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Investment Opportunities,Buying Properties,Company Formation (SRO), Moving to Czech Republic

Questions About Buying Property

:: What are some examples of properties currently available?
:: Can I buy to let? That is, purchase property and rent it out?
:: Should I buy off-plan? That is, purchase property before it is built, at a discount
off market rates, and then rent it out while I enjoy high returns?

:: What does the total price of a property purchase come out to be?
:: Can I get a mortgage for my property purchase?
:: Are Czech real estate agents accredited?
:: Are property search fees common among property agencies?
:: Can a foreign citizen buy property in the Czech Republic?
:: What are the risks of property acquisition in Czech Republic?
:: What are the pros/cons of buying with a residency permit vrs through an SRO?



What are some examples of properties currently available?


Due to the internal changes making way for the arrival of the Euro common currency, property prices are steadily rising in the Czech Republic and will continue to do so over the next 6 years, to more closely match those of neighboring European countries. The rise is happening at a rapid pace that is gaining momentum on a monthly, not yearly, basis.

However, an investor can still buy businesses, land and property for a fraction of what this would cost today in Western Europe, earn a substantial ROI minus expenses on rapid turnover, or buy and hold for potentially greater future returns.

It is important to note, is that those foreign citizens who wish to relocate permanently or just to have a holiday home in the Czech Republic for personal and family reasons, should act over the next 18 months as we expect property prices to increase substantially over that period of time due to huge foreign and domestic demand.

Home prices have already doubled over the 3 years prior to EU accession in many areas of the Czech Republic, and US investors especially should pay particular attention to the continuing slide of the US dollar, which makes investing more costly as well. (From June 2001 to now, the dollar has gone from being worth 40 Czech Crowns (CZK) to only about 20 as of mid 2012.

NOW is the time to act if investing in this country is an important business or personal/family goal.

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Can I buy to let? That is, purchase property and rent it out?


To explain, the concept of “buying to let” is as follows in italics:

The investor puts 30% of the purchase price down on the property in cash and finances the rest (70%) through a mortgage. The investor then rents the property to a tenant through a property management company. The tenant pays rent every month, which the investor uses to pay the mortgage on the property. Thus, the cost of maintenance is very low, while in the meantime the value of the property is always rising.

This, of course, is an effective and profitable plan in the USA, Canada, the UK, etc.

Can it also be a successful investment plan in the Czech Republic? Yes, if done properly with great care, patience, and the help of a trustworthy agency.

However, due to the popularity of this investment option in Europe and the hype that often surrounds it, all too often an investor is rushed into what may not be a prudent buy-to-let investment in the Czech Republic itself, because the business environment here is not the same as it is in Western Europe or the USA, etc.

Critical to remember, is that just because the option of buy-to-let works in other countries where you have had previous experience, or because you have heard good things about a certain development offer within the Czech Republic, this does not automatically mean that the Czech system is setup for such an arrangement and this must be taken into account when making your investment plans.

Here are just a few potential problems with the buy-to-let option in the Czech Republic:

Landlord / tenant laws in the Czech Republic are confusing, and difficult to enforce. If a tenant decides not to pay, there is little the owner or landlord can do to evict them, and absentee-owner properties are common targets for nonpaying tenants, and for property management companies who commonly place these “problem” tenants in flats owned by foreign-based investors. The problem of theft, even of entire plumbing, flooring and kitchen units, is also common from absentee-administered rentals.

If the property falls under Czech rent control laws, the problems worsen. Rent control means that the owner is unable to charge market rates for rent, and in fact, is forced to charge rents averaging out at about 1/5th of market rates. Meanwhile maintenance requirements are strict and expensive, and place the absentee owner constantly at risk of being overcharged by agents responsible for performing the work, and, then falling outside of the law because the work is actually not performed even thought it was paid for. Tenants under rent control are also nearly impossible to evict.

Also under rent control, apartment swaps (illegal exchanging of tenants) is controlled not by the owner, but by the property management company and on the black market. The owner will have no control, nor even usually be aware that any swaps are taking place.

