How shares and ETFs are taxed in the Czech Republic and when the time test applies

When you sell shares or ETFs in the Czech Republic, you do not have to pay any tax if you do not hold them as business assets (obchodní majetek) and you meet one of two statutory conditions. The first option is to hold the securities for more than three years, which is known as the time test (časový test). The second route to exemption is not to exceed total annual income from sales of 100,000 CZK (about 4,600 USD). In addition, from 1 January 2026, the former limit of 40 million CZK (about 1.8 million USD) for exempt income is abolished entirely for securities.

When selling shares and ETFs is exempt from tax

In Section 4(1), the Income Tax Act (zákon o daních z příjmů) sets out two separate rules under which the state does not touch your gains. You will find the first rule under letter t). It says that income from the sale of securities is exempt if the taxpayer’s total of such income for the whole tax period does not exceed 100,000 CZK (about 4,600 USD).

The second route is the time test under Section 4(1)(u). Income from a sale is exempt when the period between acquiring and selling the security exceeds three years. So if you sell shares only after three years and one day, you do not pay the state a single crown from the return, regardless of the size of the gain.

Both of these exemptions also apply to foreign instruments. According to Instruction D-59 of the General Financial Directorate (Generální finanční ředitelství, GFŘ), securities for the purposes of these exemptions also include securities of foreign issuers, which typically covers exchange-traded funds, or ETFs, as well.

However, the exemption rules have their exceptions. You cannot use them when the shares or ETFs are included in your business assets for business purposes. Nor can the exemption be applied to income from capital assets, such as dividends. Moreover, according to Instruction D-59, the two exemptions cannot be combined.

How the three years of the time test are counted

The test does not start on the day you send money to your broker or the day you place a buy order. According to Instruction D-59, for book-entry securities (zaknihované cenné papíry) the date of acquisition is the day they are recorded in the owner’s account (majetkový účet). In practice, this is the day the shares actually appear in your account with the broker. For certificated shares (listinné akcie), the day you take them over is decisive.

Each purchase has its own time test. If you buy shares in the same company gradually, for example through regular investing of small amounts, you must track the age of each share separately. If you sell earlier than after three years, you lose the time test exemption. But the exemption under the 100,000 CZK (about 4,600 USD) limit may still apply.

If your purchase was credited to your owner’s account on 12 October 2023, the first day on which you can sell these shares without having to pay tax on the gain is 13 October 2026. If you sell earlier and exceed the 100,000 CZK (about 4,600 USD) limit, you must include the income in your tax return (daňové přiznání).

Inheritance is a special case. Under Section 4(1)(u), for securities inherited from a relative in the direct line or from a spouse, the three-year period is shortened by the time the deceased owned them. So if your father owned the shares for two years and you own them for more than another year after the probate proceedings, the time test is met.

The 100,000 CZK (about 4,600 USD) limit is based on income, not profit

The 100,000 CZK (about 4,600 USD) threshold does not refer to the money you made. The text of the law in Section 4(1)(t) speaks of total income. Income means the total amount for which you sold securities in the given calendar year, regardless of how much you bought them for. If this total does not exceed 100,000 CZK (about 4,600 USD), you do not have to look at the gain or the holding period.

Imagine that your sales for the year reached a total of 95,000 CZK (about 4,400 USD). Your net profit from these trades was 30,000 CZK (about 1,400 USD) and you held the shares for only one year. Because the total income did not exceed 100,000 CZK (about 4,600 USD), the whole gain is exempt and nothing is reported in the tax return.

If you exceed the limit by a single crown, the exemption under letter t) is lost for all sales in that year that do not meet the three-year time test. If you sold shares for 120,000 CZK (about 5,500 USD), bought them a year earlier for 100,000 CZK (about 4,600 USD) and paid the broker 400 CZK (about 18 USD) in fees, your tax base will be 19,600 CZK (about 900 USD). Even though the gain is small, you have to file a return and pay the tax, because the total income was above the limit.

What changed with the 40 million CZK (about 1.8 million USD) limit

For 2025, a joint cap of 40,000,000 CZK (about 1.8 million USD) applied. It covered the total of exempt income from the sale of securities, business shares (obchodní podíly) and crypto-assets. Above this threshold, a proportional part of the income was not exempt. Under Section 10(4) of the Income Tax Act, expenses then reduce income only in the proportion in which the income is not exempt.

Act No. 360/2025 Coll., effective from 1 January 2026, abolishes the 40 million CZK (about 1.8 million USD) limit for exempt income from the sale of securities and business shares. For the 2026 tax period and later, the sale of shares and ETFs after three years is therefore exempt in full, regardless of whether you make 10 million or 100 million CZK (about 4.6 million USD).

The model calculation for 2025 looks like this. If your exempt sales of shares reached 50 million CZK (about 2.3 million USD) and the purchase price was 30 million CZK (about 1.4 million USD), you exceeded the limit by 10 million. The non-exempt part of the income is 20%, which is 10 million CZK (about 460,000 USD). You claim 20% of the purchase price as an expense, which is 6 million CZK (about 280,000 USD), and the tax base will be 4 million CZK (about 180,000 USD).

For 2026, with the same figures, the whole income would be exempt and you would only have to meet the reporting obligation. For crypto-assets, however, the 40 million CZK (about 1.8 million USD) limit remains in the law. If you are interested in buying bitcoin, you still need to take this cap into account.

How much you pay if you do not pass the test

If you meet neither the time test nor the income limit, you pay tax on the gain as other income (ostatní příjmy) under Section 10(1)(b), point 2 of the Income Tax Act. The tax base is the income reduced by the acquisition price of the security and by the fees for both the purchase and the sale.

