Acquisitions of Real Estate by Foreigners

Acquisitions of Real Estate by Foreigners

Written by Vaclav Benes,
KONECNA & SAFAR, v.o.s.




Not so long ago, it used to be presented as a crucial success of the Czech diplomacy in negotiating the conditions of the Czech Republic’s accession to the European Union that a transitional period had been agreed for acquisition of real estate serving as a secondary residence in the Czech Republic.

From the rhetoric, one could have assumed that at least during the transitional period everything would remain unchanged and that the only way for foreigners to acquire real estate in the Czech Republic would be at least during the next seven years establishing of a legal entity, typically a limited liability company, and purchase of the immovable through such company.

But nothing is as it seems to be. It is true that there is a transitional period of seven years for the acquisitions of real estate which may serve as a secondary residence (family houses, apartments, recreation cottages, building plots of land etc.). Nevertheless, such a limitation applies exclusively to foreigners from countries of the EU, Iceland, Norway and Liechtenstein, who do not hold a permission to reside in the Czech Republic.

The requirement of any permission or other official approval raises in general at least scepticism and concerns about long and cumbersome administrative proceedings. However, the word “permission” in this context is at least misleading. The permission to reside for a citizen of a member state of the European Communities, and also for citizens of Iceland, Norway and Liechtenstein, is a rather formal and illusory obstacle, and is restricted mostly to registration duty. The citizens from the aforementioned countries have legal title to obtain this permission within a short time limit without proving any special reason for the intent to “reside” in the Czech Republic. It depends only on them whether they assert that the purpose of their stay in the Czech Republic is to wander through the Czech forests, hugging the trees along the way as some Czech ex-politicians do, or whatever other reason that strikes their fancy.

The list of required documents necessary for granting permission to reside to a citizen of a member state of the European Communities is very short and the documents are easily obtainable. It all comes down generally to two photos, a passport or an ID-card, certificate of health insurance from the EU or other EEA country and an affidavit on having sufficient funds in order not to become a burden to the social security system of the Czech Republic. A health check is required only exceptionally. Under certain circumstances, the list is even shorter. Moreover, no administrative fees are charged.

Summing up the aforesaid, to obtain the permission to reside in the Czech Republic, a citizen of a member state of the European Economic Area has to fulfil significantly less conditions than in the case of any other ID-card, licence or other certificate.

While the transitional periods with respect to the Czech accession to the EU and European Economic Area had been broadly discussed in the media and in the Parliament, the preferential treatment of acquisitions of real estate serving as a secondary residence by citizens of the United States of America was implemented absolutely smoothly and quietly by means of a Supplementary Protocol to the Czechoslovak-U.S. Agreement on Mutual Support and Protection of Investment. In short, this Supplementary Protocol stipulates that a U.S. citizen should have rights to acquire real estate in the Czech Republic in the same extent as the citizens of EU countries, Norway, Iceland and Liechtenstein.

This in fact means that U.S. citizens who have visa allowing them to stay in the Czech Republic for more than 90 days may acquire real estate serving as a secondary residence without any limitations. Although obtaining visa for stay in the Czech Republic is not so simple and formal as obtaining a certificate of permission to reside for a citizen of a member state of the European Communities, it still is the most straightforward way to acquire real estate in the Czech Republic, much easier, faster, cheaper and less complicated than by using as a vehicle a limited liability company incorporated in the Czech Republic.

As hinted above, the acquisition of real estate as a secondary residence is quite a simple process. And there are trustworthy indications that it will become even easier in the near future. It is most likely that the transitional periods will be shortened and the acquisition of real estate by foreigners will be entirely deregulated. But that is a voice of the (near) future.

Written by Vaclav Benes, KONECNA & SAFAR, v.o.s.

www.konecna-safar.com

Siroka 36/5

110 00 Prague 1

Czech Republic

Tel.: +420 221 990 455

Fax: +420 221 990 450



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