A trust fund can also be established for the purpose of business and generating profit.
Moreover, the founder need not worry that creditors will be able to claim his/her remaining assets in the event he/she is not successful, as his/her assets are separated from fund assets on the establishment of the trust fund.
Profits can then also be divide among the persons designated in the statute, even those different to the beneficiary. The law thus effectively allows other investors in the fund as sharers in profit.
Trust funds are not registered in any public register.
Trust funds are established by a contract or last will, whereas the founder assigns certain property to a trustee for a certain purpose. As the establishment of the fund is linked to the moment the trustee accepts administration of the entrusted property, it is recommended this be included directly in the contract.
Trust funds follow a statute issued by the founder. The statute must have the form of a notarial deed. A notarial deed is a public document, as follows from Section 6 of the Notarial Code. It is the basic document used to resolve/specify the most important questions related to the fund’s operation – its name, what assets it contains on its establishment, what is its purpose, and/or who should receive payment from the fund – who will be the fund’s beneficiaries.
With respect to the requirement of the statute being a notarial deed, it is expected that the establishment of a trust fund will often take place at a notary public. One suitable and efficient model will be to (i) create a trust fund via a contract, (ii) receive/obtain the fund’s statute and (iii) keep both documents in escrow with the notary public, all at a single meeting with a notary public.
Since trust funds are not listed on any public register (for information on the intended registration of trust funds see news HERE), the only documents of its existence are the contract and statute. These documents will also specify the trustee and who is therefore entitled to manage the fund’s assets. With respect to the importance of these documents, it is recommended one copy of these documents be kept with the notary public and one copy at a law office. The founder should also keep one copy of the contract and the statute, so that he/she may make further copies to document the existence of the trust fund if necessary.
The establishment of a trust fund can be justified by various needs and interests; first and foremost, the establishment of a trust fund is appropriate if you are interested in protecting your assets for future generations, from execution or the enforcement of judgments. The establishment of trust funds has a long tradition abroad, particularly in Anglo-American countries, and is very common. Continue reading “Why should I establish a trust fund?”
Tax auditing obligations will apply to trust funds based on the same rules as those for natural persons and legal entities based in the Czech Republic.
Audits will be carried out by auditors with a license valid in the Czech Republic.
The trust fund is regarded as a legal entity for the purposes of the VAT Act.
The payer of real estate tax on real estate property in a trust fund is the trust fund itself. Real estate tax only applies to real estate property in the territory of the Czech Republic.
Obtaining ownership of real estate property also includes, for the purposes of real estate transfer taxes, the dedication or provision of real estate property to a trust fund. The dedication of real estate property is a subject of the real estate transfer tax only if it is made for consideration.
The transfer of real estate for consideration is not exempted from the real estate acquisition tax and is therefore subject to the same tax as other real estate transfers. The transfer of real estate is considered to be made for consideration even in case of non-monetary performance provided in return for the transfer of the real estate.
Only the transfers of real estates situated in the Czech republic are subject to the real estate transfer tax. The tax rate for the real estate transfer tax is currently 4 % of the value of the transferred property.
In case the real estate is transferred by the trustee from the trust fund, the trust fund is the taxpayer, unless the contracting parties stipulate otherwise. Should the trust fund become the taxpayer, the buyer becomes a guarantor.
If the real estate is transferred to the trust fund, the seller is the taxpayer, unless the contracting parties stipulate otherwise. Should the seller become the taxpayer, the trust fund becomes a guarantor.
Profit. Payment from trust fund profits is income from capital assets and has a separate tax base for taxation at a special rate of 15%. Payment from profits is not defined by legislation. However, it can be assumed that this is the payment of profits generated by assets in the trust fund (e.g. income from the lease of real estate in the trust fund). Continue reading “Beneficiary income tax”
Trust funds are payers of corporate income tax. The subject of taxes does not include the trust fund’s income from dedicated property to the trust fund or from property to increase trust fund assets via a contract or last will. For the purpose of the Income Tax Act, it is assumed that a trust fund established under Czech law has its registered office in the Czech Republic and is thus a tax resident of the Czech Republic. Tax residents of the Czech Republic have tax obligations which apply both to income from sources in the Czech Republic, as well as from sources abroad.