The tax rate is 15%. However, if your total annual tax base exceeds 36 times the average wage, the 23% rate applies to the part above this limit. For 2026, this threshold is 1,762,812 CZK (about 81,000 USD).

Gains and losses within one year are offset

Under Section 10(4) of the Act and Instruction D-59, gains and losses from sales of securities within one year are added together. If you make 20,000 CZK (about 920 USD) on one share and lose 20,000 CZK (about 920 USD) on another, your tax base from these trades will be zero. But if your income from sales exceeded 100,000 CZK (about 4,600 USD), you must report the trades in your tax return, even though the resulting tax is zero.

An overall loss from the sale of securities is not carried forward to later years and cannot be used to reduce other types of income. Individuals who do not keep accounts convert foreign currency using the uniform exchange rate (jednotný kurz), or the rate valid on the day the income or expense arose.

How dividends from Czech and foreign shares are taxed

Dividends are taxed differently from the sale of the shares themselves. Neither the time test nor the 100,000 CZK (about 4,600 USD) limit applies to them. If you hold Czech dividend shares, the paying company withholds the 15% tax and pays it directly to the state. You receive the net amount in your account and do not report this income in your tax return at all.

Foreign dividends are more complicated for a Czech investor. They belong in the tax return, and under Section 8 of the Income Tax Act you can include them in the so-called separate tax base (samostatný základ daně) with a 15% rate. If you choose this route, you must include all your foreign dividends for the given year in it.

The main pitfall is withholding tax in the share’s country of origin. When the country where the company is based withholds a higher tax, in the Czech Republic you can only credit tax up to the amount set by the double taxation treaty (smlouva o zamezení dvojího zdanění), and no more than the Czech tax on this income.

Distributing and accumulating ETFs are taxed differently

You will notice the difference depending on the type of ETF you hold. A distributing ETF pays out returns in the form of dividends directly to your account, and these are taxed every year. An accumulating ETF reinvests dividends inside the fund and pays you no cash.

With an accumulating fund, you only deal with tax when you sell its units. If you meet the time test, the return the fund has reinvested in the meantime is also exempt. The choice between the distributing and accumulating version also applies to funds tracking the S&P 500 index.

The W-8BEN form and US dividends

If you invest in US shares, you will come across the W-8BEN form. It is a document of the US tax authority, the IRS, in which you confirm that you are a Czech tax resident. Thanks to the double taxation treaty between the Czech Republic and the USA, published as Communication No. 32/1994 Coll., the US withholding tax on dividends for individuals is reduced from 30% to 15%.

If you have not signed the form, 30% is withheld from every US dividend. A signed form is valid from the day of signing until the end of the third calendar year following the year in which it was signed. If you sign it during 2026, it expires on 31 December 2029. Then you must renew it, otherwise the withholding goes back up to 30%.

With a gross dividend of 10,000 CZK (about 460 USD) from the USA and a valid form, 15% is withheld in the USA, which is 1,500 CZK (about 69 USD). Czech tax is also 15% and the treaty allows a credit of this amount, so you pay nothing extra in the Czech Republic.

If you do not have the form, 30% is withheld in the USA, which is 3,000 CZK (about 140 USD). In your Czech tax return, however, you can only credit 1,500 CZK (about 69 USD), the amount that corresponds to the treaty. The Czech tax office (finanční úřad) will not credit the remaining 1,500 CZK (about 69 USD), and you would have to apply for a refund directly in the USA.

When you must report income from shares in your tax return

The general rule under Section 38g(1) of the Income Tax Act is that you must file once your taxable annual income exceeds 50,000 CZK (about 2,300 USD). Exempt income and income from which tax was withheld do not count towards this amount. If you sold shares that did not meet the time test and your total sales exceeded 100,000 CZK (about 4,600 USD), you must file a return even if you made an overall loss.

Under Section 38g(2), employees who have signed the tax declaration with all their employers do not have to file a return if their other income under Sections 7 to 10 does not exceed 20,000 CZK (about 920 USD) a year. This limit includes, for example, foreign dividends, but not exempt sales of shares. So if you receive 8,000 CZK (about 370 USD) in foreign dividends in a year and have no other side income, you do not have to file a return.

The return is filed within three months after the end of the year, and for 2025 the deadline was 1 April 2026. If you file your return electronically, you extend the deadline by one month.

You must report exempt income over 5 million CZK (about 230,000 USD)

If you receive income that is exempt from tax (for example from selling shares after five years) but exceeds 5,000,000 CZK (about 230,000 USD), you must report it to the tax authority (správce daně) under Section 38v of the Income Tax Act. The deadline is the same as for filing the tax return.

If you file the notification yourself without being asked, the penalty is 0.1% of the income. After a request from the tax office, it rises to 10%, and if you do nothing at all, to 15%.

What to check in your broker statement before you sell

Before you sell part of your portfolio, go through the documents your broker provides. The first step is to check the acquisition date of each position, because for the time test the date of crediting to the owner’s account is decisive. For sales above the 100,000 CZK (about 4,600 USD) limit, the gap between holding shares for two years and 364 days and for three years and one day is the difference between taxation and exemption.

Next, check the total of your sales in the given calendar year. Sales count towards the 100,000 CZK (about 4,600 USD) limit in the year in which they took place. Also check that your W-8BEN form is valid if you receive dividends from US shares.

If you use several brokers, you must combine their statements for your Czech tax return, because both the 100,000 CZK (about 4,600 USD) and the 20,000 CZK (about 920 USD) limits are assessed for you as a single taxpayer.

USD amounts are approximate, converted at the Czech National Bank rate of 21.80 CZK per USD on 2 October 2026.