The process of buying property in the Czech Republic

Pros and cons of buying

The Czech Republic is rich in balneological resorts, castles, beautiful protected areas, therefore it attracts a large circle of foreigners who buy real estate here not only for vacation, but also for permanent residence. The advantages of this country are always noted for political and economic stability, the ability to travel to the countries of the European Union, spectacular architecture and the charm of cities - both the capital city of Prague and small settlements. Local higher education is in great demand, which is free for foreigners in the Czech Republic.

Russians, especially aged people, are always glad that even today there are many local residents in the Czech Republic who speak Russian. And in Prague and Karlovy Vary you can find shops with Russian products in abundance. But at the time of buying real estate, it makes sense to prepare for the fact that local officials will only talk in Czech. Therefore, it makes sense to learn the local language in advance and take care of the translator. Among the shortcomings, one can also name the fact that the purchase of real estate in the Czech Republic is not a reason for obtaining a residence permit and permanent residence .

The cost of real estate in the Czech Republic is lower than in many European countries. Buying an apartment or house in this country against the backdrop of a steadily growing economy and a year-round tourist season (the Czech Republic was one of the first countries where the coronavirus quarantine was lifted) is one of the best investment options. Over the past five years, property prices in the Czech Republic have been growing and, according to forecasts, will continue to increase. Those who plan to buy real estate note that the Czech Republic has rather low mortgage rates, as well as always high demand for commercial real estate (not only shops and hotels, but also warehouses) due to the fact that in recent years the Czech Republic has become a large logistics the center of Europe, through which many large companies pass, including Amazon. The Czech government also encourages start-ups and has created all the conditions for easy starting and running a business.

Restrictions on purchases by foreigners

In the Czech Republic, there are no restrictions for foreigners buying real estate, this also applies to Russians. Property in this country is acquired by both foreign individuals and legal entities. Previously, in order to buy real estate in the Czech Republic, foreigners had to register their own legal entity. But since 2004, this has not been necessary, which has greatly simplified the process. But if there is a desire to open a company in the Czech Republic, then any foreigner can do this without restrictions. The only condition that must be met is the absence of a criminal record.

Stages of the transaction

After the buyer has chosen a specific object, a deposit of 10-40% of the cost of housing is paid for his booking, which is transferred to a lawyer's account or to the account of the real estate agency or the buyer's representative in the Czech Republic. Specific dates are always discussed on an individual basis. When an object is reserved, it is removed from the sale, and the real estate agency becomes the guarantor of the transaction. At this stage, the buyer's representative is obliged to check the validity and cleanliness of all the seller's documents. Experts note the importance of this point, so it makes sense to contact qualified specialists on this issue.

Then the purchase and sale agreement is prepared, on the basis of which the buyer will become the owner of the property, it is drawn up in Czech. It indicates the points about the absence of debts and describes the current state of the apartment. On behalf of the seller-owner, the terms of the transfer of real estate, the amount of monthly utility bills and all possible nuances that relate to this object are prescribed. After the contract is signed by all participants and the full purchase price of the property is entered into the safe deposit account, this document is submitted to the real estate cadastre and within three weeks the cadastre checks the compliance of all contractual norms. After the re-registration procedure within three months, the buyer is obliged to pay a tax of 4% of the purchase price of the property, although there is one exception when this is not necessary - the initial transfer of the property into ownership. This process is usually overseen by the buyer's tax specialist. Then the new owner is registered with the utilities. There is an important point here: the buyer receives the ownership of the property immediately upon completion of the purchase and sale transaction and this is prescribed in the contract. But the right to own and dispose of real estate depends on when the seller receives the money: on the day of the transaction or after the change of ownership is registered in the real estate cadastre and a corresponding decision has been received. Therefore, it is so important to always prescribe such moments in the purchase and sale agreement, and the buyer must know this in order to plan his further actions - real estate renovation, moving, renting out an apartment.

The buyer and the seller agree in advance on how exactly the transaction will be carried out.In this case, you should be aware that the purchase and sale agreement also always contains a clause on the possible call of the parties to the Real Estate Cadastre within 14 days after the submission of documents, if cases of finding any shortcomings that need to be eliminated. When concluding a deal with the participation of competent lawyers of real estate agencies, careful work is carried out with each package of documents so that there are no such calls. Property transfer usually takes 21 to 25 days.

Purchase costs

The real estate cadastre fee is 2000 CZK (73 euros) - upon payment, you must provide a sales contract and a deposit offer. The transfer tax has now been canceled. The total cost may vary depending on the agency. A tax in the amount of 4% of the purchase price of the object is paid when it comes to secondary stock - residential and commercial real estate.

After the purchase

Real estate tax in the Czech Republic has a complex calculation system, when its rate (for an apartment and a residential building this figure is 0.072 euros per sq.m.) is multiplied by the coefficient of a particular municipality, which can vary from 1 to 4.5. For example, in the capital city of Prague, where one of the highest rates in the country, for an apartment of up to 80 square meters, this amount will be about 50 euros. This tax is payable until May 31: it includes statements for the previous year up to and including January 31.

The maintenance of Czech real estate will cost 15–20 euros per sq. M. Per year, when it comes to an apartment, and 25 euros per sq. M. m in the case of a private house.

When selling residential real estate, with a tenure of up to two years from the date of purchase, the income tax is 15%, but with the condition that the owner lived on the property. If he was absent, then the two-year period is increased to five years.

When real estate becomes property by inheritance, the individual is exempt from income tax. In the case of the donation procedure, the new owner of the property is also exempted from it if there is confirmation that this is a direct and indirect relationship. When the inherited or donated property has a value of more than CZK 5 million (EUR 182,000), then the tax office must be notified of this, otherwise very large sanctions will be applied.

Thank you for your help in preparing the material:

Tatiana Lyubov, Marketing Specialist, Lekvi Group

Miroslava Podivin, expert of Nextreality Group

Olga Goryachkina, expert at RENTSALE