Czech tax on investments: how the three-year time test works

The Czech tax system has a rule about investments that tells you, more than most, what the legislator is trying to encourage: patience. Sell a share the day after buying it and the profit is income. Sell it after a few years and, within limits, the profit may be free of Czech income tax. That is the time test (časový test), and for investors it is the most important idea in the Income Tax Act.

This explainer covers the principle and the structure of the rules. Because the figures were amended recently and may change again, treat every number here as "as of 2026; check the official source", and see a tax adviser for a real portfolio.

The principle

Czech law taxes income, and a gain from selling an asset is income. But the law also lists exemptions, and one is for sales of certain assets after a minimum holding period. The longer you hold, the more the gain looks like savings and the less like trading. The rule is generous on its face and has conditions.

For securities, the holding period is three years (as of 2026; check the official source). A security sold after that period is, in general, exempt from income tax on the gain. Securities here include shares, bonds, units in mutual funds and exchange-traded funds, among others. The rule applies to individuals who are not holding the assets as business property.

Counting the days

The holding period runs from the date you acquire the security to the date you sell it. Acquisition is the date the security is credited to your account or you become the owner, not the date you decided to buy. The period is judged on each unit separately, which is where the matching rule comes in.

If you bought units of the same fund at different times and then sell part of your holding, which units did you sell? Czech law answers with the first-in, first-out method (FIFO) for identical securities: the oldest units are treated as sold first. A saver who has invested monthly for five years and then sells a portion is therefore usually selling the oldest, longest-held units first, which helps the time test.

The illustration is deliberately simple. Real cases involve reinvested dividends, transfers between accounts and corporate actions, each of which needs care in recording the acquisition date.

The limits on the exemption

Two features narrow the exemption. First, an annual ceiling: for sales in 2025 the exemption for securities held for three years applied only to proceeds up to CZK 40 million a year. An amendment (Act No. 360/2025 Coll.) removed that ceiling for securities and business shares from 1 January 2026 and kept it for crypto-assets (as of 2026; check the Financial Administration). Either way it never mattered to most retail investors.

Second, the rule works differently for people who hold securities as part of a business, and for companies, which are taxed on gains under corporate income tax rules and have their own treatment of shareholdings.

There is also an exemption for small amounts: sales with total proceeds below a low annual limit may be exempt regardless of the holding period (as of 2026; check the official source). Because this relates to proceeds, not profit, an active trader can exceed it quickly.

Digital assets are covered by similar rules since 2025 (as of 2026; check the official source), with their own conditions and a holding period. If you hold such assets, read the current guidance, since this is a developing area.

When the gain is taxable

If the holding period is not met and no other exemption applies, the gain is part of your "other income" and goes into the personal tax base. The standard rate is 15%, with a higher rate on income above a threshold linked to the average wage (as of 2026; check the official source). Our explainer on employee income tax describes the structure.

The taxable amount is the sale price less the acquisition cost and certain documented expenses, such as fees paid to the broker. The gain is calculated per transaction, with currency conversion at the right rate. A negative result is a loss.

Losses

Losses on securities can be set against other taxable income from securities, in the same year, within the category of other income. They cannot be set against salary or business income. In practice, a loss on a sale you made within the time test can offset a gain on another sale that is also taxable. A loss on a sale made after three years, when the gain would have been exempt, generally cannot be used, as the exempt transactions sit outside the calculation. Check the details with the guidance.

Foreign brokers and records

Because foreign brokers do not report to the Czech tax office, the investor must keep complete records. That means purchase and sale confirmations, fee statements, the exchange rates used and a log of the FIFO matching. The Financial Administration may ask for proof in an audit, and the burden is on the taxpayer. If the broker supplies a tax report, check that its method matches the Czech rules, since most are written for another country's tax system. Our guide to investing basics lists the steps.

A short walk-through

Suppose an investor buys ten units of a fund in each of four consecutive years and, in the fifth year, sells fifteen. The oldest units, those bought in year one, count as sold first, then the second tranche, and half of the third. Each tranche has been held for a different time, so the tranches bought longest ago have passed three years, while the later ones may not have. Only the part of the sale matched to units that have passed the test is eligible for the exemption, and the rest forms taxable income. The numbers here are illustrative, not drawn from any real fund.

The same logic explains why the date of each purchase matters, and why a spreadsheet or a broker report that lists acquisition dates by tranche is worth keeping. A single total cost figure, without dates, cannot support a time-test claim.

Other assets and the time test elsewhere

The same idea of a holding period applies elsewhere in the Czech system, with different lengths. Sales of property by individuals can be exempt after a longer period, and sales of a home you have lived in can be exempt after a shorter one (as of 2026; check the official source). Do not carry the three years from securities across to other assets.

Common mistakes

Counting from the date of the decision to buy, not the date of acquisition. Forgetting that FIFO decides which units were sold. Assuming the time test removes the need to keep records. Ignoring a sale above the annual ceiling. Relying on a broker's generic tax report. And mixing the holding period for securities with the one for property.

Frequently asked questions

How long must I hold shares for the gain to be tax-free?

Three years under the current rule (as of 2026; check the official source), within the limits on exempt proceeds.

Which units count as sold when I sell part of a holding?

For identical securities, the oldest first (FIFO).

Can I use a loss against my salary?

No. Losses on securities can be set only against other income of the same kind.

Does the broker apply the time test for me?

A Czech broker may provide a report, but the responsibility to declare is yours. Foreign brokers usually do not apply Czech rules.

This is a general explainer, not legal or tax advice.