Selling and Transferring Czech Real Estate

RENTAL INCOME AND CAPITAL GAINS OF CZECH REAL ESTATE

Taxpayer

Basis of tax

Tax levied

Tax rates (2023)

Resident individual

Non-resident individual

Resident company

Non-resident company

Rental income

Capital gains

Rental income

Capital gains

Rental income

Capital gains

Rental income

Capital gains

Individual income tax

Corporate income tax

up to 23%

21%

up to 21%

21%

up to 21%

Rental income

Individuals

Introduction

Rental income is taxed as part of a taxpayer’s annual income.

Liability to tax

Rental income received by individuals is subject to income tax at rates of 15% or 23%. The 15% rate applies to the tax base up to 36 times the average annual wage (i.e. up to CZK 1,582,812 in 2024). The 23% rate applies to the tax base above this limit.

Basis to tax

The tax base is calculated as rental income (excluding occasional rent of movable assets) reduced by deductible expenses. Expenses can be determined either as the actual amount spent or as a lump-sum of 30% of gross income, but not exceeding CZK 600,000. A detailed overview of the taxation of rental income can be found in the chapter “Holding Czech real estate”.

Companies

Introduction

Rental income is taxed as a business income.

Liability to tax

Rental income is subject to 21% corporate income tax.

Basis to tax

Tax base is equal to the difference between business income and related expenses. A detailed overview of the taxation of rental income can be found in the chapter “Holding Czech real estate”.

Capital gains

Individuals

Introduction

Capital gains are taxed as part of a taxpayer’s annual income.

Liability to tax

Generally, gains from the sale of real estate and shares received by individuals are subject to income tax at rates of 15% or 23%. However, gains may also be exempt if the special conditions of the law are met.

Basis of tax

The tax base is generally the difference between the sale price and the acquisition costs. A detailed overview of the taxation of capital gains can be found in the chapter “Selling and transferring Czech real estate”.

Companies

Introduction

Capital gains are taxed as business income.

Liability to tax

Capital gains are subject to a 21% corporate income tax unless the conditions for tax exemption in accordance with EU Parent – Subsidiarity Directive are met.

Basis of tax

The subject of corporate income tax is the difference between business income and related expenses. A detailed overview of the taxation of capital gains can be found in the chapter “Selling and transferring Czech real estate”.

Czech VAT & transfer taxes

Taxpayer

Basis of tax

Tax levied

Tax rates (2023)

Resident individual

Non-resident individual

Resident company

Non-Resident company

Rental income

Transfer of real estate

Rental income

Transfer of real estate

Rental income

Transfer of real estate

Rental income

Transfer of real estate

Value-Added-Tax

Transfer taxes

Value-Added-Tax

Transfer taxes

Value-Added-Tax

Transfer taxes

Value-Added-Tax

Transfer taxes

0%/21%

0%/12%/21%

Not applicable

0%/21%

0%/12%/21%

Not applicable

0%/21%

0%/12%/21%

Not applicable

0%/21%

0%/12%/21%

Not applicable

Value Added Tax

Introduction

Value added tax (VAT) is based on the increase in the value of a product or a service at each stage of the supply chain.

Rental income

Individuals

Liability to tax

Rental income is subject to Czech VAT if the rented property is located in the Czech Republic.

Basis of tax

Generally, income from the rent of real estate is exempt from VAT, excluding the following cases:

short-term rent of real estate (lasting up to 48 hours);
provision of accommodation services;
rental of premises and parking places for vehicles;
rental of safe deposit boxes; or
rent of fixed equipment.

However, the lessor can opt for a VAT-able supply of the property (in case of rent to another VAT taxpayer for VAT purposes). The applicable tax rate is 21%. As of 1 January 2021, this option is not applicable in case of rent of real estate properties serving mainly for residential purposes.

Companies

The same rules as for individuals apply.

Transfer of real estate

Individuals

Liability to tax

A sale of real estate is in principle VAT-able transaction if the property is located in the Czech Republic. No transfer taxes/immovable acquisition taxes are due on the sale of real estate.

Basis of tax

Transfers of real estate after lapse of 5 years from issuance of first building permit, first approval for use or from the first use are exempt from VAT. Substantial change of the real estate restarts the five-year period. The transfers of buildings before lapse of this period are subject to 12%/21% VAT (the lower rate is applicable to transfers of residential properties).

