As part of the approved consolidation package, a limit on the exemption of income earned from the sale of securities and shares in business corporations will be introduced in the cumulative amount of CZK 40 million per tax period and taxpayer; effective from January 1, 2025.
Exemption for sales of securities and shares; the time test, limit set from 1 January 2025
Under the current regulation, income from the paid transfer of a shareholding in a business corporation held outside of business property is exempt from income tax if the specific time test is met, i.e. the period between the acquisition and the sale of shares of at least five years and for securities held outside of business property a period of three years.
From January 1, 2025, the time test for the exemption of income from sales will still be valid, but instead of the total exempt income, only the income up to a cumulative amount of CZK 40 million per tax period and taxpayer (natural person, business owner) will be exempt. The amount exceeding this limit will be subject (after deducting tax-deductible items) to personal income tax at the applicable rate.
The taxpayer (business owner) will be able to claim as an expense against the income from the sale of a shareholding in a business corporation the original purchase price, or if the security or business share is acquired by December 31, 2024, also the market value determined according to the Valuation Act i) as of December 31, 2024, or ii) on the date of the transfer of a security or share (prior to 31/12/2024); plus partially related expenses.
Please don’t hesitate to contact us for any issues related to M&A (sales and acquisition) transactions.