– by contract or by a mortis causa trust disposition (in the event of death) between the trust founder and the trustee. The founder separates the property from its ownership and the trustee holds and administers the property; the trustee must accept the authorization to manage the property. The property itself does not belong to anyone, has no owner, and is set aside in independent ownership. Ownership rights are exercised by the trustee. The trust has no legal personality.
– by entry into the register of trusts, or upon the testator’s death (in such case, it is subsequently entered into the register)
Each trust must have its own statute issued by the founder. The statute must take the form of a public deed and contain at least:
– name of the trust (incl. the words “svěřenský fond”);
– identification of the property comprising the trust at its creation;
– definition of the purpose of the trust (private or public benefit);
– conditions for drawing benefits from the trust;
– duration of the trust; if not stated, it is established for an indefinite period;
– if the trust is intended for the benefit of a certain person, specification of the beneficiary or the manner in which the beneficiary will be determined (including the initiation date);
– number of trustees and their modus agendi (manner of operation).
– natural person/legal entity, issues the statute, appoints and removes trustees, may assume multiple roles
– a legally capable natural person, or a legal entity, if the law so provides. The founder and/or the beneficiary may also serve as a trustee, but in that case, a second trustee is required, and they act jointly. The trustee is appointed and removed by the founder.
Beneficiary (if the trust is set up for a private purpose)
– determined by the founder/statute/trustee (if not specified by the founder). The beneficiary (natural or legal person) is the recipient of the trust benefits. There can be more than one beneficiary. The beneficiary must be entered into the register of trusts.
– performed by the founder and the beneficiary, or other persons designated according to the statute, and in cases stipulated by law also by another person, group of persons, or a public authority. The founder, the beneficiary, or a person with legal interest therein may move for a court to order the trustee to take a certain act, to dismiss the trustee, to appoint a new one, or invoke the nullity of an act detrimental to the trust.
– if the trust property is increased by a contract or a mortis causa disposition by a third party, such person does not become the trust founder.
– the court may, at the request of a person with legal interest, terminate the trust, if its purpose cannot be fulfilled or is difficult to achieve, especially due to circumstances unknown or unforeseeable to the founder. In the case of a public benefit purpose, the court may replace the original purpose with a similar one. The court may also amend the statute of the trust accordingly in order to better achieve the purpose.
The administration of the trust ends by the lapse of time, the achievement of its purpose, by a court decision, or if all beneficiaries waive the right to benefit from the trust.
Upon termination of the trust administration, the trustee shall release the property to the authorized person. Unless stipulated otherwise, the beneficiary is deemed to be the authorized person. If there is no beneficiary, then the trust property shall be released to the founder; if there is no founder, the property will devolve to the state. The trust itself terminates upon release of the trust property.
If the public benefit purpose cannot be fulfilled, the court, upon the trustee’s motion, will transfer the property to another trust or into the ownership of a legal entity whose purpose is as close as possible to the original purpose of the trust. However, if the statute stipulates the manner of disposal of the property upon the trust’s termination, such decision cannot be issued. This also results in the termination of the trust itself.
The trustee must then submit an application for strike off of the trust from the register of trusts within 30 days.
Rights of beneficiaries
– the law does not expressly mention what happens to the right to benefit from the trust if the beneficiary dies. However, the statute may stipulate that if a particular person is not qualified to be a beneficiary (either dies or does not meet the specified conditions), another person shall become a new beneficiary. The statute will, therefore, define the group of entitled persons who will become or may become beneficiaries in the future. The trustee then selects beneficiaries from this group. In general, the trust founder has great autonomy and may describe all these situations in detail in the statute of the trust.
If none of the beneficiaries is eligible and none of the entitled persons remains, the administration of the trust probably ceases to exist (by analogy with “all beneficiaries waive the right to benefit from the trust”, or by analogy to “the purpose cannot be achieved”), and the trustee releases the trust property to the founder. If the founder is not alive, then the property will devolve to the state.
– the trust is a payer of corporate income tax, and is obliged to register for corporate income tax. The trustee fulfills the obligations set out for the tax subject – the trust. The registration procedure is the same as other tax subjects – i.e., the trustee is obliged to submit an application for tax registration of the legal entity in cases stipulated by law. An integral part of the application are copies of the trust statute, documents evidencing the date of the trust’s establishment and other documents evidencing information provided in the application for registration.
As the trust does not have a registered seat, it is not possible to determine the local jurisdiction of the tax administrator pursuant to Section 13 (1) (b) of the Tax Code. The local jurisdiction is instead determined pursuant to Section 12 (1) of Act No. 456/2011 Coll., on the Financial Administration of the Czech Republic, as amended, according to which the Tax Office for the Capital City of Prague has competent local jurisdiction, while the Regional Office for Prague 7 is the branch office in charge.
Under Act No. 586/1992 Coll., the Income Tax Act, the income of the trust beneficiaries arising from the allocated trust property (i) placed on trust or (ii) increased by a mortis causa disposition is exempt from personal income tax. The Income Tax Act further contains numerous provisions which address trust taxation.
Administration of third-party property
Given the nature of the role of the trustee, the trustee’s activities are governed by the general provisions on the management of third-party property specified in Sections 1400 – 1447 of Act No. 89/2012 Coll., the Civil Code.
At present, the entry of a trust into the public register or its modifications are exempt from court fees. However, on February 17, 2020, the Government approved an act amending Act No. 549/1991 Coll., on Court Fees and Certain Other Acts, and submitted it to the Chamber of Deputies for the legislative process. The draft law also proposes a charge for the first registration of a trust, as well as its modifications.