Trust have recently been introduced in the Czech Republic. The Czech authorities have updated their legislation in this sense, which became applicable from the beginning of 2014. Trusts are addressed to both natural persons and legal entities, and they can be used to manage various assets or properties. Our Czech lawyers can offer legal assistance and information on the main uses of a trust and on the registration procedure.
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Who can set up a trust in the Czech Republic?
Both natural persons and companies, local and foreign, are allowed to create Czech trusts, as long as they comply with the provisions of the Civil Code. These refer to the parties participating in the trust and the assets that can be managed through such a vehicle.
In order to open a trust in the Czech Republic, the following parties must be identified:
- the settlor, the party deciding the creation of the trust and who also owns the assets that will be held in administration;
- the trustee, the party that will administer the assets in accordance with the settlor’s desire;
- the beneficiary or beneficiaries who will enter the possession of the assets, in accordance with the disposition of the settlor.
Each party must be identified with personal/corporate details in the trust deed, which is the document through which the trust is set up.
If you decide to set up a trust, our Czech lawyers are at your disposal if you want to draft the creation deed.
Czech trust – legal aspects
The trusts in the Czech Republic became available in 2014, following a regulation approved by the local government in 2013. At that moment, the respective Bill proposed to introduce on the local market the following:
- joint stock company with variable capital;
- limited partnership with investment certificates;
- trusts.
The founder of a trust, also referred to as a settlor, transfers his or her property into the respective entity, which is further managed by a trustee. The trustee must represent the best interests of the founder.
However, the Czech legislation prescribes that the trust, the founder, and the trustee can be represented by the same person and our lawyers in the Czech Republic can offer more details regarding this provision.
A trust in the Czech Republic does not have a legal entity, as it is constituted through the founder’s assets to manage those respective assets, which can be addressed to a private or a public interest.
Trusts for corporate purposes in the Czech Republic
Businessmen who are interested in company formation in the Czech Republic must also know that a trust can be incorporated to represent various business purposes, such as:
- corporate restructuration;
- international projects set up for financial purposes;
- part of employees incentive scheme;
- acquiring a company.
At the same time, the trust in the Czech Republic can be set up for investment purposes, as it can be registered as a collective investment vehicle.
Assets that can be managed through a Czech trust
In countries with tradition, the trust is a great asset administration tool and wealth management solution for settlors who wants to ensure their estate is disposed of according to their wishes. This is also the case in the Czech Republic, especially after the enactment of the new rules in the Civil Code. As such, the following assets can now be used for the creation of a trust:
- family homes and other real estate property;
- money in bank accounts;
- jewlery;
- works of art;
- cars.
The settlor can put all the assets into the Czech trust or only a part of them. The main advantage is that even if held in trust, the respective goods can still be used by the settlor. Also, he or she will decide how they will be divided among heirs, for example.
You can get advice from our Czech lawyers on how to draw up a trust deed that benefits you and your heir the most.
Taxation of various assets in a trust in the Czech Republic
An important aspect to consider when you set up a trust in the Czech Republic is that the entity itself is not subject to taxation. However, the assets are subject to various taxes, in accordance with their nature. For example:
- There is a wealth tax imposed on assets held in a trust, which is levied at a 19% rate;
- When transforming a family business into a trust, it must pay the corporate tax at the 21% rate;
- The real estate tax, which is levied in the range of CZK 3.50 to CZK 18 per sqm. per built area for houses/apartments, must be paid.
In the case of other types of real estate, the tax is computed differently.
We invite foreign entrepreneurs to contact our law firm in the Czech Republic for in-depth information on the trust fund registration.