When selling a property in the Czech Republic, individuals can exempt the gain from the sale from income tax under certain conditions. The key concept is the so-called time test, i.e. the minimum period of time you must own or live in the property in order not to be taxed on the gain.
This article explains the current conditions, the changes applicable from 2021, the exemptions and gives a practical calculation of the tax if you don't meet the conditions.
In a nutshell:
What is the time test for real estate?
The time test is a specified period of possession or use of the property after which the sale is exempt from personal income tax.
1. Time of ownership test (10 years)
As of 2021, if you don't own the property for more than 10 years, the gain on its sale is taxable. Previously, the time test was 5 years, but an amendment to Act No. 586/1992 Coll. on Income Taxes extended it for properties acquired after 1 January 2021.
If you bought the property before this date, the 5-year time test still applies.
2. Housing Time Test (2 years)
If you have resided in the property being sold for at least 2 years before the sale, you may also be exempt from income tax - regardless of the length of ownership. You just need to prove actual use for your own purposes (e.g. permanent residence, actual use of the flat or house).
Exception: use of proceeds for own housing
If you don't meet the time test, but you can prove you used all the proceeds from the sale of the property to buy your own home, you can also get an exemption.
Conditions:
Use the money within 1 year of the sale to buy a new property for your own home.
Or you have already bought the property before the sale and will use the money to pay off the loan.
You must provide evidence of the financial flow (e.g. loan agreement, purchase agreement, proof of payment).
Practical example of income tax calculation
Example:
You buy an apartment for CZK 2 000 000 in 2022.
In 2025, you will sell it for CZK 2,800,000.
The 10 year time test is not met, you have not lived in the apartment and you will not use the proceeds for new housing.
Profit on sale (the difference between the purchase price and the selling price):
2 800 000 CZK - 2 000 000 CZK = 800 000 CZK
This profit must be taxed according to §10 of the Income Tax Act.
Income tax (15 %):
15 % of 800 000 CZK = 120 000 CZK
In some cases, it may also apply Higher rate (23 %) for high-income taxpayers (income above approx. CZK 2 million per year).
When and how to declare the tax?
Income tax on the sale of real estate must be reported in the tax return for the calendar year in which the purchase contract was signed (not just the reservation).
The return must be submitted by 1 April of the following year (electronically by 2 May). If you are working with a tax adviser, you can extend the deadline until 1 July.
Caution: don't confuse income tax and property tax
The property tax was abolished in 2020.
Property tax (formerly real estate tax) is an annual tax paid by the owner - it is not related to the sale as such.
Summary: how not to pay income tax when selling a property
✔ I have lived in the property for at least 2 years before the sale
✔ I will use the proceeds from the sale for my own housing
✔ Sell without profit (e.g. below cost price)
Are you considering selling a property? I will advise you for free
As a real estate broker specializing in the sale of apartments, houses, land and commercial properties, I offer clients not only services during the sale itself, but also consultations on tax obligations and strategies to legally minimize taxation of profits.
Feel free to contact me if:
you are selling a property and don't know whether you will be taxed,
you are considering an investment and want to know the tax consequences,
you need help estimating the market price.
Contact:
📞 +420 731 098 231
✉️ michal.blaha@re-max.cz
🌐 www.blahareality.cz
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