MJ, by e-mail
Most non-Czechs are unable to own property directly, and so for non-residents of the Czech Republic, the most common way to buy property is via a special purchase vehicle (SPV), a limited liability company (known as a spolecnost s rucenim omezenym, or SRO). It is designed for the specific purpose of purchasing, renting and selling property. The company owns the property and can be used for financing arrangements. Off-the-shelf ready-made companies are available solely for the purchase of property, and can be bought within 24 hours in the Czech Republic or over the internet: visit www.companies.cz.
Since May 2004, when the Czech Republic joined the European Union, EU citizens have been able to apply for a temporary residency (EU) card, which allows the purchase of property in the Czech Republic under their own name. But you must have employment in the Czech Republic, be an executive of a Czech company or have a trade licence.
There are two particular areas of concern. Any availability for rent-free personal use is subject to income tax in the UK, known as a “benefit-in-kind” charge. The amount of tax payable will be based on a proportion of the annual market rent of the property for the duration of your occupation of the property. Where the property is otherwise on the market for third-party letting, the charge can be minimised, and it can be eliminated if you pay the market rent during your occupation.
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The second problem relates to the company itself. Even though it is a Czech company, because of the way that UK tax rules work, combined with the terms of the Czech/UK double tax treaty, the company could ultimately be treated as a UK tax-resident company. As a result, you would have two sets of tax returns and claims for double tax credit relief to fill in, in a complicated corporate setting, so you should seek further advice.
Bill Blevins is a managing director of Blevins Franks International, an independent firm providing tax and investment advice
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