Czech Taxation of Shares and ETFs in 2026: Individuals vs Companies

7.4.2026 | ARROWS law firm

Do you have surplus funds in your business and are considering investing in shares or ETFs? You need to understand the key difference in net returns between an individual and a legal entity. An individual may be exempt from tax if the conditions are met, while a company will pay approximately 33 percent. We will show you how taxation works under Czech legislation for 2026 and what mistakes to watch out for.

In the image, we see a professional consulting on the taxation of the company’s investments.

The basic difference in the tax burden
Individual – how investments are taxed
Key advantage for long-term investors
Legal entity – two-tier taxation
When to choose an individual
When to choose a legal entity
Practical comparison using specific examples
Legislative update: Abolition of the CZK 40 million limit for shares

Summary in bullet points

Individual investors may, if they meet the time test (3 years for securities, 5 years for ownership interests), be fully exempt from income tax regardless of the amount of profit; they typically have a significantly lower tax burden than a legal entity.
CZK 40 million exemption limit: From 2026, this limit applies exclusively to crypto-assets. For securities and ownership interests, it was abolished for 2026, and their sale is, after meeting the time test, fully exempt without any cap.
Legal entity is subject to two-tier taxation. First, it pays 21% corporate income tax at the company level, and then 15% withholding tax upon distribution of a profit share (dividend) to a shareholder.
Cryptocurrencies: Virtual assets have a 3-year time test. At the same time, however, a limit applies—at most CZK 40 million per year is exempt. Regardless of the holding period, sales up to CZK 100,000 per year are not taxed.
Practical risk: If you choose the wrong form, you may unnecessarily lose millions of Czech crowns in taxes; selecting the right regime is decisive before you invest.

The basic difference in the tax burden

When a business owner or manager is deciding where to invest surplus funds, they often think it makes no difference whether they invest personally or through the company. Nothing could be further from the truth. Under Czech legislation, the income of individuals and legal entities is taxed in completely different ways, and in the case of investments in securities, the difference is enormous.

The key principle is simple: an individual’s investments are, in many cases, strongly favoured by the tax system thanks to the exemption regime, whereas a legal entity’s investments are subject to the standard income taxation regime. An individual’s investments are, in many cases, strongly favoured by the tax system thanks to the exemption regime, whereas a legal entity’s investments are subject to the standard income taxation regime.

This means that the same investment that you increase, for example, by ten million Czech crowns may remain entirely yours as an individual (if the conditions are met). As a legal entity, however, after taxation and dividend distribution you will be left with just under seven million Czech crowns.

The reason for this difference stems from the historical support for long-term investing by individuals through the so-called time test. Legal entities, by contrast, follow the general income taxation regime, which fully includes investment gains in the tax base.

Individual – how investments are taxed

If you are an individual (or a sole trader who has not included securities in business assets) and you want to invest in shares, bonds, mutual fund units or ETFs, there is good news. There are statutory reliefs available to you that may mean you do not pay any tax on the profit at all.

Two routes to exemption

First, you need to understand that a taxable event occurs only at the moment you transfer a security for consideration (sell it) or when dividends are paid to you from it. A mere increase in the value of your portfolio (unrealised gain) is not income for tax purposes—tax is calculated only on realised income.

Once you carry out the transaction, under the Income Taxes Act (ITA) you have two basic exemption options. A taxable event occurs only at the moment you transfer a security for consideration or when dividends are paid to you from it.

1. Exemption based on the amount of income (value test). If your aggregate income from the sale of securities does not exceed CZK 100,000 in a calendar year, the entire income is exempt from tax (Section 4(1)(t) ITA). The decisive factor is gross income (the total sale price), not your net profit.

Example: You buy an ETF for CZK 150,000 and sell it for CZK 160,000. Because the total income is CZK 160,000, you have exceeded the CZK 100,000 limit and cannot apply this exemption. You then need to assess whether the time test is met. In practice, it is also often assessed whether this is not a transfer of an ownership interest or a security in a broader transactional context, for which the summary in the article Transfer of an ownership interest: Rules, taxes and risks for 2026 may be useful.

