The consolidation package effective from 1 January 2024 proposes partial taxation of individuals' income from the sale of securities and other business shares. However, the exemption limitation itself is likely to apply only from 2025.
Now, if the holding period test is met (three years for securities, five years for other shares in a corporation), the income of individuals is fully exempt from tax.
Now, such income will be exempt only up to CZK 40 million per year after the time test is met. This limit is the aggregate limit for the exemption of income from the sale of securities and other interests in a corporation for the taxable year.
In a situation where the income from the sale of a share in a business corporation can only be partially exempted due to the limit on exempt income being exceeded, the seller will be able to use the market value of the share as determined under the Valuation Act as of 31 December 2024 as an expense against taxable income. This will essentially ensure that the individual will only be taxed on the increase in the value of the share after 31 December 2024.
For sales made during 2024 with income received in 2025, it will be possible to recognise as an expense the value of the business share in question as determined by an expert at the date of the transfer of the share in 2024. In practice, this means that instead of the current exemption, the selling individual will report taxable income for 2025 in their tax return, plus an expense of probably a very similar amount. As a result, the seller will de facto pay almost no tax on the sale but will have to pay for an expert's report.
Of course, it remains to be seen what version of the final consolidation package will be approved.
EXAMPLE
1. I sign a contract of sale by the end of 2024 and get paid by the end of 2024 = income is exempt.
2. I sign a contract of sale in 2024 and get paid in 2025 = I do an appraisal as of the date of sale in 2024 - income over CZK 40 million is taxable in 2025.
3. I sign a contract of sale in 2025 and get paid in 2025 = I do an appraisal as of 31 December 2024 - income over CZK 40 million is taxable in 2025.