The problems get even more complex if you are buying “off-plan” with the purpose of arranging a buy-to-let, which will be discussed in detail in the next question.

Can Buying to Let Be Successful?

Again, yes, if the investor makes a serious commitment to doing their due diligence, carefully researching the offer, all parties involved, etc., and contracts the help of a trustworthy local agency – not a foreign agency working through an unknown local provider as is very often the case with British investors and investment firms!

Let’s discuss the buy-to-let situation in this country in greater detail:

Czech property, and Prague especially, has experienced an immense amount of hype in recent years, and especially since EU accession in May 2004 foreigners are scrambling to take advantage of “buy to let” deals.

Most of these deals are offered by foreign “investment firms,” and work like this:

You buy a property through them off-plan, (“off-plan” means that you pay first, and they promise to build the property at a later date, offering you a "discount price" as opposed to the "actual" price in exchange for buying early), then they agree to manage the property for you: collecting rents, doing maintenance, even advertising for tenants, all for a small fee.

In theory, they do the work, you collect the interest and watch your property increase in value.

In the real world, however, the majority of these companies, if not all of them, are brokers. They are not established entities in the Czech Republic, and they have little, if any experience conducting business deals in the Czech Republic.

That means they don't really do anything but collect their fees and arrange the deals, usually through a local representative, and then try to oversee the work performed from a foreign office located in another country.

The bottom line is that IF the broker is honest AND efficient AND experienced AND puts the time and care into hiring the construction companies, management companies, real estate agents, etc., that share the same values and commitment to you, the investor - then and only then can the deal be assured a reasonable success.

You are betting YOUR MONEY on their care, honesty, expertise, etc. in either case!

Realistically however, our combined experience in the Czech Republic has shown that the actual scenario is commonly otherwise. That is, that the broker is experienced in other countries and has the best of intentions, BUT - has little if any experience in the Czech Republic itself, and how deals actually proceed here, which always follow a very simple formula, being… agents and brokers in the Czech Republic care about their fees, period - they do not care about their clients' financial safety or success rates.

Obviously, the burden of the investment's safety and ROI falls on the investor, not the broker. They tell you the story you want to hear, and if you believe it, that's your problem, not theirs. After all, that’s what they were told by their agents.

Thus, putting your money down on the often mistaken belief that an agent or broker or management company has your own best interests in mind, in the Czech Republic, is about as safe as trusting a stranger with your wallet and credit card In point of fact, that's exactly what you are doing.

The Bottom Line

There is money to be made in the Czech Republic. Take it from all of us: we all live here, we have all invested here, and we are all making a decent return on our investments.

Like anywhere, investing in the Czech Republic – including and especially buying off-plan or buying to let - requires planning, due diligence, and careful weighing of all factors involved. It also requires the assistance of a trustworthy local company like our own to perform all legal work and look out for your best interests in all deals.

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Should I buy off-plan? That is, purchase property before it is built, at a discount off market rates, and then rent it out while I enjoy high returns?


It is our professional opinion at this office that investing in off-plan in the Czech Republic need extreme care when choosing an off-plan investment opportunity.

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What does the total price of a property purchase come out to be?


A good rule of thumb is to take the purchase price + 8% (approximately 6% if you use us for your property closing - see fee structure), to cover all commissions, expenses, taxes and fees if you are purchasing in the 1.000.000 to 2.000.000 range.

Thus, on a purchase of a property worth 1.600.000 CZK, your normal total price would be approximately 1.728.000(total fees are 128.000).

If you used our services the total fees would be approximately 96 000 CZK.

Prices and commission fees inside of Prague can be much higher due to the very high competition for attractive properties. It is common even to pay simply for information, or a prospectus, about a viable property.

Once purchased, yearly land and property taxes must be paid, but are extremely minimal. They range from 1Kc to 4Kc per square meter, per year. Maintenance fees also apply, and will be briefly discussed in the next question.

