Shrnutí: A land swap can be a practical solution if neighbors want to adjust their property lines, an owner needs a more accessible plot of land, or two parties agree to exchange agricultural land. Although no money may change hands during a swap, it is not a gratuitous transaction.
Each participant receives a different piece of real property in exchange for their land, and thus also non-monetary income. If the conditions for an exemption are not met, the exchange may give rise to an obligation to file a tax return and pay income tax.
Quick Overview
Under Section 2184 of the Civil Code, an exchange agreement commits each party to transfer ownership of a specific item to the other party in exchange for the transfer of ownership of another item. The rules governing a purchase agreement apply mutatis mutandis to an exchange. Each party is therefore considered the seller with respect to the land it is transferring and the buyer with respect to the land it is acquiring.
Entire parcels of land, co-ownership shares, and newly separated portions of parcels may be exchanged. If only a portion of a parcel of land is being exchanged, it must generally first be delineated by a geometric plan. Because ownership of real property is being transferred, the contract must be in writing, and the declarations of all contracting parties must be recorded in the same document. However, the owners do not change simply by signing the contract. Ownership of the land is established only upon registration in the real estate cadastre.
The contract must specifically identify, in particular:
If one parcel of land has a higher value, the parties may agree on a cash payment. The contract should clearly state who will pay it, the amount, when it is due, and how payment will be secured. It is advisable to have the signatures on the exchange agreement notarized. This reduces the risk that the land registry office will require further proof of their authenticity.
From the title deed, you must verify not only the identity of the owner but also:
It is also important to consider actual access to the land, its usability according to the zoning plan, boundaries on the ground, and any restrictions arising from the protection of agricultural land, nature, or technical infrastructure.
If the land is mortgaged in favor of a bank, the exchange alone does not remove the mortgage. Therefore, before signing the contract, it is necessary to agree with the bank on the cancellation of the mortgage, its transfer to another property, or another acceptable course of action.
Practical Experience: A common mistake is that the parties focus only on the area and approximate price of the parcels. Only later do they discover that one of the parcels lacks legally secured access, is encumbered by an easement, or cannot be used for its intended purpose.
Not sure how to do your taxes correctly so you don’t get it wrong? We can help you navigate the law, whether it’s dealing with a specific tax situation, preparing for an audit by the tax authority or defending yourself in court.
Act No. 586/1992 Coll., on Income Taxes, expressly stipulates that income may also include non-monetary income derived from an exchange. Income obtained through an exchange is treated for tax purposes in the same way as income obtained through a sale.
If the land is not part of business assets and the transaction does not constitute a systematic business activity, the non-exempt income of a natural person will generally be classified as “other income” under Section 10 of the Income Tax Act. Each party to the exchange must assess its tax situation separately. The fact that the parcels of land have the same market value or that no additional financial payment was agreed upon does not necessarily mean that the tax base will be zero.
Non-monetary income is the value of the land that a party acquires through the exchange. This value is determined in accordance with Act No. 151/1997 Coll., on the Valuation of Property. Unless the law specifies a particular method of valuation, the usual price is generally used as a basis—that is, the price that could be obtained in a normal sale of comparable property.
Therefore, the price stated in the exchange agreement is not necessarily decisive for tax purposes. However, it should correspond to the actual value of the land and be verifiable. An expert appraisal is not automatically required for every exchange. However, it is particularly appropriate when:
The current market value of the land that the party is transferring in the exchange is not deducted from the value of the land being acquired.
An expense is, in particular, the price at which the party demonstrably acquired the land being surrendered in the past. Demonstrable costs for technical improvements, repairs, maintenance, and other expenses directly related to the transfer may also be added.
The nature of the cost depends on the method of the original acquisition:
If the deductible expenses exceed the income from the exchange, no usable tax loss arises for this type of other income. The difference simply cannot be claimed below zero.
Mr. Karel and Mr. Jan are exchanging two parcels of land. Each parcel is valued at 1,000,000 CZK, and neither party is making an additional payment. Neither of them meets the conditions for an exemption.
Mr. Karel purchased his original plot of land for 400,000 CZK. His non-monetary income amounts to 1,000,000 CZK, and his deductible expense is 400,000 CZK. Before taking into account other documented expenses, his partial tax base is therefore 600,000 CZK.
Mr. Jan purchased his original plot of land for 850,000 Kč. His income is also 1,000,000 Kč, but after deducting the acquisition cost, his tax base is 150,000 Kč.
Although both plots of land being exchanged have the same current value, the tax outcome is different for each party. The decisive factors are primarily the value of the acquired land and the tax-deductible acquisition cost of the land being surrendered.
If the exchange includes a cash payment, this must also be taken into account when determining income and expenses.
An individual is generally required to file a tax return if their annual taxable income exceeds 50,000 CZK. An employee who otherwise meets the conditions for annual tax settlement is required to file their own return, particularly if their other income under Sections 7 through 10 exceeds 20,000 CZK. In this context, the amount of income is considered, not the resulting profit after deducting expenses.The value of the land will exceed these limits in most cases. If the income from the exchange is not exempt, it is therefore generally reported on the income tax return for the year in which it was earned.
Tip: You might think that sincethe donation of landisn’t for consideration, drafting a deed of gift isn’t such a big deal. However, the value of the land is still a factor, and it’s often quite substantial. A properly drafted deed of gift for land can help you avoid many problems. In our article, we’ll use practical examples to show you how to draft such an agreement.
Since income derived from an exchange is treated similarly to income from a sale, the exemption under Section 4 of the Income Tax Act may also apply if the conditions are met. This conclusion is also supported by case law.
