rate is applicable to transfer of residential properties). Transfers of real estate 5 years after their acquisition are exempt from VAT.
In case of an exempt supply the seller may opt for VAT-able supply upon buyer’s agreement. Reverse charge applies in such a case (i.e. VAT is applied by the purchaser).
Indirect Transfer Intra Concern
(Czech Real Estate to Foreign Company)
Resident company
Capital gains
Capital gains from the sale of the Czech real estate is subject to 19% corporate income tax. The tax base is calculated as income from the sale of real estate reduced by the tax net book value of real estate.
The tax treaty must be considered.
VAT
Transfer of shares is exempt from VAT.
Non-resident company
Capital gains
Non-resident companies are treated in the same way as resident companies.
VAT
Non-established companies are treated in the same way as Czech-based companies.
Transfer Czech Real Estate to an EU-Company
Resident company
Capital gains
Capital gains from the sale of the Czech real estate is subject to 19% corporate income tax. The tax base is calculated as income from the sale of real estate reduced by the tax net book value of real estate.
VAT
Transfer of land is VAT exempt except for building plots and land which forms a functional unit with a building. The transfer of buildings within 5 years after their acquisition or the issuance of use of permit are subject to 15%/21 % VAT (the lower rate is applicable to transfer of residential properties). Transfers of real estate 5 years after their acquisition are exempt from VAT.
In case of an exempt supply the seller may opt for VAT-able supply upon buyer’s agreement. Reverse charge applies in such a case (i.e. VAT is applied by the purchaser).
Non-resident company
Capital gains
Capital gains from the sale of the Czech real estate is subject to 19% corporate income tax. The tax base is calculated as income from the sale of real estate reduced by the tax net book value of real estate.
VAT
Transfer of land is VAT exempt except for building plots and land which forms a functional unit with a building. The transfer of buildings within 5 years after their acquisition or the issuance of use of permit are subject to 15%/21 % VAT (the lower rate is applicable to transfer of residential properties). Transfers of real estate 5 years after their acquisition are exempt from VAT.
In case of an exempt supply the seller may opt for VAT-able supply upon buyer’s agreement. Reverse charge applies in such a case (i.e. VAT is applied by the purchaser).
