Holding period test for tax exemption on sale (časový test)
A condition for exempting income from the sale of a property from income tax under § 4(1) of Act No. 586/1992 Coll. For properties acquired from 1 January 2021, 10 years must pass between acquisition and sale; for those acquired earlier, 5 years. A sale after at least 2 years of residence in the property, or when the proceeds are used for own housing (with notification to the tax office), is also exempt.
Example
A flat bought in March 2022 for CZK 4,500,000 as an investment is sold in October 2026 for CZK 5,500,000. The 10-year test is not met and the owner did not live in the flat, so on the difference of CZK 1,000,000 (reduced by documented expenses) he pays 15 % tax, i.e. up to CZK 150,000. Had he lived there for 2 years, the income would be exempt.
In practice
The clock starts when you acquire ownership (registration in the land registry), not when you sign the contract. When a pledged flat is sold, the mortgage is repaid from the purchase price: free of penalty once 24 months have passed since the loan agreement was signed, otherwise with a penalty of 0.25 % per started year until the end of the fixed-rate period, max. 1 %. Remember that since 2021 the period is 10 years instead of 5, so for newer purchases a sale “after five years” is taxed.
How it differs
It concerns income tax on a sale, not the annual property tax (daň z nemovitých věcí) the owner pays every year. Nor has it anything to do with the real estate acquisition tax (4 %), abolished in 2020. The residence test (2 years) is a separate alternative.
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