For individual parcels of land, the most common basis for exemption is meeting the time test:
If the period between the acquisition of the land and its exchange exceeds the applicable time period, the non-monetary income is generally exempt. In the case of inheritance from a direct lineal relative or a spouse, the period during which the decedent owned the land is also counted toward the time test. The exemption may be limited if the land was included in business assets. In such a situation, it is necessary to assess not only the period of ownership but also the date of its removal from business assets.
The two-year residence test applies to the transfer of a single-family home and associated land or a legally defined residential unit and associated land. Therefore, it generally cannot be applied to a standalone field, meadow, forest, garden, or undeveloped building lot. For such properties, a five-year or ten-year time test is typically applied.
Under certain conditions, the law also allows for the exemption of income from the transfer of real property for which the time test has not yet been met, provided that the taxpayer uses the proceeds to acquire housing for personal use.
However, in the case of a pure exchange without a cash payment, meeting this condition may not be straightforward, as the income is in non-monetary form. Therefore, one cannot automatically assume that the party intends to use the acquired land to build a house in the future. It is advisable to have the specific structure of the transaction and the manner in which the proceeds will be used assessed for tax purposes in advance. Another condition for this exemption is the timely notification of the acquisition of the funds to the tax authority, specifically by the end of the filing deadline for the tax return for the year in which the funds were acquired. Without such notification, the exemption based on personal housing needs cannot be claimed.
Exempt income exceeding five million crowns is generally reported to the tax office. However, this obligation does not apply to income from the transfer of real property registered in the Czech Real Estate Cadastre, as the tax authority can obtain the necessary information from public records.
This exception should not be confused with the special notification required when using the proceeds for one’s own housing needs. Such a notification may still be required even if the transfer of land is registered in the cadastre.
Income derived by spouses from the exchange of property held in joint marital property is taxed only for one of them.
If the land was included in the business assets of one of the spouses, the income is taxed for that spouse.
The real estate acquisition tax was repealed by Act No. 386/2020 Coll. Therefore, for a land exchange taking place in 2026, this tax is not payable and no tax return needs to be filed for it. However, this does not mean that the exchange is entirely free of tax implications. It is still necessary to assess income tax and the subsequent real estate tax.
Real estate tax is assessed based on the status as of January 1 of the relevant tax period. If a party acquired new land through an exchange during the previous year, they generally file a real estate tax return by January 31 of the following tax period. The return is filed in advance for the given year.
It is not necessary to file a return automatically every year. If ownership or other circumstances relevant to the tax amount do not change in subsequent years, the tax authority will assess the tax based on previously known information.
If a taxpayer has disposed of all real property within the jurisdiction of the relevant tax authority through an exchange, they must notify the tax authority of this fact within the prescribed deadline. If they continue to own other real property within that jurisdiction, they will generally reflect this change in their tax return.
In the case of a standard one-time exchange of private land between individuals, VAT is generally not an issue. A different situation may arise if one of the parties is acting as a business entity, is a VAT payer, includes the land in its business assets, or if the land is a building lot being transferred as part of economic activity. Such an exchange must be assessed on a case-by-case basis, as each reciprocal transaction may constitute a separate taxable transaction.
Before signing the exchange agreement, it’s a good idea to follow these steps:
A land exchange is a transfer for consideration in which each party surrenders its own land and acquires another. The agreement must be in writing, and ownership is transferred only upon registration in the real estate cadastre.
For income tax purposes, the value of the income is the price of the acquired land. Deductible from this amount are, in particular, the verifiable acquisition cost of the land being surrendered and related eligible expenses. Its current market value is not automatically deducted.
The income may be exempt if the applicable holding period requirement has been met. For land acquired no later than 2020, this is generally five years; for land acquired from 2021 onward, it is generally ten years.
Real estate acquisition tax is no longer payable. However, following an exchange, it is generally necessary to file a real estate tax return and, depending on the circumstances, an income tax return as well.
Yes, unless the income is tax-exempt. Each participant receives non-monetary income equal to the value of the land acquired through the exchange. In particular, the participant may deduct the verifiable acquisition cost of the land surrendered from this income.
Yes. The Income Tax Act also considers non-monetary benefits obtained through an exchange to be income. Therefore, the mere absence of a monetary payment does not preclude a tax liability.
Most often, upon meeting the time requirement. For land acquired no later than December 31, 2020, the period is generally five years; for land acquired on or after January 1, 2021, it is ten years. Special rules apply, for example, in cases of inheritance or business assets.
An expert appraisal is not required for every exchange. However, you must be able to document the value of non-monetary income. An appraisal is particularly appropriate for significantly different parcels of land, a higher additional payment, or an exchange between related parties.
Ownership arises upon registration in the real estate cadastre. Simply signing the deed of sale is not sufficient to transfer ownership.
No. The real estate acquisition tax has been abolished. However, the exchange may be subject to income tax, and real estate tax must be addressed accordingly.
Generally, yes. If you acquired or disposed of land through an exchange during the year, you must report this change on your tax return, which is generally due by January 31 of the following tax year. In subsequent years, you do not need to file another tax return unless there is a new material change.
Not sure how to do your taxes correctly so you don’t get it wrong? We can help you navigate the law, whether it’s dealing with a specific tax situation, preparing for an audit by the tax authority or defending yourself in court.
Ondřej is the attorney who came up with the idea of providing legal services online. He's been earning his living through legal services for more than 15 years. He especially likes to help clients who may have given up hope in solving their legal issues at work, for example with real estate transfers or copyright licenses.
Ondřej is the attorney who came up with the idea of providing legal services online. He's been earning his living through legal services for more than 15 years. He especially likes to help clients who may have given up hope in solving their legal issues at work, for example with real estate transfers or copyright licenses.
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