2. Exemption based on the holding period (time test). If you hold a security (shares, ETFs) for longer than 3 years, the income from the sale is exempt (Section 4(1)(u) and (zk) ITA). For ownership interests in a Czech limited liability company (s.r.o.) that are not securities, this period is longer and is 5 years (Section 4(1)(q) ITA).

It further applies that the exemption under the time test is capped at CZK 40 million per year only for crypto-assets (Section 4(3) ITA). For investments made through various instruments and structures, it is often crucial to correctly assess the specific tax implications as well, which is supported by our tax law practice. For shares, ETFs and ownership interests in an s.r.o., no financial cap applies in 2026.

Tax rate if not exempt

If the income is not exempt (you do not meet the time test, you exceed the CZK 100,000 limit, or in the case of crypto-assets you exceed the CZK 40 million limit), the partial tax base is taxed under Section 10 ITA (other income). The tax rate is 15% for the portion of the tax base up to 36 times the average wage (for 2026 approx. CZK 1,750,000) and 23% for the portion of the tax base exceeding this limit.

The tax base is the profit, i.e., income reduced by demonstrably incurred expenses to generate the income (acquisition price, broker fees). If you are dealing with investments through a company or a group reorganisation, specific regimes in transformations may also enter into the calculation; these are clearly described in the article Tax impacts of mergers and demergers: How to comply with the rules for tax neutrality when reorganising corporate structures.

Practical situation with dividends

If you hold shares and receive dividends from them, dividends from domestic (Czech) companies are automatically subject to 15% withholding tax, which is withheld and remitted directly by the paying company. You receive the net amount and do not report it in your tax return.

For dividends from abroad, you must report the income in your tax return. A 15% rate applies here. The advantage is that foreign dividends can be included in a separate tax base, allowing you to completely avoid the progressive 23% rate. At the same time, you can credit the tax withheld abroad under the relevant double taxation treaty (DTT).

Key advantage for long-term investors

In practical terms, this means that an individual investing with a horizon of at least 3 years (5 years for ownership interests) will have a gain from a sale in 2026 that is completely tax-free, with no limit.

Legal entity – two-tier taxation

When a legal entity (s.r.o., a.s.) invests, the investment becomes part of its business assets. Returns are subject to corporate income tax (CIT) and subsequently, upon distribution to the owner, to tax on profit shares.

First tier: CIT at the company level

Income from the sale of securities is included in the general tax base. As of 1 January 2024, the corporate income tax rate has been increased to 21%. If your s.r.o. realizes an investment gain of CZK 10 million, the tax is CZK 2.1 million.

Second tier: Tax on profit shares (dividends)

The remaining profit (in our example CZK 7.9 million) stays in the company. If you want to receive it in your private account as an individual, the company must pay it out as a profit share. This step is subject to 15% withholding tax. From the amount of CZK 7.9 million, the following is withheld: 7.9 × 0.15 = CZK 1.185 million.

Effective tax burden

Total calculation of effective taxation:

Profit 100%
CIT 21% -> 79% remains
Withholding tax 15% of 79% (i.e., 11.85%) -> 67.15% remains

The total tax burden is approximately 32.85%. By comparison, an individual who meets the time test (3 years for shares) will pay 0% in 2026 thanks to the abolition of the limit for securities, regardless of the amount of the gain.

Exceptions and exemptions for legal entities

For legal entities, there is the so-called Parent-Subsidiary Directive. If a parent company holds at least a 10% interest in a subsidiary for at least 12 months, dividend income and income from the transfer of that interest may be exempt from tax. This exemption targets holding structures, not ordinary portfolio investments in publicly traded shares or ETFs.

When to choose an individual

This clearly follows from the above: if you have a choice, invest as an individual if your goal is to grow private capital.

