Prague property market

The Investment Market

The purchase of individual units or entire residential buildings for investment or development purposes is an attractive proposition due to the prospect of good capital appreciation upon the country's accession to the Euro zone.

How can foreigners buy real estate in the Czech Republic?

There are two categories of foreigners – EU citizens and non–EU citizens.
EU citizens may purchase and own property in the Czech Republic as individuals if they obtain EU citizen residence permits valid for 5 years. Obtaining the permit is easy. One merely files an application with the Czech foreign police. Recently, this policy was extended to include citizens of the United States of America. Applications for residence permits may also be filed from abroad at Czech embassies or general consulates, but may take up to three months to process. If coming to Prague is not convenient for you, you may choose to designate a representative to file the application and arrange for the required documents.
A non-EU citizen must form a limited liability company called an s.r.o. The s.r.o. then buys and holds the property. The non-EU citizen can be the 100% shareholder of the s.r.o company. This is safe, and simple with the assistance of a legal representative, who will help to assemble necessary documents and fulfil other requirements. The cost ranges between EUR 2000 and EUR 3000. We work with a law firm which can arrange all of the above at a reasonable cost.

What are the tax implications of acquiring real estate?

Real Estate Tax: All properties are subject to a nominal annual real estate tax depending on the position and size of the property. A typical two-bedroom apartment in the center, for example, would be taxed at about EUR 40 per year.
Transfer Tax: According to Czech tax law, the seller is liable for a property transfer tax of 4 % of either the assessed valuation or the sale price, whichever is higher.
Income tax: Individual Czech persons, EU citizens and foreigners with residence permits, are subject to a 15% income tax based on the amount of income earned in the Czech Republic.

How does the purchase process work?

Together with signing the purchase contract, the buyer will typically register the purchase amount in a notarial or escrow account to which the seller will have access only after the Purchaser is registered as the new owner. It is likely that documents will be in the Czech language and you will need a lawyer to represent your interests.

If you would like to discuss these issues in detail or have any questions at all, please do not hesitate to contact us.