CZECH REPUBLIC Law and Practice Contributed by: Matěj Manderla, Jan Wagner, Ivo Hartmann and Aleš Malach, Tenacta, advokátní kancelář, s.r.o.
to claim additional damages, unless the contract pro - vides otherwise. For serious delays, contracts often allow the investor to terminate the agreement or have the work completed by a third party at the contrac - tor’s expense. Time-related claims are also common - ly secured through retentions or performance bank guarantees. 7.5 Additional Forms of Security to Guarantee a Contractor’s Performance Contractors are typically required to provide security for performance. The most common instrument is an on-demand bank guarantee (usually 5–10% of the contract price), often replaced after completion by a warranty guarantee. Retention is also standard, with 5–10% withheld from each invoice and released after proper completion. Other instruments are generally not used in practice. 7.6 Liens or Encumbrances in the Event of Non-Payment Czech law does not give contractors or designers an automatic right to place a lien on a property just because they have not been paid. They cannot unilat - erally create a legal encumbrance over the investor’s real estate. A mortgage over the property can only be established with the owner’s consent and must be registered in the Cadastral Register. Alternatively, a lien may arise through court or enforcement proceedings, but only on the basis of an enforceable decision. A retention right applies only to movable items in the creditor’s possession, not to real estate. If such a right has been registered, it can be removed from the Cadastral Register, typically based on the creditor’s confirmation that the claim has been set - tled, or on a court or enforcement decision ordering its deletion. 7.7 Requirements Before Use or Inhabitation Under Czech construction law, a newly completed or significantly modified building can only be used after obtaining an occupancy permit. This confirms that the building is safe and approved for its intended use.
The key requirement is that the construction must comply with the building permit, approved project documentation and zoning regulations. It must also meet all technical and safety standards, especially regarding structural stability, fire safety and health protection. In some cases, barrier-free access is also required. During the approval process, the developer must sub - mit documentation such as as-built plans, technical inspection reports (eg, electricity, gas) and approvals from relevant authorities like the fire department or public health office.
8. Tax 8.1 VAT and Sales Tax General Note
Please note at the outset that the following informa - tion is of a general nature only. The firm does not pro -
vide tax advisory services. Basic Rule and VAT Rate
In the Czech Republic, the transfer of commercial real estate is generally subject to VAT at the standard rate of 21%. However, this does not apply to share deals, where no VAT is levied. 8.2 Mitigation of Tax Liability In the Czech Republic, the overall tax burden associ - ated with real estate transfers is relatively low. The former real estate acquisition tax was abolished in 2020, and the remaining transaction costs related to registration in the Cadastre are largely administrative and relatively minor. As a result, tax considerations in real estate transac - tions tend to focus primarily on VAT and corporate income tax. In larger transactions, market practice often involves considering not only a direct transfer of the property (asset deal), but also a transfer of shares in the company holding the property (share deal). A share deal can, in certain situations, offer tax advan - tages, for example in relation to VAT treatment or the potential application of the participation exemption on the seller’s side, provided that the statutory con -
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