Long-term investments with a 3+ year horizon. For shares and ETFs, it is sufficient to hold for 3 years. For interests in an s.r.o., 5 years. If you meet this, your return in 2026 is completely tax-free regardless of the amount of income, which is the most tax-efficient option.
Regular reinvestments. Your money is not “locked” in the company and is not reduced by the 21% tax.
Investments without the company needing liquidity. If the company does not need the money for operations, there is no point in putting it into the company solely to buy shares.

When to choose a legal entity

There are situations where investing through an s.r.o. (or a holding company) is more suitable:

Active trading. If you trade over days or weeks, you will never meet the time test. An individual would have to tax at a progressive rate of up to 23%. A legal entity is taxed at 21% and allows a broader range of costs to be applied; moreover, losses can be more easily offset in the accounts against profits from other activities.
Asset protection. Separating risky investments from personal assets or from the operating risk of another company.
Reinvestment of untaxed profit. If the company generated operating profit and you do not want to “pull it out” (which would cost 15% withholding tax), the company can invest directly. This defers dividend taxation until later.
Holding structures. If you are acquiring entire companies (interests above 10%), an exemption of dividends and capital gains may apply under Section 19 of the Income Taxes Act.

Practical comparison using specific examples

Example 1: Sale of shares with a profit of CZK 10 million, 4-year holding period

Individual:

Met the time test (over 3 years)
Tax: CZK 0
Net income: CZK 10,000,000

Legal entity (s.r.o.):

Corporate income tax (CIT) 21%: 10,000,000 × 0.21 = CZK 2,100,000
Profit after tax: CZK 7,900,000
Withholding tax on profit share 15%: 7,900,000 × 0.15 = CZK 1,185,000
Net income of the shareholder: CZK 6,715,000
Difference: The individual has CZK 3,285,000 more.

Example 2: Sale of shares with a profit of CZK 50 million, 2-year holding period

Individual:

Time test not met (holding period shorter than 3 years).
Tax base: CZK 50,000,000.
Progressive tax: Up to the threshold of approx. CZK 1.75 million, the rate is 15% = approx. CZK 262,500; above the threshold, the rate is 23% = approx. CZK 11,097,500
Total tax: approx. CZK 11,360,000 (effective rate approx. 22.7%)
Net income: CZK 38,640,000

Legal entity (s.r.o.):

CIT 21%: CZK 10,500,000
Profit after CIT: CZK 39,500,000
Dividend tax 15%: CZK 5,925,000
Total tax: CZK 16,425,000
Net income: CZK 33,575,000

Even in short-term speculation with a high profit, an individual is more tax-efficient (savings of approx. CZK 5 million) because they do not pay the second level of taxation.

Potential issues	How ARROWS helps (office@arws.cz)
Incorrect classification as business assets – A self-employed individual mistakenly includes shares in business assets, sells them after 3 years, and does not report them in the tax return believing they are exempt. The tax authority will assess additional tax + penalties + social/health insurance contributions.	We will review your records and ensure the correct classification of assets. If the error has already occurred, we will assist with negotiations with the tax authority.
Exceeding the CZK 40 million limit – An investor sells cryptoassets for CZK 100 million after 3 years and does not apply the rule limiting the exemption. A massive additional tax assessment is at risk.	We will optimize the tax base so that taxation of the amount above the limit is as low as possible.
Failure to credit foreign tax – A dividend from the USA taxed in the USA at 15%; in the Czech Republic the investor taxes it again at 15% without claiming a credit. They pay unnecessarily twice.	We will prepare the tax return using the ordinary foreign tax credit method under the double taxation treaty with the USA, thereby eliminating double payment.
Failure to notify exempt income – An investor sells shares for CZK 6 million (profit CZK 2 million), meets the time test, tax is 0. But they do not submit the notification under Section 38v of the Czech Income Taxes Act (threshold of CZK 5 million in income).	ARROWS monitors deadlines and submits notifications for clients.

Legislative update: Abolition of the CZK 40 million limit for shares

It is necessary to highlight a fundamental change for 2026. Although a cap on the exemption for securities and ownership interests of CZK 40 million was introduced in 2025, the legislation for 2026 has abolished this limit again for shares and ownership interests. Once the time test is met (3 years for securities, 5 years for ownership interests), your profit from the sale is again fully exempt without any limitation.