Yearly SRO maintenance costs about 20.000 CZK a year, which covers basic accounting, tax filing and registered office rental.

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Can I get a mortgage for my property purchase? *


Generally, yes.

Mortgages are granted to foreign residents by local banks via an established SRO, (Czech limited liability company) or as an individual if you have a Czech residency. You can read much more about SROs in the next section of this webpage.

Banks lend more freely to longtime established entities and companies than they do new ones, as can be expected. Otherwise, they do not usually distinguish between foreign and local citizens that heavily.

In case of a newly established business (SRO), it is sometimes necessary to provide the bank with a precise business plan in order to assure the lender that adequate funds are available for consistent payments, (a fairly large concern here).

If the bank approves the business plan the mortgage is normally granted under the following five (5) conditions:

1. The amount lent will not exceed 75% of the maximum value of the property, as valued by the bank’s own property evaluation firm.

2. The borrower must invest their own funds at a minimum level of 20-30% of the maximum value of the property, et. al.

3. The maximum lending period cannot exceed 15 years.

4. The interest rate is fixed for a maximum of 5 years, after which it is recalculated by the lender.

5. Interest rates currently range from 4-7% per annum.

* While this information is deemed to be current, banks are always changing their offers and many are based on the qualifications of the buyer. Please contact a bank or mortgage broker for more details.

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Are Czech real estate agents accredited?


The answer is no, but it is required under Czech law a license. Real estate agents team up with lawyers, paralegals and team of real estate experts to do the work.

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Are property search fees common among property agencies?


Many high-profile, reliable Prague-based firms charge a search fee which is typically around 100,000 CZK. Most also charge substantial additional fees for due diligence work.

Property search fees are a prudent investment for anyone looking to buy real estate in the Czech Republic. In our years of professional experience working with Czechs, we have grown to depend on paid property searches for accurate information that can be relied upon when evaluating a potential investment.

The simple fact is that paid searches not only provide the most accurate results and the widest possible choice for the investor, (as opposed to real estate firms who provide free searches but ONLY from within their own listings), but they also tend to guarantee the assistance of a service provider who takes a true and genuine concern in looking out for your best interests.

Property searches which are performed free of charge normally result in the type of information you would expect to receive if you are paying nothing: a basic idea of what is available, but without any proper due diligence performed to establish it's accuracy or reliability, or any care taken to assure that the results represent a quality investment.

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Can a foreign citizen buy property in the Czech Republic?


A foreign citizen can buy property in the Czech Republic, but the laws vary according to whether or not you are a citizen of the European Union (EU) or not.

Non-EU and Non-'Favored Nation' Citizens (EU citizens should read this also):

To purchase property in the Czech Republic as a non-EU citizen for either business or residential use, you must have a Czech limited liability corporation (called an SRO) setup in your name.

The good news is that an SRO is an essential tool for all foreigners living in the Czech Republic, EU citizens and non-EU citizens alike, because it provides an essential tax and liability shelter to assist you with legal compliance issues and to protect your assets - both here and at home - from litigation and fraud.

The only exception to this requirement is for Permanent Residence holders who are also married to a Czech spouse. Even if this describes you, however, I strongly recommend that all foreign investors and/or those simply relocating to do business in the Czech Republic have an established SRO for their own protection.

'Favored Nation' Citizens (Norway, Switzerland, Lichenstein, USA):

Each of these countries have 'favored nation' agreements with the Czech Republic which give them rights regarding property purchase that are similar to those granted to EU citizens.

In the agreement between the USA and Czech Republic, any US citizen who acquires a residency permit for longer than 3 months can buy property as an individual.

An exception for the US citizen is in the case of agricultural land. To purchase agricultural land they must have a registered agricultural business in the Czech Republic.

Please recognize that since this treaty was quietly adopted and hasn't been approved by Parliament yet, it would be advisable to check with the local Land Registry office before purchasing a property. It is law and should be recognized but changes don't occur fast here and often government offices are not fully informed of the laws.

