Czech Full Tax 2026 Exemption on Share Sales After CZK 40m Cap Ends

Legislative context and rules for 2026

To understand the situation in 2026, we must start from the current wording of the Czech Income Taxes Act after its amendment. As of 1 January 2025, the consolidation package introduced a cap on the exemption of income from the sale of securities and ownership interests in the amount of CZK 40 million per taxpayer per tax period. 

This measure triggered strong criticism from the business community and experts alike. Members of Parliament, following a proposal by the Senate, voted that the CZK 40 million limit for ownership interests and shares would be abolished as of 1 January 2026. For crypto-assets, the CZK 40 million limit, by contrast, remains in place. You can read about the 2025 adjustment HERE – and in the article below about the current situation in 2026. 

2026 therefore brings a return to an unlimited exemption of income from the sale of ownership interests and shares – similar to the regime that applied before 2025. When planning the sale of an ownership interest (including setting the transaction structure and documentation for the time test), the legal steps around company sales and transaction advisory are typically addressed as well. At the same time, the legislator preserved a transitional provision allowing an expert valuation report as of 31 December 2024 to be used as the acquisition price for cases where the time test would not be met.

What applies and what has changed

The tax regime for 2026 can be summarised in several key points.

Full exemption after meeting the time test (no cap): If you sell a company for CZK 100, 200 or 500 million and you have held it for 5 years, the entire income is exempt from Czech personal income tax. No part of the income is taxed due to exceeding the CZK 40 million cap.

An important factor remains the time test, which must be met to apply the exemption. It still applies that you must hold an ownership interest for at least 5 years and a security (a share) for at least 3 years. If you do not meet the time test, the income does not fall out of taxation – and this is where an expert valuation report as of 31 December 2024 can be very important (see below).

The limit for minor income remains in place for 2026 as well. If the aggregate income from the sale of all securities in a given calendar year does not exceed CZK 100,000, it is exempt from tax regardless of the holding period.

A major specific feature compared to shares and ownership interests is the taxation of cryptocurrencies. For a practical assessment of when a loss or an uncollectible amount can be claimed for tax purposes, the follow-up analysis in the article Unpaid B2B receivables: When can you claim an invoice loss as a tax-deductible expense and meet the tax authority’s strict conditions may also be useful. Crypto-assets are subject to the CZK 40 million exemption limit – this has remained in place for them, while it was abolished for shares and ownership interests. At the same time, as of 15 February 2025, a 3-year time test applies to crypto-assets (Section 4(1)(w) of the Czech Income Taxes Act) and an annual value limit of CZK 100,000 (Section 4(1)(x) of the Czech Income Taxes Act).

Related legislative questions

1. Why was the limit abolished?
The CZK 40 million limit was criticised as a brake on entrepreneurship, the capital market, and family businesses. The Senate proposed its abolition and the Chamber of Deputies adopted the proposal – so the limit for sales of ownership interests and shares effectively applied for only a single year (2025).

2. Do the rules apply automatically, or do I have to do something actively?
The exemption applies automatically if you meet the time test. What is not automatic, however, is applying the correct acquisition price in case the time test is not met. Here, action on the taxpayer’s side is necessary, typically obtaining an expert valuation report. In practice, the broader setup of the ownership structure and transferability of ownership interests is also often addressed, where corporate law, holdings and structures can help.

3. Should I accelerate the sale or postpone it?
From a legislative perspective, the rules in 2026 are significantly more favourable than in 2025 – the CZK 40 million limit for shares and ownership interests does not apply. The key is to meet the time test and set up the documentation correctly. The attorneys at ARROWS advokátní kancelář deal with these strategies daily and can help you with a specific analysis.

Practical impacts and tax calculation

Let’s illustrate the situation with a specific example. Assume you own an ownership interest in an s.r.o. that you established in January 2021 with a contribution of CZK 200,000. In January 2026, you sell the company for CZK 100 million and you meet the 5-year time test.

Calculation in 2026 (after abolition of the limit):
Income: CZK 100 million.
Exempt: CZK 100 million (time test met, no limit exists).
Tax liability on the sale: CZK 0. However, if in a specific reorganisation or transfer of ownership interests you are also dealing with related tax implications, the article Tax implications of mergers and spin-offs: How to comply with the rules for tax neutrality when reorganising corporate structures may be useful.

Calculation in 2025 for comparison (at that time, the CZK 40 million limit still applied):
Income: CZK 100 million.
Exempt: CZK 40 million.
Taxable income: CZK 60 million.
Expense (proportionate part of the value as of 31 December 2024 according to an expert valuation report of CZK 90 million): CZK 90 million × (CZK 60 million / CZK 100 million) = CZK 54 million.
Tax base: CZK 6 million.
Tax (15%/23% rates): approx. CZK 1.3–1.4 million.

The result for 2026 is therefore fundamentally more advantageous for the seller.

The time test and how to evidence it

The basic condition for applying the exemption is meeting the time test. For ownership interests in an s.r.o. (Czech limited liability company), it is 5 years; for shares and securities, 3 years. The period between acquisition and the transfer for consideration is counted, with acquisition typically meaning the effective date of the agreement or registration in the relevant register. For interests acquired by inheritance, the decedent’s holding period is added to the heir’s holding period, provided the inheritance is in the direct line or between spouses.

The burden of proof always lies with the taxpayer. During an audit, the tax administrator will require agreements, extracts from registers, or confirmations from the custodian.