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).

Companies

The same rules as for individuals apply.

Real estate tax

Taxpayer

Basis of tax

Tax levied

Tax rates*

Resident individual

Non-resident individual

Resident company

Non-Resident company

Actual area/built up area

Real estate property tax

Depends on the type of real estate and municipality coefficient

* The municipality coefficient can be set up based on the law and the decision of the municipality. The coefficient can range from 1,00 to 25.

Introduction

Real estate properties located in the Czech Republic are subject to tax unless exempted by Czech law. The tax is calculated annually based on property ownership as of January 1 of the respective year.

The tax rates depend on the type of real estate, its location and the purpose of usage in some cases.

The tax on land and buildings is newly multiplied by the inflation coefficient, which is set at 1 for the year 2024.

Liability to tax

Generally, the owner of real estate located in the Czech Republic is liable for the tax.

Basis of tax

The real estate property tax base depends on the type of real estate and its actual area or built-up area.

The tax base for agricultural land is the land price determined by multiplying the actual area of land in square metres by the average price per square metre of the land specified in a special decree.

The tax base for other areas, built-up areas and courtyards, building land, and paved land is the actual area of the land in square meters determined as of January 1 of the tax period.

Tax base for buildings is the built-up area in square metres or floor area in square metres for the flats or separate non-residual spaces, multiplied by the coefficient in some cases.

Czech Net Wealth/worth taxes

There are no wealth/worth taxes in the Czech Republic.

Vehicles for Czech real estate

There is no special real estate vehicle in the Czech Republic. Various legal forms of companies listed below are used to own real estate.

Limited liability company

A Czech limited liability company must include the designation “společnost s ručením omezeným” or its abbreviated forms “spol. s r.o.” or “s.r.o.” in its commercial name. The limited liability company is the most frequently used vehicle for the ownership of Czech real estate. The amount of the contribution determines the share of the shareholder. The minimum deposit is CZK 1, unless otherwise specified in the articles of association. Shareholders guarantee the company’s liabilities only up to the amount of outstanding deposits.

Joint stock company

A Czech joint stock company must include the designation “akciová společnost” or its abbreviated form “a.s.” in its commercial name. A Czech joint stock company is liable for breaches of its obligations with its entire property. Its shareholders are not liable for breaches of the company’s obligations at all. The minimum share capital for a joint-stock company is CZK 2,000,000 or EUR 80,000. The joint stock company and limited liability company are widely used for the owning real estate in the Czech Republic.

Limited partnership

A Czech limited partnership must include the designation “komanditní společnost” or its abbreviated form “k.s.” in its commercial name. A Czech limited partnership is established by a memorandum of association concluded between at least two persons, with at least one being a general partner whose liability is unlimited, and at least one being a special partner, whose liability is limited. Profit and losses are divided between the company and the general partner(s).

Svěřenský fond

The ‘trust-like’ Quebec inspired version of the Anglo-Saxon Trust Fund, retaining its strong civil law nature affected by the common law institute – “Svěřenský fond”. It is attractive for both business and private use.

The main essence of the trust lies in the separation of property and the lack of legal personality, defined only by the property itself and the aforementioned purpose. A trust is constituted through thea transfer of a part (or the whole) property by the settlor (founder), administered by a trustee in favour of a beneficiary. In practice, a trust may be used to avoid rising legal restrictions normally associated with inheritance. It may also be used to satisfy various needs in the range of business and corporate relationships, management and ownership of real estate, aiming to minimize tax burdens, as well as to alleviate the burden of asset management for wealthy individuals.

Svěřenský fond is subject to corporate income at a standard tax rate of 21%. It is subject to the same provisions of the income tax act as other type of companies.

Czech investment funds

In the Czech Republic, two forms of investment through the fund are available. They are subject to more demanding regulation and administrative duties than a regular corporate entity.

Qualified investment fund
Joint stock company with variable capital (SICAV)

The aforementioned investment funds are subject to a 5% corporate income tax rate if all conditions stipulated by the Czech tax law are met. The funds are subject to relatively high regulatory requirements and are supervised by the Czech National Bank.

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