There are several possible routes for real estate investment in the Czech Republic, including direct acquisition of real estate (an asset deal), an indirect acquisition via a corporation (share deal), an acquisition via a partnership, and a purchase of an enterprise or its branch office. No specific conditions for organisations or companies apply to investment in real estate.
The previous temporary restrictions which were a derogation from the applicable European Union rules regarding the free movement of capital have already expired and do not apply.
It should also be noted that a Czech corporate entity based in the Czech Republic which is established and controlled by a non-Czech entity is not subject to restrictions when acquiring real estate in the Czech Republic. The acquisition of real estate, including agricultural land, through the establishment of such a company is common practice among non-EU investors.
In 2022, the member states of the European Union (including Czech Republic) has established certain restrictions with respect to business, transactions, free movement, investments etc. in relation to the Russian Federation and several individuals due to invasion of Russia to Ukraine.
Last modified 22 Mar 2024
With the exception of the restrictions which have been imposed to the Russian Federation and several Russian individuals due to invasion of Russia to Ukraine, there is any other restriction in place in regard to acquisition of real estate by foreign individuals; any foreign national (except Russian citizens) shall be entitled to acquire real property. Therefore, there is no need to set up a permanent establishment in the Czech Republic. Only for reasons of expediency, such as communication with authorities, namely with the Cadastral Office, it is recommended appointing a representative for the process of acquisition who is entitled to act on behalf of the foreign individual. Appointing a representative, a local resident, might help to facilitate and speed up the process of the registration in the Cadastral Register.
Last modified 22 Mar 2024
Czech law recognises four types of Czech corporate vehicles and three European forms, as follows:
In addition, one of the European corporate vehicles which are regulated by EU law and the relevant national implementation legislation may be used, in particular the European Company or "SE". The details of the legal regulation of these entities is outside the scope of this topic.
Besides these forms of Czech-based corporations, a foreign company may set up a permanent establishment in the Czech Republic in the form of a registered branch of the foreign company. Such branch is registered with the Company Register and does not possess legal personality.
Last modified 22 Mar 2024
A limited liability company is one of the most common types of company in the Czech Republic. Its registered capital consists of contributions by shareholders. The shareholders are liable for the debts of the company up to the amount equals the sum of their unpaid contributions to the registered capital. Once the registered capital is paid in full, the shareholders are not liable for any of the debts of the company. The limited liability company is liable for its debts to the full extent of its assets.
The company may have one or more managing directors appointed by general meeting. The main decision-making and governing body is the shareholders' general meeting. A supervisory board may also be established.
A joint stock company is a company whose registered capital consists of shares with a certain nominal value. It is liable for its debts to the full extent of its assets.
A joint stock company can be established by the adoption of articles of association for the company by its founder(s). However, this form of establishment is effective only after at least part of the statutorily defined minimum registered capital has been paid.
The governance system of a joint stock company may be two-tier with a board of directors (představenstvo) and supervisory board (dozorčí rada) or single-tier, with an administrative board and a statutory director. Irrespective of the governance system, the main governing and decision-making body is the shareholders' general meeting.
In contrast to many other jurisdictions, the Czech Republic recognises unlimited partnerships as companies with their own legal identity.
An unlimited partnership is a company in which at least two partners run their business under a common business name and are liable for all the partnership's debts to the full extent of their assets. Partners can either be individuals or legal entities.
Each partner has a right to manage the partnership within the guidelines agreed by the partners. One or more partners may, however, be entrusted with management responsibilities. An unlimited partnership does not have a general meeting and all decisions are made by all the partners jointly, unless the memorandum of association stipulates that a majority vote is sufficient.
A limited partnership is a company in which one or more of the partners are liable for the debts of the company to the full extent of their assets (unlimited partners), and one or more partners are liable for the debts of the company up to the amount of their unpaid capital contributions (limited partners). A limited partner must contribute to the registered capital of the company by the amount provided for in the partnership contract.
In contrast to many other jurisdictions, the Czech Republic recognises limited partnerships as companies with their own legal identity.
Last modified 22 Mar 2024
CZK1
CZK2,000,000 or €80,000
Not applicable
The partnership contract stipulates the minimum amount of the limited partner's contribution
Last modified 22 Mar 2024
Approximately CZK 100,000, including legal fees.
Approximately CZK 150,000 for a joint stock company, including legal fees.
Approximately CZK 75,000 including legal fees.
Approximately CZK 90,000 for a limited partnership, including legal fees.
Last modified 22 Mar 2024
Around 20 days
Around 30 days in the case of a joint stock company without a public offer of shares
Around 20 days
Around 20 days
Last modified 22 Mar 2024
The company is managed by one or more managing directors (jednatel), who can act for and sign on behalf of the company, either independently or jointly. Flexible management can be provided for in the articles of association. General shareholders' meetings are also required in relation to certain decisions, as laid down by law and in the articles of association. There are no restrictions on how voting and dividend rights may be allocated.
Financial statements need to be audited only if two out of three statutory thresholds, relating to the size of the company's assets, turnover and number of employees, are exceeded.