Please contact us for questions regarding the property purchasing rights of the other 'favored nation' countries mentioned above.

EU Citizens:

EU citizens may purchase land, except for agricultural or forest land, after acquiring the proper residence permit. However, as stated above both EU citizens and non-EU citizens with an SRO are exempt from any restrictions on land purchased at this time, and do not require a residence permit to purchase land.

More importantly, owning land without the protection of an SRO is extremely risky, just as it is at home but even more so here, as your personal assets (including your new property) can be attached via any legitimate, or fraudulent, liability suit.

The simple fact is that foreigners are still seen by many unscrupulous people as a cash cow in the Czech Republic. This reality needs to play an important role in your investment plans. If you are a foreigner, it is assumed that you are rich and unaware of the steps necessary to protect yourself from fraud.

It is also assumed that you do not know just how little the law offers you any protection in these matters, (it doesn't). Therefore, you must always play it safe by keeping your property and business assets under separate, individual SROs in order to protect your assets both here and abroad from litigation and fraud.

Click here to see a more in depth discussion of purchasing property by each method for an EU citizen.

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What are the risks of property acquisition in Czech Republic?


Here are some factors as published by CEREAN (Central European Real Estate Associations Network) in their Czech Republic section:

"The Czech legal code gives preference to the real owner of a property instead of that which is written into the public records (in the cadastre of real estate). An extract from the cadastre of real estate does not always reliably reflect the ownership rights to real estate. It can happen that a seller can bring forth documentation of ownership of a lot or piece of land from the cadastre of real estate, an investor buys the land, and the cadastral office registers him as the owner. A few years later, though, legal proceedings are begun to determine the actual ownership of the land, and a court decides that the owner of the land is someone else."

"An extract from the cadastre of real estate is not, therefore, sufficient documentation for closing a contract. The results of privatization and restitution of real estate do not always correspond to the actual, factual state of affairs. When buying real estate in the Czech Republic, it is of the utmost importance to thoroughly go through all available documentation on the basis of which the ownership rights have been granted to the seller, or as the case may be to any of his family members, either living or deceased. This requires adequate knowledge of local conditions and the legal directives in individual time periods in which the evaluated documentation came about. The goal of this investigative process is to find out whether there was ever an ownership dispute or conflict in the past that could in the future threaten the rights of the investor."

"Strict rules and regulations are valid for transfer of real estate in the Czech Republic. A purchase contract can be declared invalid for slight errors in how the real estate is named or described, or because certain less than specific wording is used. It is not enough for the cadastral office to agree to register the ownership rights to the cadastre. There have been and continue to be cases when the formal validity of a contract is disputed years after the cadastre office has agreed to an investment or transfer. The actual contract itself, then, by Czech law, is rendered less important. Simple, mechanical inspection of foreign contracts can act to rob an investor of his money and his real estate."

"During the Communist era, in 1951, there occurred on the territory of what is now the Czech Republic the denial of traditional principles known as 'superficies solo cedit', which up to that time had been valid. This legal principle made it impossible for one person to own a building on land which belonged to another person. Essentially, what the new legal ruling did was make it legal for one person to own a building on another person’s land. This rather inconvenient amendment to ownership law has remained on the books until today."

"A general problem in the Czech Republic is the slow rate of court proceedings. Like a number of other countries, the Czech Republic has been sanctioned for its slow pace of court proceedings. The European Court of Human Rights has ruled that the country must pay compensation in a court case on the settlement of a real estate dispute in the common name of a married couple. The court case was stuck in the court system for more than 10 years. "

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What are the pros/cons of buying with a residency permit vrs through an SRO?


The vast majority of property investors in the Czech Republic are members of the EU. Currently Czech Republic restricts how even EU citizens can purchase property here. No fixed date has been given regarding when these restrictions will be lifted.

The two options for an EU citizen for purchasing property are through an SRO (Czech limited liability company) or as an individual with a Czech residency permit.


