Legal and Tax Pitfalls for Czech Owners of Real Estate Abroad

Why foreign real estate is risky for Czech owners

The issue is that Czech regulations do not apply beyond the borders of the Czech Republic, and likewise you cannot automatically apply Czech legal practice to a property in Madrid or Miami. The attorneys at ARROWS advokátní kancelář deal with Czech owners of foreign real estate and their issues on a daily basis.

What legal systems you can expect

Spain, Dubai, and the USA do not just have different laws—they have entirely different legal systems. Spain is part of the European Union, which brings a certain degree of harmonisation (e.g., in the recognition of judgments), but property law remains within national competence. Dubai (UAE) operates as an emirate with its own legal order, combining Sharia principles with modern commercial legislation.

The USA consists of fifty states, each with its own real estate legislation, and the risk lies in not realising which specific state statutes apply to your property.

The lawyers at ARROWS advokátní kancelář have long-standing experience in handling international matters. Thanks to the global ARROWS International network, they can provide expert legal advice and representation in these areas, including practical contacts with local authorities.

Surprises can arise already at the purchase stage

A major challenge is the purchase phase, because the Czech legal tradition relies on the Land Registry (Katastr nemovitostí) and the principle of material publicity, whereas abroad the process works differently. In Spain, purchasing real estate is a two-stage process, and the key step is registration in the Registro de la Propiedad (property register), which differs from the Catastro (tax/mapping cadastre).

In the USA, you need to address Title Insurance (insurance against defects in title), local registry entries (deed recording), and in Dubai there is a specific registration process with the Dubai Land Department (DLD) with its own rules.

If you do not prepare properly, you risk ending up with a property burdened by debts, liens, or hidden easements. Abroad, the level of your responsibility (caveat emptor) is often higher, and without qualified assistance you may incur significant financial losses.

Renting out a property abroad – legislative pitfalls

Once you buy property abroad, you will often want to rent it out—whether for passive income or to ensure ongoing maintenance. However, renting is highly regulated in every country, and this is exactly where Czech owners are in for a number of surprises.

Spain: differences between autonomous communities

In Spain, long-term rentals are governed by the Urban Leases Act (Ley de Arrendamientos Urbanos - LAU), but regulation of short-term (tourist) rentals falls within the competence of the individual autonomous communities. The conditions for obtaining a tourist licence in Barcelona are therefore radically different from those in Alicante.

Specific issues include caps on rent levels in so-called “stressed zones”, mandatory registration of tourist rentals, compulsory insurance, and energy certificates. If you rent out a property without the relevant tourist licence or fail to submit the required tax filings, you may face substantial fines from the authorities.

USA: the state is the law—and it changes

In the USA, rental regulation is a matter of state and local government (Landlord-Tenant Law). If you own property in California, California laws apply to you and are very tenant-protective, whereas in Florida the legislation is more balanced.

A major challenge is rental management, which requires knowledge of the US legal system and procedures for enforcing rent payments. Breaching rules—such as unauthorised entry into the property—can lead to a damages claim.

Dubai: the Ejari system and obligations

In Dubai, specific rules apply to foreigners, and rentals are regulated by RERA (Real Estate Regulatory Agency). Registration of the lease agreement in the Ejari system is essential; without it, the lease is not legally enforceable.

ARROWS’ Prague-based law firm can provide a legal opinion tailored to your specific situation, the drafting and review of lease agreements, and advice reflecting the applicable local legislation. This also includes the specifics of short-term rentals (holiday homes), which require a licence from the DTCM.

Remote property management and maintenance

Owning property in Spain, Dubai, or the USA is one thing – managing and maintaining it is another. If you own a property that you rent out, you must ensure it is in good condition and meets all local safety and hygiene standards.

How to find a reliable property manager

Many Czech owners arrange rentals through a Property Management Company, but the quality of these firms varies. If you do not choose the right team, you risk unnecessary costs for fictitious maintenance, poor handling of income, and breaches of local regulations.

