Parents helping you buy a Czech home: gift or loan?

Your parents offer CZK 1.5 million so you can reserve an apartment. They call it “help”; your partner calls it the shared deposit; one sibling calls it an advance on inheritance. The bank asks where the money came from. Do not send it to escrow until everyone can answer the same question: is this a gift, loan, ownership investment or collateral arrangement?

1. A gift: no repayment and no hidden ownership promise

Under the Civil Code, a gift requires the donor to give or promise something without payment and the recipient to accept it. Czech government guidance confirms that a gift agreement may be oral in some cases, but must be written where delivery does not occur at the same time as the agreement. For a home deposit, a written agreement is the sensible evidence even where the money could legally be handed over immediately.

• Identify every donor and the exact recipient—not merely “the young couple”.
• State the amount, currency, housing purpose, bank accounts and transfer date.
• Say expressly that no repayment, interest, ownership share or right to control the home is expected.
• Record whether the gift is for the recipient alone or for both members of a couple.
• Attach or preserve the transfer confirmation and documents supporting the parents’ source of funds.

A gift is not absolutely irreversible. The official government guide describes the Civil Code’s exceptional revocation routes for the donor’s need and the recipient’s ingratitude. Those are not a substitute for writing “repayable on demand” into an alleged gift. If parents want money back in ordinary circumstances, use a loan.

Does a child pay tax on money gifted by parents?

The Financial Administration confirms that a gratuitous receipt from a direct-line relative, such as parent to child, is exempt from Czech personal income tax under Section 10(3)(c)(1) of the Income Tax Act. It is not included in the recipient’s tax return merely because it was received.

The parent’s sale of investments or property to raise the money is a separate tax event for the parent. The child’s exemption does not make the parent’s underlying disposal automatically exempt.

2. A family loan: disclose the debt and make it executable

If repayment is expected, use a written family-loan agreement. Czech law calls this a zápůjčka where fungible things such as money are transferred for later return. The agreement should not leave the most important terms to family memory.

• Lender, borrower, amount, currency, drawdown account and proof of transfer.
• Purpose and whether the money may be paid directly into purchase escrow.
• Interest-free or interest-bearing status, instalments, final maturity and voluntary prepayment.
• What happens on missed payment, sale, separation, death, disability or mortgage refinancing.
• Whether the loan is unsecured, guaranteed or secured, and what the mortgage bank must approve.
• Whether parents may demand early repayment and whether the debt passes into an estate.

Do not tell the bank it is a gift while privately promising repayment. A lender assessing creditworthiness considers income, expenditure, assets and liabilities. How a particular bank treats a subordinated, deferred or interest-free family loan is lender-specific, but the debt and payment obligation must be disclosed accurately before approval. Your family agreement does not change the mortgage bank’s rights.

3. Co-ownership: use it only when parents really want title

Funding part of the price does not create ownership. If parents are meant to own 15% of the apartment, they must participate in the acquisition with that share and be registered accordingly. That turns “help” into a long-term property relationship involving management, expenses, sale decisions, succession and potentially a later buyout.

• Set the exact share and connect it to the price contribution without calling the share a repayment guarantee.
• Agree who may live in or rent the home and whether the parent receives any rent or occupation compensation.
• Allocate services, insurance, tax, repairs, improvements and voting.
• Write the valuation and finance process for a later child buyout.
• Plan what happens if a parent dies, divorces, is enforced against or needs the money back.

If the actual intention is repayment of a fixed amount, co-ownership may create much broader rights and risks than needed. If the intention is a share of future value, a disguised “loan” may not express it honestly. Have a Czech property lawyer align the purchase, co-ownership, mortgage and exit documents.

4. Parents’ home as collateral: not free own funds

A lender may accept another property as additional security, subject to its own valuation and underwriting. The parent who owns that property may become a pledgor without becoming an owner of the child’s new apartment; borrower, owner and pledgor are separate roles. If the mortgage is not paid, the pledged parental home is exposed to enforcement under the security documents.

Before using this route, obtain the bank’s written conditions for releasing the parents’ property: required loan balance or LTV, valuation method, fees, timing and documents. Do not rely on “we will remove the parents’ house after two years” unless that exit is supported by the signed loan terms or a bank confirmation.

Who exactly receives the gift matters for couples

A gift to one spouse is generally excluded from statutory Czech community property; a gift to both spouses is a different instruction. But a gift agreement naming one spouse does not, by itself, answer the ownership of a home then purchased, how separate funds were used, or what reimbursement may be due on settlement. The purchase structure, title, money trail and matrimonial regime must be reviewed together.

For an unmarried couple there is no community property. Decide whether the parents’ gift changes the child’s registered share or creates only an internal balancing claim. The unmarried-couple purchase guide covers unequal deposits, loan liability, breakup and death.

What will the bank, escrow holder or broker ask for?

Requirements depend on the institution and risk profile. The Financial Analytical Office’s current source-of-funds methodology lists a contract plus information about the donor, relationship, purpose and source of donated funds as possible gift evidence. For a private loan, it lists the amount, purpose, creditor, date, maturity, security and the contract. Prepare a clean chain instead of moving cash through several unexplained accounts.

• Signed gift or loan agreement with the final parties and amount.
• Parents’ account statement showing the outgoing transfer and the recipient’s statement showing receipt.
• Evidence of the parents’ underlying source where requested, such as savings, sale proceeds or inheritance.
• Mortgage application information consistent with the family agreement and purchase documents.
• Tax-notification evidence where the exempt-receipt rule applies.
• Escrow instructions showing whose money pays which part of the price.

Ask the mortgage lender for its exact list before signing the reservation. AML checks are risk-based, and another bank, lawyer or escrow provider can reasonably request different evidence.

Siblings and inheritance: do not settle it with one vague sentence

“This will come out of your inheritance” can mean several different legal outcomes. Civil Code Sections 1660–1664 contain rules on bringing certain gratuitous benefits into account for compulsory and inheritance shares, while a will or inheritance contract and the family facts can matter. The parents should tell a Czech notary whether they intend an ordinary gift, an equalisation between children or another estate plan.

Keep the gift agreement, transfer evidence and later estate documents consistent. A sibling’s informal consent today does not replace the donor’s valid estate planning and does not resolve a future dispute about what was given, to whom and on what terms.

The family meeting before paying a reservation fee

• Name the route: gift, loan, registered share or collateral support—never “we will decide later”.
• Name every role: donor, recipient, lender, borrower, buyer, owner, co-borrower and pledgor.
• Stress the bad cases: mortgage rejection, low valuation, breakup, missed payments, forced sale, parental need and death.
• Get lender confirmation: accepted structure, required documents, effect on affordability and conditions for releasing family collateral.
• Coordinate documents: family agreement, reservation, purchase contract, escrow, mortgage, title and estate planning.

Build the full acquisition budget first with the Czech mortgage affordability guide. The family contribution should improve a safe plan, not disguise a price the household cannot carry after the parents’ money has been spent.