When is it necessary to buy a property as company acquisition in the Czech Republic?

The topic of today’s post was supposed to be an explanation of when it is preferable regarding taxes to own real estate as a company rather than to own it in one´s own name. When we were preparing this topic with our tax advisor Ondřej Antoš, we de facto came to the conclusion: Regarding taxes, in the Czech Republic it is preferable in the vast majority of cases to buy real estate as a physical entity and if there is sometimes a reason for establishing a company to carry out the purchase, there are other reasons than taxes.

• When the real estate is purchased by a company, it is a company of a more significant character, e.g. it is hard to imagine that the land for the construction of a car production hall would be bought by the CEO of Škoda Auto in his own name for tax reasons, this land will always be bought by Škoda Auto a.s.  However, if you are an ordinary entrepreneur, it will always be preferable for you to buy this land in your own name and rent it out to your company, thus saving considerable funds in income tax in the future, see our last article.
• The bank that will finance the purchase includes the purchase of real estate by the company as one of its conditions for granting a loan.
• For development projects, the establishment of companies is necessary to finance and limit potential risks related to persons behind the given company, especially when the project fails.
• An investment fund wants to buy real estate if the capital for the purchase has multiple sources, e.g. an investment fund can have ten shareholders or several thousand shareholders, the only acquisition option in this case is to establish a company co-owned by the individual shareholders.
• A person who does not want to make it clear that they own the property wants to buy it. In this case, it is preferable to establish a company, represented by persons other than the owner and to purchase real estate for this company.

We discussed the reasons why it is preferable to buy real estate as a physical entity in the last article. They include especially the exemption from income tax after 5 years of ownership of real estate when acquiring real estate by the end of 2020 and after 10 years of ownership of real estate when acquiring real estate after 2021.

Finally, I would like to add that physical entities can also take advantage of other exemption options, which we discuss in the article What taxes we will pay when selling real estate.