Capital gains tax on selling property in the Czech Republic…

Selling a flat or a villa? When you acquired it, whether you lived in it and what you do with the proceeds decide whether you pay nothing or hundreds of thousands of crowns. We explain the holding period test, the residence test, reinvestment and the common mistake about the CZK 40 million cap.

In 2026, an individual does not pay tax on the sale of a property if they lived in the flat or house for at least two years immediately before the sale, or if they meet the holding period test. The holding period is five years for property acquired by the end of 2020 and ten years for property acquired from 2021 onwards. If you meet neither condition, you can still avoid the tax by using the money for your own housing. Otherwise you pay 15% on the gain, and 23% on the part of your total tax base above CZK 1,762,812. The CZK 40 million cap does not apply to property sales.

Who pays tax on selling property and who is exempt

Income from the sale of a property that an individual does not hold as business assets counts as 'other income' (ostatní příjmy) under Section 10 of the Income Taxes Act (zákon o daních z příjmů). It is not the full purchase price that is taxed, but the difference between the price and your provable expenses. These mainly include the acquisition price, documented technical improvements (technické zhodnocení) and the costs of the sale, such as agency commission or legal fees. Section 4 of the same Act provides an exemption in three ways: through residence, through the holding period test, or by using the money for your own housing needs.

For 2026, a rate of 15% applies up to an annual tax base of CZK 1,762,812, which is 36 times the average wage. Above this threshold, the rate is 23%. The gain from the sale is added to your other income, such as salary or rental income. With more expensive properties, a large part of the gain may therefore fall into the higher rate.

The holding period test: why the acquisition date matters

What counts is the day you acquired the property. If you acquired it by 31 December 2020, five years between acquisition and sale are enough. For property acquired from 1 January 2021, ten years must pass. A flat bought in February 2021, for example, can therefore be sold tax-free only from February 2031. Where ownership is acquired by registration in the Land Register (katastr nemovitostí), the ownership right takes effect from the day the application for registration (návrh na vklad) was filed.

A common mistake is to count the period from the date the house received its occupancy approval (kolaudace). What matters is the day you acquired ownership – for a purchased house with land, the day from which you are the owner. If you built the property yourself, it is advisable to have your specific situation assessed by an adviser. Take care also with 'older' properties that you later rebuilt or extended by further purchases. An adjoining plot or cellar bought later has its own acquisition date, and therefore its own holding period test.

The residence test: two years and what exactly the tax office assesses

Income from the sale of a family house with its associated land, or of a residential unit, is exempt if the seller had their residence there for at least two years immediately before the sale. So it is not any two years in the past – it must be the last two years before the sale. If you move out and then let the flat for a year, you lose the exemption under this rule.

Permanent residence recorded in your identity card is not sufficient on its own, but neither is it a requirement. The tax office (finanční úřad) assesses whether you genuinely lived in the property. Evidence can include energy and water consumption, your correspondence address, utility connection contracts, home insurance or testimony from neighbours. If you alternate between several homes, establish in good time which one you actually use and how you will prove it.

The CZK 40 million annual cap: what to do when selling a luxury property

A misconception has spread that, since 2025, exempt income from the sale of property has been limited to CZK 40 million a year. The consolidation package introduced such a limit only for securities, business shares and crypto-assets. From 1 January 2026, under the current wording of Section 4(3), it applies only to crypto-assets. If you sell a flat or villa after meeting the holding period test or the residence test, the income is exempt regardless of the price.

For large sales, timing is far more important. If only a few months remain until you meet the holding period test, it may pay off to sign the purchase contract later or to adjust when the application for registration is filed. The obligation to report exempt income above CZK 5 million to the tax office does not apply to the sale of property registered in the Czech Land Register. The exception is an exemption conditional on reinvestment in housing, which we cover below.

Reinvesting in your own housing as a route to exemption

If you meet neither the holding period test nor the residence test, you can still be exempt from tax if you use the money for your own housing needs (vlastní bytová potřeba) under Section 4b. This covers buying a flat or house, construction, maintenance and renovation. Buying a plot also qualifies, provided construction on it begins within four years of acquisition. You must use the money no later than the end of the year following the year in which you received it. For a sale in 2026, that means by 31 December 2027.