Protection against fraud

With remote management, you are vulnerable to fraud, where a manager may “forget” to forward rent or charge you for non-existent repairs. In some countries, legal enforcement of damages against such a manager is very difficult without a high-quality contract in place in advance (a Property Management Agreement).

What looks like a simple rental is, in reality, a complex legal relationship, and it is better to have control mechanisms set up from the outset. ARROWS’ Prague-based attorneys regularly handle cases where Czech owners discovered management issues only once significant damage had already occurred.

Local certificates and requirements

Each country has specific requirements for placing a property on the market. In the EU, for example, this includes an Energy Performance Certificate (EPC), while in Dubai service charges must be paid; otherwise, access to the property or services may be restricted.

Tax obligations – you cannot avoid the Czech tax authority

Many Czech owners mistakenly believe that if they buy property abroad, they only pay taxes there. However, as a tax resident of the Czech Republic, you are obliged to tax your worldwide income, including income from renting abroad.

Czech tax obligation

If you have tax domicile in the Czech Republic, you must file a Czech personal income tax return and report gross income from renting abroad. You must also claim expenses and prevent double taxation by applying the method set out in the relevant Double Taxation Treaty.

This requires knowledge not only of Czech legislation, but also of the applicable international treaty, to avoid incorrect taxation.

Tax obligations in the country where the property is located

In the country where the property is located, there is usually an obligation to register and pay non-resident income tax. In Spain, this is the IRNR tax; in the USA, a 1040-NR tax return is filed; and in Dubai it is necessary to monitor municipality fees.

If you do not address your tax obligations correctly, you risk penalties, late-payment interest, and in extreme cases even criminal liability for tax evasion.

Tax treaties and double taxation relief

The Czech Republic has tax treaties with Spain, the USA, and the United Arab Emirates that determine taxing rights. Incorrect application of the method (e.g., tax credit vs. exemption) may result in you paying unnecessarily too much, or conversely too little and exposing yourself to sanctions.

Specific examples: what can happen and when the problem arises

Imagine the situation of a Czech entrepreneur who bought an apartment in Barcelona for EUR 300,000 and rents it out “under the table” to tourists via Airbnb without a licence. After being reported by neighbours, he receives a fine of EUR 60,000 from the city, a ban on the activity, and in addition the Spanish tax authority assesses additional tax on his profits.

The second example concerns a Czech investor who bought a house in Florida, rents it out for two years, but does not file a US tax return because she relies on the property management company. When selling the property, she finds out that due to the FIRPTA rules the buyer must withhold up to 15% of the sale price as an advance tax payment, and she must retrospectively resolve all unfiled returns under threat of penalties.

ARROWS’ Prague-based attorneys handle such cases and know how to prevent them. That is precisely why it is better to secure expert advice at the very beginning, so that similar situations do not arise at all.

What risks a Czech owner may face

International presence and cooperation options

If you own or plan to buy property in Spain, Dubai, or the USA, you should be aware that the right solution requires local expertise. The attorneys at ARROWS, a Prague-based law firm, have access to the ARROWS International network, which covers key regions.

This means you do not have to search for a lawyer in Barcelona or Miami yourself, because ARROWS, a Prague-based law firm, will arrange representation through its vetted partners. Coordination of the approach and ensuring that your interests are protected is handled by our Czech legal team, backed by high-level professional indemnity insurance.

Conclusion

Owning property abroad is an attractive investment, but it comes with complex legal and tax challenges. Lack of knowledge of local legislation—whether it is the Ley de Arrendamientos Urbanos, RERA regulations, or US statutes—leads to fines and losses.

If you want to save time and money, do not hesitate to contact consultation@arws.cz to request a consultation. ARROWS attorneys in Prague will provide you with comprehensive legal services.

Read also:

• Taxation of foreign investments 2026: How to correctly declare income from abroad and avoid the risk of double taxation
• Investing in Dubai and tax residency 2026: Avoid Double Taxation and Assessments
• Czech Real Estate VAT 2026: Tax Risks in Leasing vs Sale
• Tax aspects of large inheritances 2026: Hidden tax risk when selling inherited property
• Claiming Tax Losses in the Czech Republic in 2026: Rules and Risks