How to Start a Real Estate Business: Real Estate Brokerage vs. Investment Property

Renting and selling real estate can generate attractive income, but it’s important to ensure that your business license, taxes, and VAT are properly set up. We’ll explain how long-term rentals, short-term accommodations, and the work of a real estate agent differ in this regard.

Three ways to start a real estate business

If you’re considering entering the real estate market, you generally have three basic options to choose from:

The Work of a Real Estate Agent: What Does Real Estate Brokerage Entail?

Are you drawn to the exciting world of real estate and wondering how to get started as a real estate agent? While you can often avoid registering a business entirely when renting out your own apartment, the situation is significantly different when brokering the sale of real estate.

As a professional real estate broker, you help sellers and buyers or landlords and tenants close a suitable deal. If you’re wondering when you need a business license, the answer is clear—you need it from day one. Moreover, this is not “ordinary” self-employment, because the law strictly states that real estate brokerage is a regulated trade and has its own precise rules.

So if you’re currently figuring out how to become a real estate agent, you must also meet the legal requirements for professional competence to obtain a business license: without relevant experience, education in the field, or certified exams—or a responsible representative—you simply cannot legally practice this attractive profession. In addition, professional liability insurance for real estate agents is mandatory for you, so be sure to arrange it in a timely manner.

Do you need a business license if you rent out an apartment?

The answer is: It depends on exactly what you’re doing.

If you rent an apartment to a single person or a family for a longer period, draw up a lease agreement, and only provide water, heat, trash removal, or cleaning of common areas, you do not need a business license. The state considers these activities to be basic services associated with renting. It is therefore a standard rental arrangement and not a business.

However, as soon as you start hosting guests for short stays, provide apartment cleaning, wash linens, or restock toiletries, you are effectively running a small hotel and thus a business.

The law does not take the name of the contract into account. It is not enough to write “apartment rental for a month” in an ad if you are actually offering short-term stays and full service. What matters is the actual nature of your business activity. The tax authorities note that short-term accommodation provided in your own name cannot be classified under Section 9 of the Income Tax Act as rental income, but falls under Section 7 as a separate activity—that is, a business operated under a trade license.

How to properly tax income from real estate business?

If you operate as a real estate agent under the self-employed (OSVČ) regime (you are not an employee of anyone), you can choose one of four options for taxing business income.

From your net profit—that is, the difference between income and expenses—you will pay a 15% income tax, and you must not forget to pay social security and health insurance contributions.

For long-term rentals to individuals, you fall under the provisions of Section 9 of the Income Tax Act. You can claim actual expenses or use a flat-rate expense deduction of 30% of your income, up to a maximum of CZK 600,000. For smaller landlords, this is the simplest option—you don’t have to register a business or deal with accounting paperwork just for one apartment.

Conversely, short-term accommodation services that you operate directly or through online platforms such as Airbnb or Booking, as well as the rental of commercial real estate, fall under Section 7 of the Income Tax Act as income from self-employment (business). In practice, this means you must register a free trade and often keep records of income and related expenses using tax records or accounting. If such business is your main source of income, don’t forget to pay self-employed contributions in this case as well.

Also be mindful of VAT: what should you keep track of?

Long-term property rentals are exempt from VAT under Section 56a of the VAT Act. Different rules apply to accommodation services: this is a service and therefore a taxable supply, which currently falls under the reduced rate of 12%.

Turnover for VAT payers is no longer calculated over any 12-month period retroactively, but is strictly tracked on a calendar-year basis (from January to December). You currently need to monitor two thresholds:

• CZK 2,000,000: If you exceed this turnover during the year, you will become a VAT payer as of January 1 of the following year (you have time to prepare).
• CZK 2,536,500: This amount corresponds to the EU-wide limit of EUR 100,000. If your business grows to the point where you exceed this second threshold, you become a VAT payer immediately.

Short-term accommodation through platforms hides one more detail. If Airbnb or Booking charges you a commission as a service from abroad, you become a so-called identified person for VAT purposes. This is exactly the moment when it makes sense to consult a tax advisor and have your tax affairs reviewed.

Real-life example: the same apartment, two completely different situations

Imagine you own a one-bedroom apartment in Brno. You can handle it in two ways that may not seem very different at first glance, but from the authorities’ perspective, they are different situations:

When does it make sense to set up a limited liability company (s.r.o.) for real estate business?

Beginning landlords often think that an s.r.o. automatically means lower taxes. In practice, this is not the case. If you have a single long-term lease, it makes the most sense to tax this income as a natural person.

On the other hand, you should establish a limited liability company when:

• you are building a larger portfolio and purchasing additional properties,
• you’re entering the business with others (whether an investor or a co-founder—in an LLC, you can clearly and securely handle ownership shares, profit distribution, and mutual liability and responsibility for debts),
• you plan to reinvest profits into other projects (so-called “flips”),
• you are launching a development project.

We’ll help you succeed in real estate without unnecessary mistakes

Not sure whether to choose a sole proprietorship or a limited liability company (s.r.o.) to start your real estate business? We’ll help you choose the right business structure and take care of everything from A to Z, including providing a virtual office.

Focus on your real estate portfolio; leave the paperwork and legal details to us. Just reach out to us via the contact form below.