Income tax on a property sale: the holding period test and exceptions
“After five years, you pay no tax on the sale of property (daň z příjmu z prodeje nemovitosti)” is a sentence that no longer holds for flats acquired from 1 January 2021: the holding period test (časový test) was extended to ten years at that point. The five-year period remains, but only for what you acquired by 31 December 2020. This text leads from the date on the title deed (list vlastnictví) to the answer to whether the tax concerns you, and ends with a decision chart.
Five years or ten: the date of acquisition decides, not the date of sale
The law has two periods side by side, and it distinguishes them not by when you sell but by when you acquired the property. For property acquired by 31 December 2020, the test is five years. Under § 4(1)(b) of Act No. 586/1992 Coll., on Income Taxes (zákon o daních z příjmů), for property acquired from 1 January 2021 it is ten years.
The difference is unpleasantly sharp. A flat with the legal effects of registration (právní účinky vkladu) as at 20 December 2020 passes the test after 20 December 2025. A flat with legal effects as at 5 January 2021 passes the test only after 5 January 2031. Two weeks’ difference in acquisition means six years’ difference in the freedom to sell.
That is why, on every assignment, we ask about the date of acquisition before the price. With flats bought in 2019 and 2020 it often turns out that the test ran out only recently; with flats from 2021 and later, that it will not run out before the end of the decade. The real estate acquisition tax (daň z nabytí nemovitých věcí), which people still confuse with this, has been abolished — this text is only about income tax (daň z příjmů).
When the period starts: the line “Legal effects of entry as at”
The date on which the purchase agreement (kupní smlouva) was signed is irrelevant for the test. Ownership arises on entry in the Land Registry (katastr nemovitostí), and the legal effects of registration arise retroactively at the moment the application for registration (návrh na vklad) reached the cadastral office (katastrální úřad). On the extract from the title deed, you will find this in the part on the title of acquisition (nabývací titul): under the document (Smlouva kupní ze dne…, i.e. purchase agreement dated…) there is the line “Legal effects of entry as at” (Právní účinky zápisu ke dni). We count from this, not from the date of signing or from the date the keys were handed over. The holding period test also runs from this date, because the law measures it from the acquisition of ownership (§ 4(1)(b) of Act No. 586/1992 Coll.).
This has a practical impact at the turn of the year. An agreement signed on 18 December 2020 whose application for registration reached the office only on 4 January 2021 is an acquisition in 2021 — and the test is ten years. Between signing and delivery of the application there are usually a few days: signatures are verified and the purchase price is placed in escrow. On transactions that lie close to the boundary, we watch these days particularly closely.
Registration proceedings (vkladové řízení) take weeks, not days: under § 18(1) of Act No. 256/2013 Coll., on the Land Registry (katastrální zákon), the cadastral office may not approve registration until after the protective period (ochranná lhůta) of 20 days from sending the notice to the owner. A delay at the office does not change the date of acquisition, however; only the day the application arrived does.
Two years’ residence: a second route that does not depend on the holding period test
Alongside the holding period test there is a separate ground for exemption: residence (bydliště) in the house or flat being sold for at least two years immediately before the sale (§ 4(1)(a)). Anyone who has lived in the flat that long need not deal with the holding period test at all, even if they bought the flat the year before last.
The word “immediately” is there deliberately. The two years must end with the sale, not at any time in the past. Anyone who lived in the flat in 2018–2020 and has let it since no longer has this route.
“Residence” is also not the same as permanent residence (trvalý pobyt) recorded in the population register. It is the place where the taxpayer actually stays with the intention of living there permanently. Permanent residence is a pointer, not proof. When we know on an assignment that residence will have to be proven, we recommend that the owner start a file before clearing out the flat: utilities statements (vyúčtování energií) in their name, receipts for waste collection, correspondence with the owners’ association (společenství vlastníků jednotek, SVJ), a breakdown of payments into the repair fund (fond oprav). Once the flat has been cleared, this is considerably harder to trace.
Own housing needs: an exemption you must claim yourself
The third route is for those who do not pass the test and use the money for their own housing. The exemption applies if the taxpayer uses the funds obtained for securing their own housing needs (obstarání vlastní bytové potřeby) by the end of the tax period (zdaňovací období) immediately following the year in which they obtained them. The funds can also be used before the sale — but no earlier than in the year immediately preceding it.
This comes with one formal obligation: you must notify the tax administrator (správce daně) that you have obtained the funds by the end of the deadline for filing the tax return (daňové přiznání) for the year in which you obtained them (§ 4b(3)). The General Financial Directorate (Generální finanční ředitelství) has issued an optional form for this, 25 5259 — Notification of obtaining funds that will be or have been used to secure own housing needs (Oznámení o získání prostředků, které budou nebo byly použity na obstarání vlastní bytové potřeby), now in version (vzor) No. 2. Optional means that the notification can also be filed in free form; the form merely makes sure it contains everything it should.