This is where most of the pitfalls lie. You must use the entire proceeds of the sale for housing, not just the gain. If you use only part of them, the remainder may be taxed. In addition, you must notify the tax office that you intend to claim the exemption through reinvestment, by the deadline for filing your tax return. If you ultimately fail to meet the condition, you must tax the income retrospectively. The housing need must be your own, so a flat bought to let does not qualify.

Property held as business assets, through an s.r.o. or inherited: special cases

If you held the property as business assets as a self-employed person, you may not be entitled to the exemption. Under the residence test, you are not exempt if you sell within two years of removing the property from your business assets. Transitional rules may apply to older cases, so your specific situation needs to be assessed.

If the property is owned by a limited liability company (s.r.o.), none of the exemptions for individuals apply. The gain is subject to corporate income tax at 21%, and the distribution of profits to shareholders is taxed again. The situation is different if, instead of the property, you sell your share in the company. From 2026, income from the sale of a share is once again exempt after meeting the holding period test, without the CZK 40 million cap. Such a transfer, however, requires thorough legal and tax due diligence.

If you inherited the property from a relative in the direct line or from your husband or wife, the period during which the deceased owned it also counts towards your holding period test. Special rules apply to determining the deductible expense for inherited property, so it is worth keeping the documents from the probate proceedings.

Illustrative calculations and documents for your tax return

A flat in Vinohrady (figures are purely illustrative): bought in March 2022 for CZK 12 million and let out, sold in 2026 for CZK 16 million. A documented renovation cost CZK 0.8 million, and commission and legal fees CZK 0.5 million. The gain is therefore CZK 2.7 million. The seller did not live in the flat and will meet the holding period test only in March 2032. If their other income already exceeds the CZK 1,762,812 threshold on its own, they will pay 23% on the entire gain, i.e. CZK 621,000. They will not pay the tax if they use the full CZK 16 million for their own housing by the end of 2027 and report the reinvestment in time, or if they wait before selling.

A villa in Prague 6 (illustrative): a plot with a house bought in 2019 for CZK 25 million, sold in 2026 for CZK 68 million. The property was acquired before 2021, so five years are sufficient and the holding period test is met. The entire income is exempt, even though it exceeds CZK 40 million, and no notification to the tax office is required. If, however, the owner had part of the villa included in their business assets – for example as an office – the situation would change fundamentally.

Before the sale, prepare the following documents and keep track of these deadlines:

purchase contract, deed of gift or inheritance decision showing the acquisition date, and an extract from the Land Register
evidence of the acquisition price and of technical improvements (invoices, building permits)
evidence of the costs of sale: commission, escrow held by a lawyer (advokátní úschova), expert valuation
evidence of genuine residence: energy bills, correspondence address, home insurance
for reinvestment: the notification under Section 4b by the tax return deadline, and evidence of how the money was used by the end of the following year
tax return for 2026: the regular deadlines are usually 1 April (paper filing), 1 May (electronic filing) and 1 July (when represented by a tax adviser), with any deadline falling on a weekend moved to the next working day; check the exact dates in the tax calendar of the Financial Administration (Finanční správa)

Frequently asked questions

Do I have to file a tax return when selling an exempt flat? If the income is exempt thanks to the residence test or the holding period test and the property is registered in the Czech Land Register, you do not need to file a tax return or a notification because of the sale. If you are relying on reinvestment in housing, you must file the notification.

Does the CZK 40 million limit apply to property sales? No. In 2026, the limit applies only to crypto-assets. In 2025, it also applied to securities and business shares. A property that meets the conditions for exemption can be sold tax-free at any price.

Can I claim a renovation as an expense? Yes, if you can document it and if it increased the value of the property, meaning it was a technical improvement. Without invoices and contracts, the tax office is unlikely to accept it in an audit. Keep your documents for the entire period of ownership.

This article explains the general rules under the law as in force in October 2026. Before you time the sale or choose a transaction structure, have your situation assessed by a tax adviser or lawyer. DALILE LIVING will help you prepare the sale and its timetable so that it can be aligned with your adviser's recommendations.