DIRECT PURCHASE OF REAL ESTATE
This section shows the most important tax implications of direct purchase of real estate (asset deal). Firstly, the impacts for resident and non-resident individuals are explained, thereafter the impacts for resident and non-resident companies.
Resident Individuals
Transfer tax
There is no transfer tax in the Czech Republic.
Value added tax
Transfers of real estate after lapse of 5 years from issuance of the 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 15%/21% VAT (the lower rate is applicable to transfers of residential properties).
The transfer of land is exempt from VAT except for building plots and land which forms a functional unit with a building.
In case of an exempt supply the seller may opt for VAT-able supply upon the buyer’s agreement. Reverse charge applies in such a case (i.e. VAT is applied by the purchaser).
Deductibility of costs
Individuals who own the real estate as a business asset must activate the costs related to the purchase of real estate and depreciate along with the purchase price. Other individuals apply the purchase price only when selling the real estate.
Non-resident individuals
Non-resident individuals are treated in the same way as resident individuals.
Resident companies
Transfer tax
There is no transfer tax in the Czech Republic.
Value added tax
Transfers of real estate after lapse of 5 years from issuance of the 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 15%/21% VAT (the lower rate is applicable to transfers of residential properties).
The transfer of land is exempt from VAT except for building plots and land which forms a functional unit with a building.
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).
Deductibility of costs
Costs related to the purchase of real estate must be activated as a main rule and depreciated along with the purchase price.
Non-resident companies
Non-resident companies are treated in the same way as resident companies.
INDIRECT PURCHASE OF REAL ESTATE
This section shows the most important tax implications of indirect purchase of real estate (i.e. share deal). Firstly, the impacts for resident and non-resident individuals are explained; thereafter the impacts for resident and non-resident companies.
Resident individuals
Transfer tax
There is no transfer tax in the Czech Republic.
Deductibility of costs
The costs related to the purchase of shares are not treated as tax deductible.
Non-resident individuals
Non-resident individuals are treated in the same way as resident individuals.
Resident companies
Transfer tax
There is no transfer tax in the Czech Republic.
Deductibility of costs
The expenses related to the purchase of shares are not treated as tax deductible expense (e.g. purchase price, acquisition financing expense). Generally, in case of a pure holding company, most of the expenses are tax non-deductible due to the exempt dividends.
Non-resident companies
Non-resident companies are treated in the same way as resident companies.
