Exemption of income from sale of securities and shares in corporations restricted from 1 January 2025
From 1 January 2025, income from the sale of securities and shares in corporations meeting the time test of three years for securities and five years for shareholdings will be exempt from personal income tax only up to CZK 40 million per taxpayer in a taxable period.
The aggregate income threshold of CZK 40 million will only apply to income from securities and shares in corporations that meet the conditions of the time test for tax exemption. If the time test for holding a security or a share in a corporation is met and at the same time the aggregate gross income in the taxable period does not exceed CZK 40 million, then such income will be fully exempt from personal income tax. However, if the aggregate income exceeds CZK 40 million, such income will be exempt from personal income tax only partly, i.e., only to the extent not exceeding CZK 40 million. The taxable income may then be reduced by expenses demonstrably incurred to generate such income in an amount corresponding to the proportion in which the income exceeds the CZK 40 million threshold.
Example
A personal income tax payer generates income from the sale of a share in a corporation exempt based on the time test and amounting to CZK 21 million and income from the sale of a security exempt based on the time test and amounting to CZK 39 million. The aggregate income totals CZK 60 million.
The acquisition cost of the share in a corporation was CZK 9 million, while the purchase price of the security was CZK 36 million. The taxpayer does not generate any other income from the sale of securities or from the transfer of shares in corporations.
Shares in corporations |
Securities | |
| Income meeting the time test |
CZK 21 million | CZK 39 million |
| Acquisition cost/purchase price |
CZK 9 million | CZK 36 million |
The income from the sale of the share in a corporation that will now be tax exempt amounts to CZK 14 million, i.e. (CZK 40 million / CZK 60 million) * CZK 21 million, while CZK 7 million, i.e. (CZK 20 million / CZK 60 million) * CZK 21 million will be included in the tax base. Similarly, income from the sale of the security that will now be tax exempt amounts to CZK 26 million, i.e. (CZK 40 million / CZK 60 million) * CZK 39 million and CZK 13 million, i.e. (CZK 20 million / CZK 60 million) * CZK 39 million will be included in the tax base.
The income from the sale may be reduced by the expenses demonstrably incurred in generating such income in the same proportion as that used for calculating taxable income. For the sale of the share in a corporation, expenses would amount to CZK 3 million, i.e. (CZK 20 million / CZK 60 million) * CZK 9 million and for the sale of the security, expenses would amount to CZK 12 million, i.e. (CZK 20 million / CZK 60 million) * CZK 36 million.
Shares in corporations |
Securities | |
|---|---|---|
| Exempt income | CZK 14 million | CZK 26 million |
| Income to be taxed | CZK 7 million | CZK 13 million |
| Eligible expenses | CZK 3 million | CZK 12 million |
The partial tax base for income from the sale of the security is CZK 1 million, and the partial tax base for the sale of the share in a corporation is CZK 4 million.
Revaluation of claimed expenses
The acquisition cost/purchase price of a security or a share in a corporation acquired before 31 December 2024 and included as income in the tax base due to exceeding the limit of CZK 40 million may be remeasured to market value under certain conditions.
A taxpayer who sells securities or shares in corporations (acquired before 31 December 2024) after the effective date of this act may claim as an expense the market value as at 31 December 2024. A taxpayer who sells securities or shares in corporations in a taxable period beginning before the effective date of this act but receives the income after the effective date (e.g., payment is agreed to in instalments) may claim as an expense the market value as at 31 December 2024 or the market value as at the date of sale.