Until the middle of 2024, failing to file the notification cost you the exemption. Act No. 163/2024 Coll. removed this harshness: the obligation remains, but failing to meet it no longer cancels the exemption in itself. The sanction can be a fine for failing to fulfil a non-monetary obligation under § 247a of the Tax Code (daňový řád), of up to CZK 500,000. What matters is that the funds really go to housing needs within the time limit.
And there are more housing needs than just buying another flat. The Act lists eight of them in § 4b(1):
- construction of a block of flats, a family house or a unit, and alteration of a building — letter (a);
- acquisition of land for consideration, if you start construction on it within 4 years of acquisition, or in connection with the acquisition of a house or unit — letter (b);
- acquisition for consideration of a block of flats, a family house, a building under construction or a unit — letter (c);
- payment of a contribution to a legal entity by its member in order to obtain the right to lease or otherwise use a flat or a family house — letter (d);
- maintenance and alteration of a block of flats, a family house, a leased or used flat, or a unit — letter (e);
- settlement of the community property of spouses (společné jmění manželů) or settlement between co-heirs, where it concerns a share in a housing need — letter (f);
- payment for the transfer of a share in a business corporation in connection with the transfer of the right to lease a flat — letter (g);
- repayment of borrowed funds, for example under a borrowing agreement (zápůjčka), used to pay for any of the preceding needs — letter (h).
If you use only part of the income, only that part is exempt; the rest is taxed.
Inheritance and gifts: when the period is shortened and when it is not
The period is shortened in only one narrow case: inheritance from a deceased (zůstavitel) who was a relative in the direct line (příbuzný v řadě přímé) or a spouse. There the period is shortened by the time for which the deceased owned the property (§ 4(1)(b)). If you inherit a flat that your father bought in 2004, you pass the test on the day you acquire the inheritance. If you inherit a flat from an aunt or a sibling, this rule does not apply and your period runs in full from acquisition. A gift is in the same position as inheritance from an aunt: the donor’s holding period does not count, even if the donor was your father.
| Method of acquisition | Does the previous owner’s period count? |
|---|---|
| Inheritance from a relative in the direct line or from a spouse | Yes, the period is shortened by the time they owned it |
| Inheritance from anyone else | No, the period runs in full from acquiring the inheritance |
| Gift, even from a parent | No, the period runs in full from acquiring the gift |
For property acquired free of charge, the expense is also determined differently. It is neither what the deceased or the donor once paid, nor zero. Under § 10(5), the expense is the price determined under Act No. 151/1997 Coll., on Property Valuation (zákon o oceňování majetku), as at the date of acquisition — in practice an expert valuation (znalecký posudek) prepared retrospectively to that date. What is taxed is then the difference between this price and the price achieved on the sale. Anyone who has no valuation and sells before the test has run out has nothing to prove the expense with. That is why the valuation is obtained right after the probate proceedings, not only in the year of sale, when the condition of the flat as at the date of acquisition is considerably harder to trace.
The exemption does not apply to property held as business assets (obchodní majetek), and after it has been removed from them two different periods apply: the residence exemption is not available until two years after removal (§ 4(1)(a), point 1), and the holding period test not until ten years, or five years for property acquired by 31 December 2020 (§ 4(1)(b), point 1). A flat depreciated in a business is therefore a different case, even if the test ran out long ago.
When the exemption does not work out: how tax on the sale of property is calculated
The difference between the income and the proven expense is taxed as other income under § 10. It is entered in Section 2 of Annex 2 (Příloha č. 2) to the tax return as income type B – sale of immovable property; the partial tax base (dílčí základ daně) from line 209 is carried over to line 40.
The list of deductible expenses is in § 10(5), and it is narrower than owners expect. You can claim the price at which you demonstrably acquired the property, amounts demonstrably spent on technical improvement (technické zhodnocení), repair and maintenance of the property, and expenses related to carrying out the sale — the brokerage fee (odměna za zprostředkování), the expert valuation, escrow of the purchase price, the administrative fee for registration. Your own work cannot be claimed: under the same provision, the value of the taxpayer’s work on a thing they made themselves or improved through their own work is disregarded. A do-it-yourself renovation therefore counts in materials and tradesmen’s invoices, not in weekends worked.
And a loss is not carried over anywhere. If the expenses related to a particular type of income exceed the income, the difference is disregarded (§ 10(4)). No tax is paid on a sale below the acquisition price, then, but the loss does not reduce tax on wages, on rent or on another sale either.
Model calculation — a 3+kk flat (three rooms plus a kitchenette), 78 m² in Vinohrady, acquired in April 2022, sold in 2026; the owner never lived in it and has no other income:
- Income from the sale: CZK 14,900,000
- Acquisition price under the 2022 purchase agreement: − CZK 11,200,000
- Renovation documented by invoices, model amount: − CZK 940,000
- Brokerage fee of 3 % + VAT: − CZK 540,870
- Partial tax base: CZK 2,219,130; tax base rounded down to whole hundreds of CZK: CZK 2,219,100
- Tax: 15 % up to CZK 1,762,812, i.e. CZK 264,421.80; 23 % of the amount above it, i.e. of CZK 456,288, i.e. CZK 104,946.24
- Total CZK 369,369 before tax credits (slevy na dani)
The threshold of CZK 1,762,812 is 36 times the average wage for 2026 (CZK 48,967), and it is calculated from the sum of all partial tax bases, not just from the sale. Anyone with a salary goes over it sooner. For 2025 the threshold was CZK 1,676,052.