The founders of the company may provide for either a single-tier or a two-tier system. In both systems, the highest body is the shareholders' general meeting. In the two-tier system, the company is managed by a board of directors (představenstvo) and controlled by a supervisory board. In the single-tier system, an administrative board is established (správní rada) and a statutory director appointed. It is also possible to provide in the by-laws of the company that these bodies will consist of only one person.
There is flexibility on corporate governance as set out in the company by-laws. Day-to-day management in a two-tier system is carried out by directors generally appointed by shareholders' general meeting or by the supervisory board if the company by-laws provide for this. In a single-tier system, such management is usually carried out by the statutory director.
It is possible to create different categories of shares with different rights. Voting and dividend rights can be freely allocated.
Financial statements need be audited only if one-out-of-three statutory thresholds, relating to the size of the company's assets, the turnover of the company and the number of employees, are reached or exceeded.
An unlimited partnership is managed by all the partners unless the articles of association state otherwise.
There are few restrictions on the way the articles may regulate corporate governance or the allocation of voting rights and dividends.
All partners are fully liable for the obligations of the partnership and this liability cannot be limited.
Financial statements need be audited only if two out of three statutory thresholds, relating to the size of the company's assets, turnover and number of employees, are exceeded.
A limited partnership has two categories of partners: partners with unlimited liability (komplementáři) and partners with limited liability (komanditisté).
Day-to-day management may only be conducted by unlimited liability partners. Other matters must be decided by all partners jointly. There are no restrictions on voting rights and the allocation of dividends which will be governed by the articles of association.
Financial statements need to be audited only if two-out-of-three statutory thresholds, relating to the size of the company's assets, turnover and number of employees, are reached or exceeded.
Last modified 22 Mar 2024
Management and accounting costs depend on the size of the company and the scope of its activities.
Approximately CZK100,000, although the costs depend on the size of the company and the scope of its activities.
Management and accounting costs depend on the size of the entity and the scope of its activities.
Last modified 22 Mar 2024
Rental income is taxed after deducting related expenses (eg interest, depreciation and administrative costs).
Currently the corporate income tax rate is 21%.
In general, there is a withholding tax in the amount of 15% from dividends paid to corporate and individual shareholders.
There is no withholding tax if the dividend is distributed by a subsidiary to its parent company, provided that the parent company is a corporation of comparable legal form (ie a Limited liability company or a joint stock company) registered in the Czech Republic, in an EU member state or in Switzerland, Norway, Iceland or Liechtenstein and has held or will have held at least 10% of the shares/ownership interest in the subsidiary for an uninterrupted period of 12 months; this exemption is not applicable if the dividend is distributed to a shareholder – an individual.
There exist number of complex rules relating to tax deductibility of a loan interest and related party loan interest;, these can to a certain extent be modified with special tax structuring.
Under double-taxation treaties concluded between the Czech Republic and other countries, dividends may be taxed either in the country of the company's registration or in the country of the shareholder's residence. However, the rate of withholding tax in the country of the company's registration is usually lower.
Dividend income received from Czech subsidiaries is normally exempt from tax in corporate structures, as described above.
Capital gains from the sale of real estate made by non-resident corporations are subject to Czech corporate income tax, as part of general tax base.
Capital gains made by an individual are taxable only if the shares are sold within five years of purchase in case of limited liability companies, and three years in joint stock companies, as part of general tax base.
Capital gains derived from the sale of shares by corporate investors are subject to tax, as part of general tax base. A parent–subsidiary exemption described above for a dividend distribution applies also for sale of shares/ownership interests in a subsidiary.
Double-taxation treaties set out whether gains from the sale of shares, if not tax exempt under internal tax laws, are taxed in the country of residence of the foreign investor or in the country where the company is registered.
An unlimited partnership is considered to be fully transparent for income tax purposes. Any profits generated by the unlimited partnership or distributed to unlimited partners in a limited partnership are regarded as the profits of individual partners and are, therefore, treated as their personal income.
Profits of an unlimited partnership which are to be distributed to its limited partners need to be first taxed as income of the limited partnership (corporate income tax) and, if they are to be subsequently paid out to the limited partners, they are subject to 15% withholding tax.
These rules will also apply to allocation of income (profit) to foreign investors.
Last modified 22 Mar 2024
Does the concept of a 'permanent establishment' apply when a foreign person invests in real estate and, if so, how much does it cost to set up such a permanent establishment, how long does it take and what corporate governance requirements apply?
With the exception of the restrictions which have been imposed to the Russian Federation and several Russian individuals due to invasion of Russia to Ukraine, there is any other restriction in place in regard to acquisition of real estate by foreign individuals; any foreign national (except Russian citizens) shall be entitled to acquire real property. Therefore, there is no need to set up a permanent establishment in the Czech Republic. Only for reasons of expediency, such as communication with authorities, namely with the Cadastral Office, it is recommended appointing a representative for the process of acquisition who is entitled to act on behalf of the foreign individual. Appointing a representative, a local resident, might help to facilitate and speed up the process of the registration in the Cadastral Register.
Last modified 22 Mar 2024