CZECH REPUBLIC Law and Practice Contributed by: Matěj Manderla, Jan Wagner, Ivo Hartmann and Aleš Malach, Tenacta, advokátní kancelář, s.r.o.
In practice, particularly in the commercial real estate context, the VAT treatment is often driven by the spe - cific structure of the lease and the factual circum - stances of the arrangement. Subject to the relevant statutory framework being satisfied, it may be pos - sible for VAT to be applied to rent, typically where the tenant carries on economic activities. At the same time, the legislation provides for certain restrictions, especially in relation to premises intend - ed for residential use, where a VAT-exempt treatment generally prevails. 6.8 Costs Payable by a Tenant at the Start of a Lease Security Deposit For commercial leases, tenants usually provide secu - rity equal to 3–6 months of gross rent (including ser - vice charges), typically as a bank guarantee or cash deposit. First Service Charges and Utilities In commercial leases, rent and operating costs are typically paid in advance. The tenant therefore pays the first instalment (often covering the first month or quarter) at the commencement of the lease. Fit-Out Costs In the context of commercial real estate, landlords commonly provide a fit-out contribution (fit-out allow - ance). To the extent that the actual fit-out costs exceed this allowance, the tenant bears the difference, usually payable upfront or progressively during the construc - tion phase. 6.9 Payment of Maintenance and Repair The landlord typically manages the maintenance of common areas, but the costs are borne by the tenants through service charges common area maintenance – CAM). Tenants pay these costs in advance (monthly or quar - terly), with a year-end reconciliation based on actu - al expenses. Costs are allocated pro rata, usually according to the size of the leased space. In practice, tenants only cover operational costs (oper - ating expenditure – OPEX), such as maintenance,
cleaning and security. Major investments and struc - tural repairs (capital expenditure – CAPEX) remain the landlord’s responsibility. 6.10 Payment of Utilities and Telecommunications Costs for utilities and telecommunications are typically treated as utilities and telecommunications costs, and are allocated among the tenants on a pro rata basis, usually according to the size of the leased space. The landlord generally arranges and manages the provi - sion of such services and subsequently recharges the relevant share of costs to the individual tenants. 6.11 Payment of Property Taxes Under Czech law, the legal owner of the property (the landlord) is the sole statutory taxpayer for real estate taxes. Despite this statutory framework, it is a market standard in the commercial real estate sector to con - tractually shift the actual economic burden of the real The landlord typically arranges and maintains the pri - mary building insurance, including structural coverage and owner’s liability. Tenants are responsible for securing their own insur - ance at their own expense. This usually covers their fit-outs, equipment, inventory, third-party liability and business interruption. estate tax onto the tenant. 6.12 Insurance Issues Property insurance is typically arranged on an “all-risk” basis, covering a wide range of events such as fire, flooding, natural disasters, vandalism and machinery breakdown. It is also standard for landlords to main - tain loss of rent insurance, which covers lost rental income if the premises become temporarily unusable due to an insured event. 6.13 Restrictions on the Use of Real Estate Landlords restrict how tenants can use premises through “permitted use” clauses, requiring consent for any change. Public law adds mandatory limits: premises may only be used for their approved pur - pose unless a change of use is officially granted.
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