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Greek Economic and Trade Office Embassy of Greece Prague, Czech Republic |
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E-mail: [email protected] |
Website:
http://geocities.com/greek_trade |
I N V E S T I N G I N T H E
C Z E C H R E P U B L I C
Real Estate
Acquisition in the Czech Republic
Czech foreign exchange regulations
have been rapidly liberalized since 1990. The latest amendments, which became
valid 1 January 2002, abolished all provisions relating to the free movement of
capital except limitations applying to the acquisition of real estate in the
Czech Republic. But access of foreign persons to real estate in this country
has been liberalized partially.
The acquisition of real estate in the Czech Republic
by foreign persons is treated by the general regulation contained in Act No.
219/1995 Coll., the Foreign Exchange Act, as amended. This law distinguishes
between two groups of parties to foreign exchange relations - residents and
non-residents. The criterion is the place of permanent residence of natural
persons, and the registered office of legal entities. It must be emphasized
that the citizenship of a natural person is not decisive.
According to Article 1 letters
b) and c) of the Foreign Exchange Act:
b) resident
shall mean a natural person having permanent residence in the Czech Republic or
a legal entity having its
registered office in the Czech Republic;
c) non-resident
shall mean any natural person or legal entity not referred to in letter b)
The terms under which a
foreign citizen or a person without citizenship can acquire a permanent
residence permit are stipulated in Act No. 326/1999 Coll., on the residence of
foreign persons in the territory of the Czech Republic, as amended. We call
attention to the fact that a temporary residence permit, even a long-term visa,
has no influence on the status of non-resident.
According to
Article 17 of the Foreign Exchange Act, non-residents, who are not citizens of
the Czech republic, can acquire an ownership right to real estate in the Czech
Republic only in the following cases:
a) by inheritance,
b) for the diplomatic representation of
another state on condition of reciprocity,
c) if the property is acquired into
community property of spouses only one of which is a non-resident, of where a non-resident acquires the
property from a spouse, parents or grandparents,
d) through the exchange of domestic real
estate which he owns for other domestic real estate,
where the usual price of the latter does not exceed the usual price of the
former,
e) if he has a pre-emptive right by reason
of co-ownership of real estate,
f) if it is a construction built by a
non-resident on his own land,
g) where expressly provided by a special
legislative act.
In addition to the
cases referred above, a non-resident legal entity which has a business or
organizational unit thereof in the Czech Republic and which is authorized to do
business in the Czech Republic may
acquire the right of ownership to real estate in the Czech Republic, except for land which forms part of,
or belongs to, the agricultural land fund and land set aside as woodland.
In other cases, the acquisition of real estate by
non-residents is prohibited. This
prohibition does not apply to legal
entities with their registered office in the Czech Republic, since corporations
with foreign shareholding having the
registered office in the Czech Republic are considered residents.
Generally, until the end of 2001, foreign legal entities
were not able to directly obtain Czech real estate. It was, however, and still
it is possible to acquire indirectly Czech real estate through a Czech legal
entity, which could be 100% owned by the foreign entity.
Effective 1 January 2002, non-Czech legal entities
(companies, not individuals) may also directly acquire real estate in the Czech
Republic (excluding agricultural and forest land), provided they have a Czech-registered branch through which the acquisition is carried out.. This change was introduced to confirm
with EU standards in anticipation of Czech Republic membership. In some cases
it may be tax beneficial for a foreign entity to structure an acquisition of Czech real estate through a branch, even if registering a branch may be as
administratively demanding as incorporating a new Czech legal entity. An important factor to consider is the
taxation system in the home country of the investor. For different countries
different considerations apply. These considerations need to be judged in close
connection with the tax treaties which the Czech Republic has concluded with the investor’s home country.
The Commercial
Code defines these possibilities primarily in relation to business activities
in the Czech Republic. According to the Commercial Code, foreign persons may be
engaged in entrepreneurial activity in the Czech Republic under the same
conditions and to the same extent as Czech persons. A foreign person does not
become authorized to carry on this activity until the day its enterprise, or an
organizational unit of its enterprise, is entered in the Companies Register,
defining the extent of the intended activity and the authorization granted by
the trade office. As of 1 February 2001, this provision no longer applies to
natural persons resident in one of the member states of the European Union or
in another state of the European economic area.
Legal entities may
be established exclusively on the basis of Czech laws. After being entered in
the Companies Register, foreign persons become Czech legal entities, having the
same rights and duties as Czech legal entities.
Under the Czech Commercial Code, the following Czech legal entities may be established as business
entities:
a) general commercial partnership
(veřejná obchodní společnost)
b) limited partnership (komanditní
společnost)
c) limited liability company
(společnost s ručením omezeným)
d) joint stock company (akciová
společnost)
All four types of
legal entities may hold real estate, even if they
are fully owned by foreign entities or foreign individuals.
A limited
liability company and a joint stock company are the most frequently used types
of companies for holding real estate. A limited
liability company may be founded by one or more resident or non-resident
persons, who may be either legal entities or individuals.
A joint stock
company may be founded by one founder if the founder is a legal entity;
otherwise
a joint stock
company must be founded by two or more persons.
In harmony with the above, foreign corporate persons
may acquire real property as co-owners of the total property of a company, or
as owners of newly-built enterprises, by building a production plant or
marketing facility, buying stock of an existing enterprise at the Stock
Exchange or through purchase of real estate from a Czech owner on the basis of
a contract of purchase.
A contract for the
transfer of real estate must be in writing and a notary
public must verify the
signatures. If real estate is transferred on the basis of a contract, ownership is
acquired by its
registration with
the Real
Estate Cadastre in accordance with specific
regulations governing such a
transfer (unless a
special law provides otherwise).
A contract on real estate transfer (by sale and
purchase, by exchange, gift, inheritance, etc.) does not yet effect a change in
the real property owner, but only obliges the parties to take legal steps
ensuing from the contract. The new owner acquires the actual ownership title to
real property only by its entry in the Real Estate Cadastre.
In accordance with
the European Agreement - Article 45 point 7 third sentence, the Czech Republic
should grant citizens of the European Union, who do business in our territory
as individual entrepreneurs, the right to acquire, use, rent, and sell real
estate property, and the right to lease natural resources, farmland and
woodland, when they need it to secure their economic activities, until the
31st of January 2005 at the latest. All
foreign entrepreneurs already have these rights except the right to acquire
real estate. The chapters already closed in talks on the accession of the Czech
Republic to the European Union include the chapter "Free Movement of
Capital and Payments", which grants the Czech Republic the transition
periods to be valid after its accession to the EU.
Dr. Athanassios Pantazopoulos
Mgr. Lucia Triebusnikova
Tel.: (+420) 222 722351
Fax.:(+420) 222 719472
E-mail: [email protected]
Visit also:
Legal
forms of companies in the Czech Republic
Real
Estate Acquisition in the Czech Republic
Ιδιωτικοποιήσεις
Τσεχία κατά το 2001