If the same owner sold only after passing the ten-year test, the tax would be zero. The difference of CZK 369,369 is 2.48 % of the purchase price.
Where our approach hits its limits
To owners with only a few months left until the end of the test, we usually recommend postponing the sale. It is only fair to say what this advice is not backed by: we do not know where the market will move in those few months. For the model flat the saving is 2.5 % of the purchase price, so a fall in asking prices of three per cent is enough for the wait to have been a loss. The advice “wait” is therefore a bet we cannot support with data — and the brokerage carries no risk in it, because the costs of waiting (running the flat, tied-up capital, a postponed move) lie entirely with the owner.
The second weakness lies in the documents. Only a proven expense can be claimed. In recent years we have repeatedly seen renovations paid in cash without invoices, where nothing could be deducted from the purchase price. We can help collect documents only from the moment we take on the assignment; we cannot trace what happened before.
And the third thing: we do not file tax returns and we do not provide tax advice. We prepare the groundwork — dates of acquisition, the Land Registry extract, an overview of documented costs, a calculation in both variants — and hand it over to the owner’s tax adviser.
Annex: decision chart for the exemption
Chart 1. Work from top to bottom. Each question is answered yes or no; a “no” moves you one row down.
DECISION CHART — EXEMPTION OF INCOME FROM A SALE sheet 1/1
══════════════════════════════════════════════════════════════
① Is the property held as business assets, or was it
removed from them less than 2 years ago?
YES ──▸ [D] NO ──▸ ②
② Did you live in the house or flat being sold for at
least 2 years immediately before the sale?
YES ──▸ [A] NO ──▸ ③
③ Did the legal effects of registration on acquisition
arise by 31 December 2020?
YES ──▸ ④ (5-year test) NO ──▸ ⑤ (10-year test)
④ Have 5 years passed from acquisition to sale, and was
the property not held as business assets in the last
5 years?
YES ──▸ [A] NO ──▸ ⑥
⑤ Have 10 years passed from acquisition to sale, and was
the property not held as business assets in the last
10 years?
YES ──▸ [A] NO ──▸ ⑥
⑥ Did you acquire it by inheritance from a relative in
the direct line or from a spouse?
YES ──▸ add the deceased’s holding period;
if the answer to ④ / ⑤ is now yes ──▸ [A],
otherwise ──▸ ⑦
NO ──▸ ⑦
⑦ Will you use the entire income for your own housing
needs by the end of the year following the year of sale?
YES ──▸ [B] NO ──▸ ⑧
⑧ Will you use at least part of it for own housing needs?
YES ──▸ [C] NO ──▸ [D]
If the property was held as business assets in the last
10 years, ⑦ and ⑧ apply only if you had your residence
in it immediately before the sale.
──────────────────────────────────────────────────────────────
RESULTS
[A] exempt unconditionally
not entered in the tax return; the notification of exempt
income over CZK 5,000,000 is not filed for property
recorded in the Land Registry
[B] exempt conditionally
notify the tax administrator by the deadline for the
return for the year of sale; use the funds by the end
of the following year
[C] proportionate part exempt
the rest is taxed as under [D]
[D] taxed
Annex 2 to the tax return, § 10; rate 15 %, on the base
above CZK 1,762,812 (year 2026) rate 23 %
══════════════════════════════════════════════════════════════
Frequently asked questions
When is no tax paid on the sale of a flat? In three cases: the holding period test is passed (5 or 10 years depending on the date of acquisition), you resided in the flat for at least two years immediately before the sale, or you use the income for your own housing needs within the set time limit.
Do I pay tax after five years if I bought the flat in 2021? Five years is enough only for property acquired by 31 December 2020. For property acquired from 1 January 2021 the test is ten years, and the five-year period is irrelevant.
When does the holding period test start? From the date of the legal effects of registration, which you will find on the extract from the title deed next to the title of acquisition — not from the signing of the agreement.
Do I have to include an exempt sale in my tax return? No. Exempt income is not entered in the tax return, and for properties recorded in the Land Registry no notification of exempt income over CZK 5,000,000 is filed either.
What if I sold the flat at a loss? If the expenses related to a particular type of income exceed the income, the difference is disregarded (§ 10(4)). A loss-making sale therefore does not reduce your tax; it simply incurs none itself.
Conclusion
The holding period test is not one period but two, and the boundary between them runs along a single date. Before anyone starts talking about price, the extract from the title deed should be on the table, and with it the date of the legal effects of registration; only then can one say whether tax is an issue or not. The wider context is covered in the texts on how to sell a flat in Prague and on property tax (daň z nemovitých věcí), which, unlike this tax, is paid anew every year. A specific case is worth checking with a tax adviser before the date of sale is decided on that basis.