The CZK 40,000,000 limit per tax period therefore applies from 2026 exclusively to cryptoassets. For legal entities, nothing changes in this respect, as there is no time-test exemption for them.

Final summary

The choice between investing as an individual and as a legal entity has a crucial impact on your final return. In the Czech Republic, individuals have significantly better tax conditions for long-term investments. The 3-year time test for securities (ETFs, shares) and the 5-year time test for ownership interests in an s.r.o. make it possible in 2026 to achieve a 0% tax on capital gains entirely without limitation.

By contrast, legal entities bear the burden of 21% corporate tax and subsequent 15% withholding tax upon profit distribution, leading to effective taxation of approximately 33%. Investing through an s.r.o. is primarily worthwhile for active trading, the management of very large assets, or within holding structures.

The key is not to make a mistake at the outset and to set the strategy correctly. If you are unsure or your investments are in the millions, it is essential to have the situation assessed by experts.

ARROWS’ Prague-based legal team specializes in tax and corporate law and will help you set up a holding structure, assess the time tests, and prepare your tax return. Contact us at (office@arws.cz) – the right setup can save you a substantial part of your return.

FAQ: Most common questions on investing in securities

1. Can I deduct a loss on one share from a gain on another?
Yes, under Section 10 of the Czech Income Taxes Act (other income), gains and losses from the sale of securities can be offset against each other, but only within the same tax period. A loss on shares cannot be carried forward to subsequent years (unlike in business). Note: A loss from the sale of securities cannot be deducted from employment income, business income, or rental income.

2. I am a Czech tax resident. How are US shares and dividends taxed?
Capital gains on sale are taxed in the Czech Republic (if you do not meet the time test). Dividends from the USA are subject to withholding tax directly in the USA. You must report the dividend in the Czech tax return, but you can credit the tax paid in the USA against your Czech tax liability using the ordinary foreign tax credit method to prevent double taxation. The advantage is that foreign dividends can use a separate 15% tax base, thereby avoiding the 23% progressive rate.

3. I have an ETF fund registered in Ireland. How is it taxed?
An accumulating ETF (does not pay dividends, reinvests profits) is the most tax-efficient option. If you hold it for 3 years, the sale in 2026 is fully exempt regardless of the amount of profit, and you do not pay any ongoing tax. A distributing ETF, by contrast, regularly pays dividends, which you must report each year in the Czech tax return and tax at 15% (the Irish often do not apply withholding tax, so the entire obligation lies with you).

4. How are investments via automated platforms taxed?
The same rules apply as for traditional brokers. Pay close attention to automatic portfolio rebalancing, where the platform sells and buys assets in the background. If the volume of these sales exceeds CZK 100,000 per year and you do not meet the 3-year time test, you must tax the profit even if you have not actually withdrawn any money from the platform.

5. Which exchange rate should I use to convert investments in foreign currency?
As a non-business individual, you have two options. The simplest is to use the so-called unified exchange rate published after year-end by the General Financial Directorate (GFŘ), which you use to convert all transactions for the given year at once. The alternative is to use the exact daily exchange rates of the Czech National Bank (ČNB) from the time of each transaction (which is more demanding in terms of record-keeping). You must apply the chosen method consistently for all currencies in that year.

Notice: The information contained in this article is of a general informational nature only and is intended to provide basic guidance on the matter based on the legal framework as of 2026. Although we strive for maximum accuracy, legal regulations and their interpretation evolve over time. We are ARROWS advokátní kancelář, an entity registered with the Czech Bar Association (our supervisory authority), and for the maximum protection of our clients we maintain professional liability insurance with a limit of CZK 400,000,000. To verify the current wording of the regulations and their application to your specific situation, it is necessary to contact ARROWS advokátní kancelář directly (office@arws.cz). We accept no liability for any damages arising from the independent use of the information in this article without prior individual legal consultation.

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