Income tax on the sale of property

For an individual, income from selling a property is taxable under Act No. 586/1992 Coll. on Income Taxes unless an exemption under Section 4 applies. If the property was not part of business assets, it is taxed as other income under Section 10. The tax concerns the seller. The real estate acquisition tax, formerly paid by the buyer, was abolished with effect from 26 September 2020.

When a sale is exempt

• own home: selling a family house or flat (a unit with no non-residential space other than a garage, cellar or storage room) with the related land, if the seller had their residence there for at least 2 years immediately before the sale
• holding test: more than 10 years passed between acquiring ownership and the sale; for property acquired by 31 December 2020, 5 years are enough
• housing needs: if the residence or holding test is not met, the income is exempt if the seller uses it for their own housing needs (for example buying or building a home, or repaying a mortgage taken out for it)

The 10-year test has applied since 1 January 2021, introduced by Act No. 386/2020 Coll. together with the abolition of the acquisition tax. For property inherited from a relative in the direct line or from a spouse, the period is shortened by the time the deceased owned it.

Points to watch

The holding test does not apply if the property is, or in the last 10 years was, part of business assets; for the own-home exemption the period is 2 years from removal from business assets. The law also expressly excludes a future sale carried out before the period ends, even if the purchase contract is signed only afterwards - so with an agreement on a future contract the timing is worth discussing with a tax adviser.

Money for housing needs must be used by the end of the year following the year of sale, and the tax office must be notified of receiving it by the deadline for the tax return. Otherwise the income is taxed in the following year. Exempt income above CZK 5,000,000 must be reported to the tax office unless the office can obtain it from public registers; failure to report can lead to a fine.

How taxable income is taxed

The tax base is the income less provable expenses, typically the acquisition price or the commission paid to the estate agent. A loss is not taken into account. The rate is 15 %, and 23 % on the part of the base above 36 times the average wage. The income is declared in the income tax return for the year in which it was received.

Not to be confused with the annual property tax paid by the owner to the municipality. The acquisition date on which the holding test is based can usually be seen in the title of acquisition and the title deed extract.