Changes to the Taxation of Income from the Transfer of an Interest in a Limited Liability Company and the Sale of Securities from 2025

What you need to know

|Attorney

Published:12/17/2024Updated:10/22/2026

In 2025, Czech tax rules capped the exemption for income from sales of shares and securities at CZK 40 million per tax period, even where the time test was met. For the taxable part, market value as at 31 December 2024 could be used as an expense. The article explains the 2025 regime, proportional expense allocation and notes that the cap was abolished from 2026.

Key takeaways

Income from the sale of shares and securities will be limited from 2025. As of 1 January 2025, individuals will only be exempt from tax on income from the sale of shares in a limited liability company (s.r.o.) and securities up to a total amount of CZK 40 million per tax period. Any amount exceeding this limit will be subject to taxation.
Exceeding the CZK 40 million limit will trigger taxation. If you sell a share for CZK 100 million in 2025 and meet the holding period test, CZK 40 million will be exempt, but the remaining CZK 60 million will be taxed at the standard personal income tax rates.
Market value can now be claimed as an expense. From 1 January 2025, to reduce the tax base for income exceeding the exemption limit, you may claim the market value of the shares or securities as of 31 December 2024, supported by an expert valuation report, instead of their acquisition cost.
Expenses are reduced proportionally to the taxable portion of the income. If your income from the transfer of shares or securities exceeds the CZK 40 million limit, the claimed expense (e.g., the market value) will be reduced in proportion to the part of the income that is subject to taxation.

Facing a similar situation?

Ing. Petra Hučíková, MBAProcesses and finance, partner

consultation@arws.cz +420 245 007 740

New rules from 1 January 2025

From 2025, income of natural persons from the sale of shares or securities will be exempt only up to the amount of CZK 40 million per tax period. The portion of income exceeding this limit will be taxed at the standard personal income tax rates.

Practical example:

If a taxpayer sells a share in an s.r.o. for CZK 100 million in 2025 and meets the holding period test, CZK 40 million will be tax-exempt, and the remaining CZK 60 million will be subject to taxation.

New option to claim market value as an expense

To reduce the tax base for income exceeding the exemption limit, from 1 January 2025 it will be possible to claim the market value of the share or securities as of 31 December 2024 instead of the acquisition cost. This value must be supported by an expert valuation report.

If the income from the transfer of a share or securities exceeds the exemption limit of CZK 40 million, the expense is reduced proportionally to the taxable portion of the income. The exempt portion of the income therefore does not "use up" the corresponding part of the expenses.

Practical example:

A taxpayer acquired a share in an s.r.o. in 2010 for CZK 10 million. According to an expert valuation report, this share has a market value of CZK 50 million as of 31 December 2024. In 2025, the taxpayer sells the share for CZK 100 million.

Exempt portion of income: Of the total amount of CZK 100 million, CZK 40 million is tax-exempt.
Taxable portion of income: The remaining CZK 60 million is subject to taxation.
Ratio of taxable income: 60/100 = 0.6 (i.e., 60% of the income is taxable).
Expense based on market value: The market value of the share as of 31 December 2024 is CZK 50 million. This expense must be reduced to 60% according to the ratio of the taxable portion of the income:
50 x 0.6 = CZK 30 million
Tax base: The taxable portion of income (CZK 60 million) is reduced by the proportional part of the expense (CZK 30 million). The tax base will be CZK 30 million.
Resulting tax: If the tax rate is 15%, the tax liability is CZK 4.5 million.

It is crucial to note that if the total income is below CZK 40 million, it is fully exempt, and no expense reduction is applied. If the expenses are higher than the taxable portion of the income, the excess expenses cannot be used or carried forward to subsequent periods. The option to use market value as an expense applies only to shares and securities acquired by 31 December 2024.

Frequently asked questions on the exemption of income from the sale of a share

1. How do I claim the market value of a share as an expense?

Use it instead of the acquisition cost if you include the income in the tax base only in part because of the CZK 40 million limit and you acquired the share by 31 December 2024. You determine the market value under the act governing the valuation of assets as of 31 December 2024 or, for a transfer before that date, as of the date of the transfer (Section 10(9)).

2. How are expenses reduced if the income is only partly exempt?

The expenses reduce the income only in the part corresponding to the ratio in which the income is not exempt (Section 10(4)). If the expenses related to one type of income exceed that income, the difference is disregarded.

3. When does the exemption not apply to a share acquired from business assets?

The exemption does not apply to income from the transfer of a share that was acquired from the taxpayer's business assets, for 5 years after the termination of the activity from which income from self-employment arises.

