Zrušení limitu 40 milionů Kč při prodeji podílů a cenných papírů

Legislative Change 2025–2026: From the Limit Back to Unlimited Exemption

From 2025, an annual limit of CZK 40 million applied to tax-exempt income from the sale of shares and securities. However, it did not even last a year before the legislature abolished this limit again. From 1 January 2026, Czech law is returning to the original regulation: if you meet the time test and other conditions, income from the sale of shares or securities is tax-exempt regardless of the amount.

For your transaction, this means one key thing: if you execute the sale from 1 January 2026 and meet the relevant conditions, you do not have to worry about part of the purchase price being subject to taxation due to exceeding the limit. Today, the CZK 40 million limit remains only for income from the sale of crypto-assets.

Our Prague-based legal team at ARROWS handles these matters daily, helping investors with the optimal timing and structuring of their exits.

Time Test: The Cornerstone of Tax Exemption

In order for your income to be exempt from income tax, you must first and foremost meet the time test – i.e., the period between the acquisition and the transfer for consideration of the share or security. The law distinguishes between two categories.

Three-Year Time Test for Securities (Shares)

You must hold a security – typically a share – for more than 3 years between acquisition and transfer for consideration. However, for a share certificate (kmenový list – a security representing a share in an s.r.o.), the period is 5 years.

Five-Year Time Test for Shares in s.r.o. and Other Companies

A share in a business corporation – especially a share in a limited liability company (s.r.o.) – requires a period of more than 5 years between acquisition and transfer. This period is reduced by the time you were a member of the corporation before its transformation, and for a share acquired by inheritance from a direct relative or spouse, also by the period of ownership of the deceased.

In legal practice, we see that these seemingly simple time limits hide pitfalls:

• Non-monetary contributions to equity: the exemption does not apply to the part of the income corresponding to an increase in the acquisition price of the share by a non-monetary contribution or the acquisition of a share from another member, if the transfer occurs within 5 years of such contribution or acquisition.

• Transformations and exchanges of shares: if statutory conditions are met, the period is not interrupted during an exchange of shares or transformation of a business corporation. However, any restructuring prior to the sale must be assessed individually.

• Gradual acquisition: if you acquired shares or stock gradually, it is necessary to assess for each part whether it meets the time test.

What to watch out for: many sellers fail to conduct a detailed analysis before signing the contract, and the tax authority subsequently assesses additional tax with penalties. Therefore, we recommend conducting a tax and legal audit of share ownership before initiating the sale.

Other Exemption Conditions: What You Must Avoid

Meeting the time test is not the only condition. There are other situations where the income will not be exempt, even if you have held the share for a long time.

Share in Business Assets

If the share was acquired from the business assets of an entrepreneur (sole trader/OSVČ), the exemption does not apply until 5 years after the termination of their self-employed activity. For securities included in business assets, a 3-year period applies similarly. An investor who is also an entrepreneur and records the share in their business assets will therefore generally not benefit from the exemption.

Prohibition of Abuse of Law

One of the most sophisticated risks is the transaction being assessed as an abuse of law. If, according to the tax authority, the transaction is primarily motivated by tax advantage and lacks legitimate economic substance, the tax authority may challenge it.

A typical example is establishing a holding company just before selling shares solely to obtain a tax exemption. Conversely, if the holding structure has existed for a longer period and has real business reasons (centralization of share management, group financing), defending it is significantly easier. However, it always depends on the specific circumstances.

Sale of Shares and Securities in Practice

Due Diligence – Pre-sale Review

The sale of a company or shares cannot do without due diligence – a legal, financial, and commercial review of the company. The buyer wants to know what hidden debts, disputes, or legal issues they are assuming. If you conduct the review yourself in advance (vendor due diligence), you will increase the buyer's trust and reduce the risk of subsequent claims.

Share Purchase Agreement (SPA)

The heart of every transaction is the Share Purchase Agreement (SPA). For an s.r.o., it must be in writing with officially certified signatures. The key elements of the agreement are:

• Specification of the transferred share: company, size of the share, and associated rights.

• Purchase price and payment method: fixed price, installments, or earn-out (part of the price dependent on future results).

• Representations and warranties: the seller declares, for example, that the share is unencumbered and the company has no hidden debts. Liability is usually limited by a minimum threshold (basket) and a cap.

• Closing conditions: for example, clearance from ÚOHS or fulfillment of financial conditions.

• Payment security: attorney or notary escrow, escrow account, or pledge of shares.

An earn-out is common but risky for the seller. After taking control, the buyer may intentionally reduce the company's performance. We therefore recommend limiting its scope and duration, precisely defining the metrics, and appointing an independent arbitral auditor.

Do not forget about the articles of association: if they contain a pre-emptive right of other shareholders or require the consent of the general meeting for the transfer, you must respect them.

Regulatory Obstacles: ÚOHS Clearance

If the buyer is acquiring control of the company, the transaction may be subject to clearance from the Office for the Protection of Competition (ÚOHS). Clearance is required particularly if:

• the total net turnover of all merging competitors in the Czech market for the last accounting period exceeded CZK 1.5 billion and at least two of them each achieved a turnover in the Czech Republic of more than CZK 250 million, or

• the acquired company has a turnover in the Czech Republic of more than CZK 1.5 billion and another merging competitor has a worldwide turnover of more than CZK 1.5 billion.

Clearance from ÚOHS is thus often a condition for closing the transaction and must be factored into the timeline and the contract. If ÚOHS identifies a risk to competition, it may condition or block the merger.

International Element: Sale to a Foreign Buyer

If you are selling a share to a buyer from abroad, or if you are a tax resident of another state yourself, double taxation treaties, sanctions, and other legal systems come into play. The tax residency of the seller and the wording of the specific treaty are particularly decisive.

Thanks to the ARROWS International network, we handle cross-border transactions practically every day – from preparing English SPAs to coordinating with local lawyers in the buyer's country.

Final Summary

The abolition of the CZK 40 million limit is welcome news for sellers. However, the legal reality of selling a company is more complex: the time test must be assessed for each part of the share, the structure must not be artificial, the contract must contain reasonable warranties and payment security, and for larger transactions, ÚOHS clearance must be anticipated.

Are you planning to sell a share or stock? Write to us at consultation@arws.cz and arrange a consultation.