Are you considering selling your land? Then you should know that in addition to the joy of making a profit, you may also have to pay tax. But not always – Czech law allows for a number of exceptions that can make the sale of land completely tax-free. For example, the length of time you have owned the land or what you use the proceeds for is key.
In this article we explain when you pay land sales tax, how to calculate it, how to avoid it and what to look out for if you are a business. And we won’t forget a practical step that sellers often forget – opting out of property tax.
Land sales tax is an income tax that is paid on the earnings (profit) from the sale of land. However, it is not always paid. In some cases, you may be exempt from land sales tax.
Income tax on the sale of real estate – how to declare it and the correct procedure? The answer can be found in our article.
Income tax on the sale of land is payable by the seller unless they meet the conditions for exemption. Taxable income arises if the difference between the sale price and the purchase price is positive, i.e. if the seller has made a profit on the sale.
The Income Tax Act provides for several situations in which income from the sale of land is exempt from tax. Exemption is available in two cases:
The most common reason for exemption is a sufficiently long period of ownership of the land. If you have owned the land:
the income from its sale is fully exempt.
The time test starts from the time you acquired the land and runs until the date of sale. If the land is transferred during this time (for example, by gift), the time test starts again.
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.
Even if you don’t meet the time test, you may be exempt from tax if you use the proceeds of the sale to provide for your own housing needs. This includes, for example:
If you use the whole amount, the income is fully exempt. If only part of it, only the corresponding part of the income is exempt.
Housing expenses can be claimed up to one year after the sale, or back for the previous year if incurred before the sale.
Previously, this had to be notified to the tax office, but from 1 July 2024 the notification obligation no longer applies. However, you must be prepared to prove that the money was actually used for the purpose of your own home (e.g. purchase contract, invoice, loan agreement).
For apartments and houses, there is a third option for sales tax exemption. This states that you are exempt if you have lived in the property for at least two years. However, this option is not available for land because the land itself does not fulfill the purpose of a permanent residence.
If you don’t meet the conditions for exemption when you sell the land (for example, you don’t meet the time test or use the money for your own home), you must pay income tax on the sale. However, only the profit is taxable, not the entire sale price.
The basis for calculating tax is the profit on the sale of the land, i.e. the amount you actually earned. This profit is calculated by deducting the purchase price of the land from the sale price, as well as any other deductible expenses related to the sale or improvement of the land. These costs may include, for example, a commission to a real estate agent, the cost of legal services, an expert’s report or technical evaluation of the land. The resulting amount is then the basis for calculating income tax. If these expenses together exceed the sale price, no profit has been made – and no tax is payable.
The profit is taxed as ordinary income under the Income Tax Act:
The obligation to pay the tax is dealt with in the tax return for the year in which the sale took place. The income from the sale is reported under other income.
The tax is payable within the same period as the return is filed.
What are your tax obligations when selling a property? This is discussed in the next article.
No tax exemption applies when the land is classified as business property, i.e. it is registered in the books or tax records of the entrepreneur and is used for business purposes. This means that income tax is always payable, regardless of the length of ownership or the purpose of the use of the money received.
In this case, the income from the sale of the land is considered self-employment income (not other income). This has several implications:
If you sell the property, it is your responsibility to opt out of property tax. The tax office does not automatically know about the change of ownership and the notification must always be made by the former owner.
You must opt out if you no longer own any other property in the tax office’s jurisdiction after the sale. This applies not only to a sale, but also to a donation or exchange. The decisive factor is that the transfer of ownership took place in the previous year – i.e. that the application for entry into the Land Registry was submitted by 31 December.
You must submit the notification of the loss of ownership by 31 January of the following year. If you do not do so, the tax office will continue to assess you even though you no longer own the property. Although you are unlikely to be fined, you need to rectify the situation as soon as possible.
In both cases, you must provide your details, the exact designation of the property and the reason for deregistration (e.g. sale, donation).
If you own other properties in the region, you cannot opt out completely. In this case, you will file an updated tax return where you will indicate the change – a so-called partial deregistration. You can indicate the change on either your regular or partial return, also by 31 January.
See the next article for more information on the rules for opting out of property tax and a sample opt-out.
When land is sold, income tax is payable on the gain, i.e. the difference between the sale price and the purchase price. You don’t pay tax if you own the land for at least 10 years (or 5 years if acquired by the end of 2020) or if you use the proceeds of the sale for your own home.
The basic tax rate is 15%, 23% above an annual income of CZK 1.68 million. The income is declared in the tax return for the year of sale. In the case of entrepreneurs, land in commercial property is always taxed, including social security and health insurance contributions.
After the sale, be sure to opt out of property tax – by 31 January of the following year.
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 10 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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