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

Mgr. Marek Hučík
Mgr. Marek Hučík
7.4.2026 | ARROWS law firm

In 2026, entrepreneurs and investors are subject to fundamentally revised rules – compared to 2025, the CZK 40 million limit for the tax exemption of income from the sale of ownership interests and shares is abolished. If you meet the time test, the entire income from the sale of a company or shares is fully exempt from personal income tax, regardless of the transaction value. In this article, we will break down the rules applicable for 2026, their impact on business sellers, and optimisation options.

In the image, we see a specialist discussing the topic of the exemption of income from the sale of ownership interests and shares.

Quick summary

  • The CZK 40 million limit for shares and ownership interests was abolished as of 1 January 2026: Income from the sale of ownership interests in an s.r.o. and shares is fully exempt from tax if you meet the time test – regardless of whether you sell for CZK 40, 100, or 500 million.
  • No social security or health insurance contributions: Income from the sale of ownership interests and shares by individuals (if not included in business assets) falls under Section 10 of the Czech Income Taxes Act and is not subject to social security or health insurance contributions.
  • Cryptocurrencies have had a time test and a value limit since 2025: For crypto-assets, as of 15 February 2025 there is both a 3-year time test and an annual value limit of CZK 100,000 for exemption. At the same time, the CZK 40 million limit for income from crypto remains in place – unlike for ownership interests and shares.
  • The time test has not changed: To qualify for the exemption, the holding-period condition remains: 5 years for ownership interests and 3 years for securities (shares).

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.

Related questions on calculating the tax 

1. What counts towards the limit – each company separately?
In 2026, no aggregate limit applies to ownership interests and shares. If you sell two companies, each for CZK 50 million, and you meet the time test for both, both incomes are fully exempt.

2. Can I deduct sale-related expenses, such as legal services or a broker’s commission?
Yes, if the income is not fully exempt (i.e., you do not meet the time test or it concerns cryptoassets above the limits). Expenses directly related to generating the income are deducted from the taxable portion of the income.

3. How is it calculated if I sell in instalments?
If the sale is spread over multiple years, the income is taxed in the year you receive it (for individuals who do not keep accounts). Each year, you assess the exemption conditions separately. ARROWS, a Prague-based law firm, advises on exactly this kind of transaction structuring.

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.

Related questions on the expert valuation report

1. Do I have to have a report?
It is not an obligation, but a right—and it is mainly relevant when you do not meet the time test. If you meet the time test, the income is fully exempt in 2026 without any calculation.

2. Who can prepare the report?
For tax purposes, the report should be prepared by a court-appointed expert in economics, specialising in business valuation.

3. How much does it cost?
The price of a high-quality expert valuation report for valuing a business enterprise is in the tens of thousands of Czech crowns (typically CZK 20,000–50,000).

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.

Who can advise you on this issue?

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

Risks and penalties

How ARROWS can help (office@arws.cz)

Failure to meet the time test: Selling earlier than after 5 years (ownership interests) or 3 years (shares) results in the income being taxed.

Ownership audit: We will verify the exact acquisition dates, whether holding periods can be counted in cases of inheritance or transformations, and recommend the optimal timing of the sale.

Sale of an ownership interest without meeting the test and without optimisation: Taxation based on the original historical price (contribution) without using the revaluation as of 31 December 2024 may unnecessarily increase the tax.

Arranging a valuation as of 31 December 2024: We will arrange cooperation with an expert appraiser and the application of market value as a deductible expense, which may reduce tax by millions.

Failure to comply with the notification obligation: Failure to file a notification of exempt income exceeding CZK 5 million may result in a fine of up to 15%.

Compliance service: We will ensure timely submission of the notification to the tax administrator in accordance with Czech legislation.

Incorrect taxation of cryptocurrencies: The mistaken belief that crypto is exempt in the same way as shares, without any limit.