Expert valuation report and tax optimisation

The transitional provision of the law still applies and can be crucial in situations where the time test is not met (typically a sale of an interest held for less than 5 years). If you do not meet the conditions for full exemption, for interests and shares acquired before 2025 you may use, as an expense, their market value determined as of 31 December 2024.

In practice, this means you “lock in” the company’s non-taxable value as of that date. In the future, you will tax only the difference between the sale price and that value, not the entire historical acquisition cost. The report does not necessarily have to be prepared exactly in December 2024, but it must value the condition and value as of 31 December 2024. However, it is advisable to have it prepared as soon as possible while current data are still available.

No social security and health insurance contributions on the sale of interests

Income from the sale of ownership interests and securities by individuals falls under Section 10 of the Czech Income Taxes Act. No social security or health insurance contributions are paid on this income, provided it is not part of business assets.

This means that even if part of the income were subject to income tax (e.g., if the time test is not met), contributions of approximately 45% do not apply to this income.

Be careful in situations where you would carry out trading systematically as a business activity. For a one-off sale of a company, this risk does not arise, but for systematic trading it would be business income subject to contributions.

Progressive taxation and tax rates

For 2026, two personal income tax rates apply in the Czech Republic: 15% and 23%. The higher rate applies to the portion of the tax base exceeding 36 times the average wage.

The average wage for 2026 was set by Government Regulation No. 365/2025 Coll. at CZK 48,967. The threshold for applying the 23% rate for 2026 is therefore exactly CZK 1,762,812 per year (48,967 × 36).

If the income from the sale of a company were taxable (i.e., the time test is not met and an expert valuation report as of 31 December 2024 does not fully resolve the situation), the vast majority of the tax base exceeding CZK 1,762,812 will fall under the 23% rate.

Cryptocurrencies – specific rules

It is necessary to emphasise a fundamental difference between shares/ownership interests and cryptocurrencies in 2026:

• Shares and ownership interests: After meeting the time test (3 or 5 years, respectively) – full exemption with no limit.
• Cryptoassets: After meeting the 3-year time test – exemption, but only up to a limit of CZK 40 million per year. Above CZK 40 million, the income is taxable.
• Cryptoassets held for less than 3 years: Exempt only up to CZK 100,000 per year (value test).

Income from the sale of Bitcoin, Ethereum and other cryptoassets is taxable under Section 10 of the Czech Income Taxes Act. The time test for cryptoassets was introduced by Act No. 32/2025 Coll., effective from 15 February 2025.

A tax liability for cryptocurrencies also arises when exchanging one cryptocurrency for another, not only when converting into fiat currency. At the same time, exchanging a cryptoasset for another cryptoasset does not interrupt the time test.

Ownership structures and tax consequences

The sale of an interest is not always only about one individual. If you own an interest as spouses under the community property regime (SJM), the income is taxed only for one of them. The threshold for the reporting obligation is assessed separately in the case of spouses’ community property, and it is sufficient for one spouse to file the notification.

If you own the interest through a holding company, the tax regime is entirely different. The sale of an interest by a parent company in a subsidiary may be fully exempt from corporate income tax.

The condition for this exemption is usually holding at least a 10% interest for 12 months. In such a case, no limit applies and the exemption is unlimited. A holding structure is therefore often advantageous for larger transactions, but it requires longer-term planning.

Notification of exempt income

Even if you manage to sell a company so that the tax is zero, you still have a reporting obligation. If you receive exempt income exceeding CZK 5 million, you must notify the tax administrator of this fact. The notification must be filed within the deadline for filing the tax return for the relevant tax period.

The threshold for the reporting obligation is CZK 5,000,000—and each item of income is assessed separately, not in aggregate.

If you fail to comply with this obligation, you face a penalty of:

• 0.1% of the amount of unreported income (if you submit a late notification without being prompted),
• 10% of the amount (if you notify only upon the authority’s request),
• 15% of the amount (if you do not notify even upon request).

For a sale for CZK 30 million, a 15% penalty may amount to CZK 4.5 million. This is a formal step, and overlooking it can have fatal financial consequences.

Table of risks and solutions with ARROWS

Conclusion

The year 2026 brings a major change for the better for business owners and investors: the CZK 40 million cap for the exemption of income from the sale of ownership interests and shares has been abolished. If you meet the time test (5 years for ownership interests, 3 years for shares), the entire income from the sale is exempt from tax—regardless of the transaction value.

More specific rules apply to cryptoassets: there is a 3-year time test, but the CZK 40 million cap for the exemption remains in place.

The key to a smooth sale is meeting the time test, proper documentation, and not forgetting the notification obligation for income exceeding CZK 5 million. If the time test is not met, an expert valuation as of 31 December 2024 remains a valuable tool.

The lawyers and tax advisers at ARROWS advokátní kancelář have experience in structuring transactions to be tax-efficient and legally secure under Czech law. Contact us at consultation@arws.cz for a non-binding consultation regarding your situation.

Read also:

• Taxation of Business Interest Transfers in the Czech Republic in 2026
• Share Deal vs Asset Deal in the Czech Republic: Key Tax Implications for 2026
• Tax Implications of Mergers and Demergers in the Czech Republic
• Expansion via Share Deals in the Czech Republic: Legal Checklist for Safe Growth
• How to Structure Intercompany Agreements in a Holding to Avoid Disputes and Tax Risk