| Czech
real estate legislation explained
by the Czech Ministry of Finance:
Acquisition of Real Estate
Current legislation governing the acquisition
of real estate in the Czech Republic presents the last exception
in the system of otherwise free movement of capital and payments.
On 1 May 2004, the Czech Republic becamea full member of the European Union.
This article explains how this is reflected
in the country’s legislation on the acquisition of real
estate.
The primary law of the European Communities,
specifically article 56 of the Treaty establishing the European
Community, in its Amsterdam wording, stipulates that all restrictions
on the free movement of capital and payments are forbidden, both
between member states and in relation to third countries outside
the European Union.
The Czech Republic has been granted two
exemptions from this rule, namely two transition periods, enabling
it to apply certain restrictions temporarily on the acquisition
of buildings designed for non-permanent residence, farmland, and
forest land.
These transitional periods are provided
for in chapter 2 of Appendix V to the Act on the conditions of
the accession of the Czech Republic, the Estonian Republic, the
Hungarian Republic, the Latvian Republic, the Lithuanian Republic,
the Polish Republic, the Republic of Cyprus, the Republic of Malta,
the Slovak Republic, and the Slovenian Republic, and on the amendment
of treaties establishing the European Union, which is an integral
part of the actual treaty on the accession of the above states
to the European Union.
Transition
Periods
According to the rules on transition periods, the Czech Republic
may keep the following provisions in force:
- for the duration of five years from accession
day the restrictions provided for by the Foreign Exchange Act
applying to the acquisition of real estate (buildings designed
for non-permanent residence) by citizens of the other EU member
states not residing permanently in the Czech Republic and companies
from the European Union not having their registered offices, branches,
or representations there;
- for the duration of seven years from accession
day restrictions on the acquisition of farmland and forest land.
provided for by the Foreign Exchange Act, the Act on Land and
the Act on the Privatization of State-owned Land by citizens of
the other EU member states and companies from the European Union
not having their permanent residence in the Czech Republic and
not being registered there;
- the rules relating to private farmers
from the European Union wishing to settle in the Czech Republic
and have their permanent residence there are to be the same as
those applying to Czech citizens.
Current Legislation
As a reminder of the conditions applying to transition periods
ensuing from the above current legislation, the following is a
brief summary of its basic provisions.
I.
The basic regulations are the general rules provided for by the
Foreign Exchange Act (No. 219/1995 Coll.), as later amended.
This Act distinguishes between two groups of parties to foreign
exchange relations: residents and non-residents. The criterion
for determining the foreign-exchange status of legal entities
is the place of their registered offices, and in the case of individuals,
the place of his/her permanent residence, regardless of his/her
citizenship. Under section 1 b) and c) of the Foreign Exchange
Act, persons with permanent residence or registered offices in
the Czech Republic have resident status, the rest being non-residents.
The Foreign Exchange Act imposes no restrictions
whatsoever on residents acquiring real estate. On the other hand,
a non-resident may acquire real estate in the Czech Republic only
in the cases listed in section 17 of the Foreign Exchange Act.
Czech nationals, however, are granted special treatment under
this Act and the restriction does not apply to them even if they
have permanent residence in another country, and consequently
have non-resident status.
II.
Under section 4 of Act No. 95/1999 Coll. on the transfer of land
from state ownership to the ownership of other persons, as later
amended, only the following entities may take part in the privatization
of state-owned farmland:
- Czech nationals, municipalities,
- legal entities that are owners or co-owners
of buildings or structures belonging to the original farmstead
or serving agricultural production or related water management
projects (only the land under such buildings or structures and
the land adjoining them, if it is essential for their operation,
may be transferred to them)
- public universities,
- and in the case of state-owned forest
land., only municipalities and public universities.
III.
From a practical point of view, a slight restriction is comprised
in the Land Act (No. 229/1991 Coll.), as later amended, which
in section 3 stipulates that "land cannot be transferred
to the possession of foreign non-residents". This restriction,
however, does not apply generally, but it only refers to state-owned
land administered by the Land Fund of the Czech Republic being
transferred under the provisions of this Act.
Proposed Legislation
The Czech Parliament is currently debating a government bill (Parliamentary
print No. 474) comprising amendments to the aforementioned three
acts.
Its only purpose is to project the transitional
periods described above into Czech legislation.
Unlike current legislation, the new amendment
does not distinguish solely between residents and Czech nationals
on the one hand and foreign non-residents on the other hand, but
also between citizens of the European Union and citizens of third
countries.
In the latter category, stricter rules are
to be maintained for the time being as regards the acquisition
of real estate in the Czech Republic than those that will apply
to citizens from other EU member states, who will be legally resident
or doing business in agricultural production in the Czech Republic.
The specific requirements those persons
will have to meet to be registered as business entities operating
in agriculture will be laid down in the new amendment to the Agricultural
Act (No. 252/1997 Coll.).
There will be several exemptions from these
general rules, as the special treatment to apply to citizens of
the European Union will also be granted to persons from other
countries under international arrangements made by the Czech Republic.
This concerns the countries of the European
Free Trade Association, which means Iceland, Norway, and Liechtenstein,
since the Czech Republic, like the other new EU members, has acceded
to the European Economic Area Agreement, which also comes into
force on 1 May 2004.
Zdenka Slavíková
Ministry of Finance
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