Tax analysis of cryptoassets: We will help determine the correct tax regime and the methodology for matching costs.

Incorrect application of transitional provisions: Incorrect determination of the proportional part of expenses when the time test is not met.

Tax calculation and representation: We will prepare an accurate calculation of the tax base and represent you in the event of a tax audit.

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 office@arws.cz for a non-binding consultation regarding your situation.

FAQ – Most frequently asked questions about changes in income taxation from 2026

1. How does the taxation of a business sale in 2026 differ from 2025?

From a tax perspective, 2025 was significantly disadvantageous for business sellers—the CZK 40 million cap applied, above which the income was taxable. As of 1 January 2026, this cap was abolished for ownership interests and shares. If you meet the time test (5 years for an ownership interest in an s.r.o., 3 years for shares), the entire income from the sale is exempt from Czech personal income tax—regardless of whether it is CZK 50, 100, or 300 million. For cryptoassets, the CZK 40 million cap remains in place.

2. What happens if I do not meet the time test—do I lose the exemption entirely?

No, you still have options. If you do not meet the time test, the income is subject to tax, but you may claim the acquisition cost of the ownership interest or shares as an expense. For assets acquired before 2025, the market value as of 31 December 2024 determined by an expert valuation may be used as the acquisition cost. You therefore tax only the increase in value after that date—not the entire sale price. Specifically: if you bought the company in 2022 for CZK 5 million and an expert valued it as of 31 December 2024 at CZK 20 million, and you sell it in 2026 for CZK 25 million (and you do not meet the time test), you will tax only the CZK 5 million difference.

3. Do I always have to file a notification with the tax office even if the tax is zero?

Yes. If you receive exempt income exceeding CZK 5 million, you are required to notify the tax administrator within the deadline for filing the tax return—even if your tax liability is zero. The penalty for non-compliance may be up to 15% of the unreported amount. For a sale of CZK 40 million, this represents a potential penalty of CZK 6 million—even though you paid zero tax.

4. I own an s.r.o. through a holding company—does the abolition of the CZK 40 million cap apply to me as well?

Not directly—but in many cases a holding structure is even more advantageous. If the parent company (holding) holds at least a 10% interest in the subsidiary for at least 12 months, the income from the sale of that interest is fully exempt from Czech corporate income tax without any cap—regardless of whether the CZK 40 million cap for individuals applies or not. A holding structure can therefore be particularly beneficial for repeat transactions or larger business groups.

5. How are cryptocurrencies taxed in 2026 compared to shares?

This is a fundamentally different regime. For shares and ownership interests, once the time test is met, the exemption is unlimited. For cryptoassets, the situation is more complex: as of 15 February 2025, a 3-year time test applies; once met, the income is exempt, but only up to CZK 40 million per year—the CZK 40 million cap for crypto has remained in place. Income below CZK 100,000 per year is exempt regardless of the holding period (value test). Please note: a tax liability for cryptocurrencies also arises when exchanging one cryptocurrency for another, not only when withdrawing money to a bank account.

6. What should I do first if I plan to sell my company in 2026?

Before starting any negotiations with potential buyers, we recommend three steps. First, verify the exact acquisition date of the ownership interest and make sure you will meet the 5-year time test—if not, consider whether it makes sense to postpone the sale. Second, if you do not meet the time test or are unsure, have an expert valuation prepared valuing the company as of 31 December 2024, while historical data are still available. Third, structure the transaction and the purchase agreement so that the payment terms are clearly defined, and do not forget the notification obligation for income exceeding CZK 5 million. The attorneys at ARROWS advokátní kancelář are ready to guide you through the entire process—email us at office@arws.cz.

Notice: The information contained in this article is of a general informational nature only and is intended for basic orientation in the matter based on the legal situation as of 2026. Although we take maximum care to ensure 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 maximum client protection we maintain professional liability insurance with a limit of CZK 400,000,000. To verify the current wording of 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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