🧾Taxes and Fees for a Czech Investor Without Stress: Time Test, FIFO, and a Practical Example

Taxes are not the most popular part of investing, but for a Czech investor they can be understood fairly simply. The goal is not to memorize the law, but to know when a sale of shares may be tax-exempt, when a tax return matters, and why it is important to record purchases, sales, dividends, and fees.

This article is an educational overview for beginners. Rules may change, and a specific situation can depend on the broker, country, account type, and the investor’s other income.

1. Two main types of income: sales and dividends

For a typical stock investor, the two most common areas are:

• Income from selling securities

For example, an investor sells shares of AAPL, MSFT, ČEZ, or an ETF. The sale price, purchase price, fees, and possible gain or loss are tracked.

• Dividend income

For example, KO or ČEZ pays a dividend. Dividends are usually taxed through withholding tax, often at 15%, but for foreign dividends it depends on the country, broker, and tax forms.

In simple terms: sales are often reported under Section 10 of the Czech tax return, while dividends typically fall under income from capital assets. In practice, however, it is sensible to check the specific situation using broker documents or with a tax advisor.

2. The three-year time test: when the holding period exceeds 3 years

One of the most important rules for a Czech investor is the so-called time test.

If an investor holds a security for more than 3 years, the income from selling it may be exempt from income tax. In plain language: for long-term holding, the state says that the gain from a sale is not taxed if the conditions are met.

Example:

• An investor buys 10 MSFT shares on 1 February 2021.
• They sell them on 5 February 2024.
• The holding period was longer than 3 years.
• The income from this sale may pass the time test and be tax-exempt.

The important phrase is holding of specific units. If an investor bought shares gradually, each purchase batch has its own date. This is where FIFO comes in.

3. Exemption up to CZK 100,000 of annual sales income

The second important rule is the limit of CZK 100,000 of annual income from selling securities.

Careful: this means income, not profit.

That means the total value of sales during the year is tracked, not just the difference between purchase and sale.

Example:

Situation	Annual sales income	Profit	Possible exemption under the limit
Investor sold shares for CZK 80,000	CZK 80,000	CZK 12,000	Yes, the CZK 100,000 limit was not exceeded
Investor sold shares for CZK 130,000	CZK 130,000	CZK 5,000	Not under this limit, because income exceeded CZK 100,000

This limit is often confusing for beginners. Someone may think: “I only made CZK 5,000, so I am below CZK 100,000.” But for this exemption, the law tracks sales income, not net profit.

If a sale does not pass either the time test or the CZK 100,000 limit, taxation of the gain is handled in the tax return.

4. FIFO: the first purchased units are sold first

FIFO means First In, First Out.

Imagine a warehouse of apples. When a shopkeeper buys apples on Monday and then on Wednesday, the Monday apples are considered sold first for accounting purposes. With shares, it is similar: if an investor buys the same security gradually, a sale is usually calculated as selling the oldest purchased units first.

Practical FIFO example

Illustrative example, not a recommendation:

An investor bought AAPL shares:

Date	Transaction	Number of shares	Price per share	Total
10 Jan 2022	Purchase	5 pcs	CZK 3,500	CZK 17,500
15 Jun 2023	Purchase	5 pcs	CZK 4,000	CZK 20,000
20 Aug 2024	Sale	6 pcs	CZK 4,500	CZK 27,000

The investor sold 6 shares. Under FIFO, the sold shares are:

• first 5 pcs from the 10 Jan 2022 purchase,
• then 1 pc from the 15 Jun 2023 purchase.

Cost of the sold units:

• 5 × CZK 3,500 = CZK 17,500,
• 1 × CZK 4,000 = CZK 4,000,
• total cost = CZK 21,500.

Sale income is 6 × CZK 4,500 = CZK 27,000.

Gross gain before fees:

CZK 27,000 − CZK 21,500 = CZK 5,500.

Then relevant fees are also considered, such as broker purchase and sale fees. If fees were, for example, CZK 300 in total, the gain for tax calculation may be lower:

CZK 5,500 − CZK 300 = CZK 5,200.