ARROWS law firm

consultation@arws.cz +420 245 007 740

Recommendations for taxpayers

Sale by the end of 2024: If you are planning a sale and meet the holding period test, consider completing the transaction by the end of 2024 to take advantage of the full tax exemption.
Staggered sale: Splitting the sale into multiple parts across different tax periods can help you stay below the annual limit of CZK 40 million.
Expert valuation report: Have an expert valuation report prepared for the market value of your share as of 31 December 2024 to optimise your tax liability.

We recommend carefully planning your sales strategies and consulting them with experts.

Impact on legal entities

For legal entities, the Income Tax Act does not introduce significant changes to the rules for taxing income from the transfer of shares from 1 January 2025. The following rules continue to apply:

Income from the transfer of shares is fully included in the tax base and is subject to a 21% rate.
Only the actual acquisition costs of the share can be claimed as an expense.
The exemption of income from the transfer of shares does not apply to legal entities

Exception: Transfers between parent and subsidiary companies

Income from the transfer of shares between a parent and a subsidiary company may be exempt from tax. This exception is based on European legislation (the Parent-Subsidiary Directive) and is implemented in Section 19 of the Czech Income Tax Act.

Main conditions for applying the exemption:

Shareholding: The parent company must hold at least a 10% share in the subsidiary's registered capital continuously for at least 12 months.
Legal form and tax residency: Both companies must be business corporations (e.g., s.r.o. or a.s.) and tax residents of an EU or EEA member state. The exemption does not apply if a company benefits from tax exemptions.
Beneficial ownership of income: The parent company must be the beneficial owner of the income from the transfer of the share, not merely an intermediary.

Conclusion

The changes in the taxation of income from the transfer of shares from 2025 can have a significant impact on your financial plans. If you need advice on how to prepare for them, claim the market value of a share, or optimise your tax burden, do not hesitate to contact us. We will be happy to help you find the most effective solution tailored to your situation.

Don't want to solve this problem on your own? The ARROWS law firm is trusted by more than 2,000 clients and we have been awarded Law Firm of the Year 2024. See our references HERE and it will be our honour to help you solve your problem. The initial inquiry is free of charge.

Frequently asked questions on the taxation of the sale of a share in an s.r.o.

1. When is income from the sale of a share in an s.r.o. exempt from income tax?

If the period between the acquisition of the share and its transfer for consideration exceeds 5 years (Section 4(1)(q)). The period is shortened by the time during which the share was demonstrably owned by a deceased person who was a relative in the direct line or a spouse, or during which the taxpayer was a member of the corporation before its transformation.

2. How much income remains exempt if CZK 40 million is exceeded?

The non-exempt part is the proportional part of each exempt income corresponding to the share of the portion of the total exceeding CZK 40,000,000 in the total exempt income in the tax period (Section 4(3)). With a total of CZK 100,000,000, CZK 40,000,000 therefore remains exempt and CZK 60,000,000 is taxed.

3. How is income from the sale of a share that is not exempt taxed?

It is other income from the transfer of a share in an s.r.o. The tax base is the income reduced by expenses; the expense is usually the acquisition cost of the share.

4. What tax rate applies?

The tax rate is 15% on the part of the tax base up to 36 times the average wage and 23% on the part exceeding this threshold (Section 16(1)).

5. What are the periods for stock and other securities?

Income from the transfer of a security for consideration is exempt if the period between its acquisition and transfer exceeds 3 years; for a share certificate (kmenový list), it is 5 years (Section 4(1)(u)).

6. Is small income from the sale of securities exempt?

Yes. Income from the transfer of securities is exempt if its total for the tax period does not exceed CZK 100,000.

About the author

Ing. Petra Hučíková, MBA

Processes and finance, partner

Petra Hučíková is the executive director and partner at ARROWS law firm, where she is responsible for the overall operation and management of the firm, including financial management, internal controlling, support departments, and recruitment processes. In her role, she connects strategic management with an emphasis on functional and transparent day-to-day management, thanks to which ARROWS has long been one of the fastest growing law firms in the Czech Republic.

hucikova@arws.cz +420 770 115 004

Disclaimer:

The information contained in this article is for general informational purposes only and serves as a basic guide to the issue as of 2026. Although we strive for maximum accuracy, laws and their interpretation evolve over time. We are ARROWS Law Firm, a member of the Czech Bar Association (our supervisory authority), and for the maximum security of our clients, we are insured for professional liability with a limit of CZK 350,000,000. To verify the current wording of the regulations and their application to your specific situation, it is necessary to contact ARROWS Law Firm directly (consultation@arws.cz). We are not liable for any damages arising from the independent use of the information in this article without prior individual legal consultation.