The amendment to the Income Tax Act, adopted as part of the so-called consolidation package, introduces fundamental changes for individuals selling company shares, effective from January 1, 2025, as previously discussed in our earlier articles on the taxation rules for individuals selling company shares.

While the well-known holding period test remains unchanged, a new exemption limit and the option to use the market value of the share are introduced. These changes have a significant impact, particularly for owners planning to sell companies with higher value.

 

Key changes in taxation from 2025

From the beginning of 2025, new rules apply to the taxation of individuals’ income from the sale of stakes, which limit the previously applicable full tax exemption.

• Holding period test remains: Income from the sale is still exempt if the seller has held the share for more than 5 years.
• Exemption limit: Income from the sale of shares and securities is exempt from tax only up to a total amount of CZK 40 million per tax period. Income exceeding this limit is subject to taxation.
• Tax rate: Income above CZK 40 million is taxed at standard personal income tax rates, depending on the total tax base: 15% or 23%. The threshold for the lower rate is set at CZK 1,676,052 for 2025. Note that the exemption limit applies cumulatively to all sales of shares and securities within the calendar year. Larger sales (with income above approximately CZK 1.7 million) fall under the higher tax rate.
• Splitting the payout: To take full advantage of the exemption, you can split the payment over several years. A new CZK 40 million limit applies for each tax period. For example, if you receive a purchase price of CZK 120 million divided over three years (e.g., CZK 40 + 40 + 40 million), the entire income will be exempt from tax.
• Use of market value as cost: To reduce the tax base for income above the limit, it is possible to use the market value of the share as of December 31, 2024, instead of the original acquisition cost. This approach ensures that only the increase in value of the share after January 1, 2025 is taxed. For this value to be recognized, an expert appraisal is recommended.

 

Why is the expert appraisal crucial?

An expert appraisal of the share value as of December 31, 2024 is a key tool for minimizing the tax liability.

If you do not have an appraisal and sell a share for CZK 100 million, you would pay tax on CZK 60 million (100 − 40). If, however, the market value as of December 31, 2024, is for example CZK 80 million, the tax base is significantly reduced and the tax due is much lower.

 

Important points about the appraisal

• The appraisal may be prepared at a later date, but must state the value as of December 31, 2024.
• The appraisal value reduces the tax base subject to the 23% rate.
• The appraisal should be handled by a reputable expert firm capable of defending the valuation before the tax authorities. Select based on references and documented experience, ideally supported by case studies that demonstrate the expert’s ability to defend their work in proceedings before the tax authorities. Skimping on this is not advisable.

 

Does the sale of a share apply to you? Here are some points you should adhere to

• Verify the holding period (has the share been held for more than five years?).
• Obtain an expert appraisal of the share value as of December 31, 2024 (the appraisal can be prepared later but must always value as of that date).
• For a sale, keep an eye on the annual exemption limit of CZK 40 million.
• By splitting the payout over several years, you can significantly optimize the tax outcome.
• Correctly apply proportional reduction of costs when calculating the tax base for income tax.

 

Do not skimp on consultations and preparations

This reform will affect deal structuring as well as the method of determining the share value. All these areas are complex and definitely not trivial. Therefore, it is strongly recommended to consult with tax advisors and carefully choose the valuation methodology for the expert appraisal. A proper choice of method can have a major impact on the tax base.

For more about company valuation methods, see our article Sale of a company share that the seller received as a gift. Reviewing this overview will provide basic insight into the available options used by court-appointed experts.

 

Practical example of taxation

Model calculation – total price CZK 330 million

Assumptions

• The share is owned by two partners equally (each receives CZK 165 million).
• Payments: CZK 33 million in 2025, CZK 33 million in 2026, CZK 99 million in 2027 (per person).
• The share has been held for more than five years.
• Expert valuation as of December 31, 2024: share value CZK 50 million per person.

 

Year 2025 (income: CZK 33 million)

• Exempt: CZK 33 million (below the limit of CZK 40 million).
• Taxation: CZK 0.

 

Year 2026 (income: CZK 33 million)

• Exempt: CZK 33 million.
• Taxation: CZK 0.

 

Year 2027 (income: CZK 99 million)

• Exempt: CZK 40 million.
• Taxed: CZK 59 million.
• Expense (proportional part of the expert opinion): 50 million × (59 / 99) ≈ 29.8 million.
• Tax base: 59 – 29.8 = 29.2 million.
• Tax (23%): approx. CZK 6.7 million.

 

Recommendations for the model case

• Splitting the payout over several years is advantageous – it allows you to use the exemption repeatedly.
• Expert appraisal as of December 31, 2024, can significantly reduce the tax base.
• Each shareholder should address the tax situation individually—according to their share and holding period.

 

The following chart shows the tax burden for one partner receiving CZK 165 million in three installments.

 

Chart explanation:

• Total income: the amount the shareholder receives in individual years.
• Exempt income: the amount that is not subject to tax (up to CZK 40 million per year).
• Taxed income: the amount above the limit that is subject to a 23% tax.
• Expense (valuation of the stake): the proportional part of the expert opinion (CZK 50 million) that reduces the tax base.
• Tax: calculated income tax (23% of the taxable profit).

 

The chart clearly shows that in 2027 the tax is highest, because income exceeds the exemption limit and only a proportionate part of the cost can be applied.

 

Need advice in a similar case? Contact us

If the topic of this article applies to you, do not hesitate to contact us. We solve similar cases (see our case studies) and are thus ready to lend you a helping hand.