At the same time, the investor checks:

• whether any of the sold units passed the 3-year time test,
• whether total annual income from sales of securities exceeded CZK 100,000,
• whether the transaction belongs in the tax return.

5. Where sales are reported in the tax return: Section 10

If a sale of securities is not exempt, for an individual it is typically reported in the tax return as other income under Section 10 of the Czech Income Tax Act.

Simplified principle:

• Income = how much the investor received from the sale.
• Expense = purchase price of the sold units under FIFO + related fees.
• Tax base = income − expense.

If an investor sold multiple securities in one year, results are usually aggregated within the given category. A loss from one sale may reduce a gain from another sale in the same category, but it cannot always be freely used against other types of income. This is why records matter.

6. Dividends and 15% withholding tax

A dividend is a share of company profit paid to shareholders. A Czech investor often encounters 15% withholding tax.

Dividend example:

• ČEZ shares pay a dividend of CZK 5,000.
• 15% withholding tax is CZK 750.
• The investor receives CZK 4,250 net.

For foreign shares, such as KO or AAPL, tax may be withheld abroad. For U.S. shares, the W-8BEN form often plays a role and may reduce U.S. withholding tax under a double taxation treaty. Practical treatment then differs depending on the broker and tax situation.

For a beginner, the key point is this: dividends should be recorded separately from share sales. They are not the same as a gain from selling shares.

7. Fees and currency conversions: a small leak that hurts over time

Fees are not a tax, but they have a similar effect: they reduce net return.

The most common costs are:

• purchase or sale fee, for example USD 1 per transaction,
• spread, meaning the difference between the buy and sell price,
• currency conversion, for example from CZK to USD,
• money transfer fee,
• possibly an account maintenance or inactivity fee.

Example: CZK 100,000 portfolio

An investor has CZK 100,000 and converts it into USD to buy shares of NVDA and KO. The broker charges a 0.5% currency conversion fee.

• 0.5% of CZK 100,000 = CZK 500.
• Economically, CZK 99,500 remains for investing.
• If the investor later sells and converts USD back to CZK, another cost may arise.

When purchase and sale fees are added, the real return can be lower than what the share price chart alone shows.

A simple analogy: a stock may rise like a car driving uphill, but fees are like a slightly pulled handbrake. They may not stop the car by themselves, but over a long journey they matter.

8. Practical mini-summary

A simple checklist helps beginners:

• Save the date, number of units, price, currency, and fee for each purchase.
• For each sale, identify the income, sold units under FIFO, and fee.
• Check whether the sale passes the 3-year time test.
• If not, check whether annual income from sales of securities exceeded CZK 100,000.
• Record dividends separately.
• Include currency conversions and fees in the real result.
• Do not wait with recordkeeping until March — after a year, details are harder to find.

How to do this in QMA

QMA can mainly help with recordkeeping and checks, not replace a tax advisor.

• /journal

The investment journal allows users to record transactions, dividends, and trade notes. In the tax area, it can prepare overviews for tax reports and a CZ tax panel, where transactions are grouped by income type, holding period, and basic tax rules.

• /portfolio

The portfolio shows asset allocation, currencies, realized and unrealized results. It helps show how much of the return may be affected by fees, currency movements, and individual positions.

• /stocks/[symbol]

A stock detail page, for example /stocks/AAPL, /stocks/MSFT, or /stocks/CEZ, helps separate the analytical side of investing from tax records. The user can see price development, fundamentals, and dividend information, then connect these with their own records in the journal.

• /screener

The screener is used to filter stocks by indicators such as dividend yield or valuation. From a tax perspective, it does not prescribe decisions, but helps understand what type of income a strategy has historically generated — for example more dividends or rather capital gains.

QMA therefore helps keep things organized: what was bought, what was sold, how long it was held, and what fees entered the result.

Disclaimer

Past performance is not a guarantee of future results. All investment decisions are your own responsibility.