According to Act No. 185/2001 Coll., on waste, there is an obligation to dispose of used motor oil in an ecological manner; its disposal by pouring into nature, sewage, or inappropriate burning, etc., is not permissible. Likewise, you cannot paint a fence with this motor oil.
Used oil is waste oil within the meaning of Section 3 and Section 28 of the Waste Act. It should only be handed over to a facility that has a permit for waste management, i.e. that is intended for the collection or use of this waste (i.e. to an authorized person who has been granted permission to operate the facility by the relevant regional office). Another option where waste oils can be sent are so-called waste oil take-back sites.
If the originator of the used oil transfers the waste to an entity other than the one mentioned above, this is a significant violation of the Waste Act and may be fined up to CZK 10 million. At the same time, a natural person may be fined up to CZK 1 million for unauthorized acceptance of waste (used oil), and a legal entity up to CZK 10 million.
Based on the above, it can be concluded that the handling of used oil as described in your question is contrary to the obligations imposed by the Waste Act, and for this both the generator of the waste and the entity (citizen) who would take over the waste are at risk of sanctions.