The main consideration of whether to go the route of one or the other remains taxation.

If you buy as an individual and hold the property for more than 5 years, this property not being your primary residence, you will not pay capital gains on the property in Czech Republic.

This being said, some clients from EU countries have informed me that even if the capital gains is not paid here because of this exemption, their home countries would require payment of taxes on this gain. This would be a good question to pose to your home country accountant. In some cases there can be a tax advantage in your home country to receive the capital gains as dividend payment through a foreign company rather than capital gains.

If you buy as an individual and sell before the 5 years, you will be required to pay capital gains tax as an individual.

Here is the current chart of taxation for an individual in the Czech Republic:

Tax Base (CZK) Tax
0 to 121,200 12%
121,201 to 218,400 19% of base exceeding 121,200
218,401 to 331,200 25% of base exceeding 218,400
331,201 and over 32% of base exceeding 331,200

As can be seen, taxation quickly jumps to the highest tax bracket of 32%.

Let's work through a scenario then where an individual sells a property before the 5 years with a capital gains of a hypothetical 1 000 000 CZK with no other income. Based on the chart above you would pay a total of close to 275 000 CZK in taxes.

For an SRO, on the other hand, capital gains are always taxed at the corporate tax rate for net profit. As of 2006 this is 24%. This would make the tax on 1 000 000 CZK of capital gains at 240 000 CZK. This leaves you with less tax on the amount than you would have as an individual.

This is an easy calculation should you choose to leave your gains in the SRO and reinvest it. However, many at this time might be interested in retrieving it for other purposes. In this case a possible scenario is to withdraw it as dividends, in which case there would be a 15% withholding tax (in the scenario above, another 114 000 CZK) from the payments.

In the SRO scenario, your takeaway would be 646 000 CZK while as an individual, 760 000 CZK.

Another consideration of taxation is that it is generally easier to expense property related costs through an SRO compared to an individual, because it is a stand-alone enterprise.


Regarding the costs of each, an SRO is definitely more expensive to maintain and requires some added costs because of the higher standard of accounting required. Currently the cost of accounting and tax filing for a one property SRO through our accounting partner is around 10 000 CZK/year.

Also, there can be slightly higher rates for electrical and gas if the owner of a property is a company rather than an individual (don't understand this one...).


Another consideration is liability.

Czech law stipulates that a company is only liable for the amount of assets it possesses. The individual shareholders are not personally responsible unless there is unpaid initial capital outstanding (200 000 CZK total). If this is paid in full then there is no additional liabilities. This being said, there is personal liability on the part of the director of the company, should there be found gross negligence.

Although the Czech Republic has not typically been a litigation oriented society, it is increasing moving in this direction, following the trends in Western countries.


Currently at the outset of investment in Czech Republic, it is easier for a person purchasing as an individual to get a better loan to value ratio and slightly better interest rates than purchasing through an SRO.

Banks are looking for a track record on the SRO.

This being said, after two years of good investment history and payment through an SRO, the banks often offer better interest rates and mortgage terms to an SRO as opposed to an individual.


The final factor in the discussion, is how difficult it is to obtain either.

A Czech SRO can be owned by any individual and individuals of any citizenship are now able to fulfill all roles within a company, provided they have a clean criminal record, are over 18, have not been subject to bankruptcy, etc.

For an EU citizen obtaining a residence permit, it requires two things that can be difficult to obtain.

The first is a valid 'purpose of stay'. This can be any number of things including being registered in a university program, having a work permit or being a licensed professional or business person.

The second requirement is that you need an accommodation address for which you have permission to stay while in Czech Republic.

Meeting these requirements can be the difficult part of obtaining a Czech residency permit for those who are not actually living here at the time of purchasing a property.


Well, hopefully this adds some factors and helps you to make the right decision when it comes to which route you will take when investing in Czech Republic.

We are prepared to assist you with either route in meeting the requirements and, ultimately, help you to achieving a successful investment.

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