For non-EU and non-US individuals, such as Indian citizens, the procedure of purchasing a property in the Czech Republic is more difficult. To receive a green card that enables them to purchase real estate, they must hold a visa, stay in the Czech Republic for seven years, or marry a citizen of the country. As an alternative, they may purchase real estate via an s.r.o., a limited liability business. However, the corporation may only be controlled by an EU citizen without Czech involvement. The company’s executive director must be chosen by a non-EU citizen from among Czechs, EU citizens, or those with long-term visas.
Purchasing a home via a business
A corporation is created by being entered into the Commercial Register of an appropriate regional court. A certain amount of paperwork is necessary to purchase a shell business, and it often takes 24 hours. A shell business should not cost more than CZK60,000 (€2,319) to CZK100,000 (€3,866), and the whole procedure should ideally take one to two working days. A registered location for the firm for six months after the purchase date should also be included in the flat rate, along with registration of any required institutional modifications and any other procedural fees. The next step is to choose a company representative. This person should be a Czech citizen or lawful permanent resident who will have full access to the bank account and decision-making authority. The firm may be relocated to the property acquired with the SVP for the first six months. The s.r.o. must submit an annual income tax return, which will cost around CZK10,000 (€387) in accounting fees.
The Czech Republic’s property registration procedures
Once you’ve discovered a property, get a report to verify the property’s quality and title security. Your Czech attorney and the real estate agent will draft the reservation contract (intent to buy), which is the outcome of the parties discussing and agreeing on a price and down payment, and the contract of deposit once the property has passed inspection. A 10% to 30% down payment is often required. Before you sign a reservation contract, get it reviewed by an impartial attorney. The agreements that real estate agencies provide are often one-sided and even created with the buyer’s deposit loss in mind. After both parties have signed a purchase agreement, the buyer often needs to provide the seller with the balance of the purchase money, which will be held in “escrow.” The buyer will subsequently apply to the property registrar to start the title transfer. The whole registration process for a property in the Czech Republic typically takes 31 days, albeit it is currently much quicker than it used to be.
Real estate purchase tax
The market value of the property or the sales price, whichever is larger, serves as the tax basis for the 4% real estate purchase tax. Real estate purchase tax is typically the seller’s responsibility to pay, however, the buyer and seller are free to agree that the buyer would cover this tax.
Broker’s Fee
The compensation for the agent ranges from 2.5% to 5%. In Prague, the buyer or the buyer and seller both pay a portion of the real estate agent’s commission. The commission is always covered by the buyer in Brno.
Living in a bought home
Regardless of whether they own property here, foreigners must obtain residence permits if they plan to stay in the Czech Republic for more than 90 days. Foreign nationals with work, business, or student visas are eligible to apply for residency. As a partner or manager of your own Czech company, which in turn owns your property, you are eligible to apply for a business visa.
Taxes
Property tax: In the Czech Republic, a nominal annual property tax is imposed on all real estate. The kind of property, the total floor area or land area, and the location all affect how much it costs. Anyone who obtained the property in the preceding fiscal year, whether it was purchased, given as a gift, or inherited, is required to pay the tax. It also applies when the owner modifies the property’s specifications considerably, particularly when doing so via additions, conversions, changes to the plot’s characteristics, etc.
Tax on property acquisition
With retroactive effect beginning on December 1, 2019, the property purchase tax was eliminated on September 26, 2020. As a result, from December 2019 forward, real estate purchases that were recorded in the Land Registry are not taxed. Property buyers who purchased after this date and paid the tax are eligible for a refund. The appropriate tax administrator should receive the refund application form either online or in writing.
