Online consultation


Purpose of the foundation The Civil Code of the Czech Republic, which entered into force on 01.01.2014, introduced a trust fund definition into the Czech law.

A trust fund is not a legal entity, it is a property allocated by the founder. As a result of the foundation of a trust fund, the property of the founder becomes independent.

The foundation of a trust fund can be for private or public benefit as well as for investment purposes.

A trust fund has a charter that governs the activities of the fund, the procedure of appointing managers and beneficiaries, the conditions under which beneficiaries are entitled to use the property and profits of the fund. The charter is executed in the form of a notarial deed. The charter should clearly specify all the necessary provisions. All the possible situations should be foreseen in advance and recorded in it. The charter cannot be amended over the entire period of the trust fund’s existence (amendments are possible only by court order).

Any property may be contributed to the fund: real estate, cash, shares and membership interests in legal entities, securities, vehicles, jewelry, art objects, etc.

Any third party may contribute their property to the fund during the entire period of the fund’s existence.






There are three key components in the structure of a trust fund:



an individual or legal entity that has established the fund and transferred their/its property to the fund. The founder sets the conditions and rules of the fund.



an individual or legal entity in whose favour the fund has been established. 



an individual or an investment company. The manager is responsible for the activities of the fund. The activities of the manager are controlled by the founder and beneficiary. The manager is obliged to make transactions with the property that will maximise profits of the beneficiary. The manager receives remuneration for his activities, as a rule, the percentage specified in the agreement.



The Trust Fund Advantages:


  • A trust fund provides new opportunities for individuals who would like to be sure that the heirs will properly manage the property. With the help of the fund, the testator will go beyond the framework of inheritance law. For example, not only heirs, but also beneficiaries will be provided with money. This is an excellent alternative to probate.
  • A trust fund provides new opportunities for individuals who intend, for whatever reason, to rid themselves of the burden of managing their property.
  • Trust funds reliably protect assets. For example, a parent can establish a fund by means of a monthly contribution of a certain amount that a child will be able to receive when certain conditions occur (graduation of the higher education institutions, reaching the statutory age, etc.).
  • The fund assets are not subject to enforcement of creditors' claims.
  • The fund assets are not common property of spouses and are not divided upon divorce.
  • A trust fund can be created in favor of a person who cannot independently manage assets. In this case, special conditions are set to define that they are entitled to use the fund's profits exclusively for certain purposes.
  • A trust fund has the right to undertake entrepreneurial activity.
  • Taxation is similar to a legal entity taxation.





  • Trust funds are taxed in a similar way to a limited liability company.
  • The Act on Accounting applies to trust funds, all types of taxes apply to them.
  • Accounting From the date of foundation, the fund is obliged to keep accounting records. The fund manager is responsible for the accounting.
  • Income tax  Profits from the property allocated by the founder at the foundation or subsequent contributions of property to the fund is not subject to income tax. All other types of profits are taxed. The income tax rate is equal to the tax rate for trade corporations - 19%.
  • Distribution of profits to the beneficiaries. It is taxed at a rate of 15%, there are exceptions when profits are not taxed.
  • Real estate tax. A trust fund may receive real estate when the founder allocates their property at the foundation or subsequently by increasing the property of the fund. Real estate tax is not paid in this case. In the case of real estate purchase, the real estate tax is to be paid at a tax rate on the date of the purchase. In the case of gratuitous transfer of real estate in the name of the beneficiary, the beneficiary does not pay the acquisition tax.
  • Real estate tax is to be paid annually by a trust fund in the same way as other property owners do.
  • Value added tax- A trust fund may be registered as a VAT payer (voluntarily or by law). The tax is paid in the same way as for legal entities.





© Prague Lawyer, 2015 — 2020