Taxes on Stocks and ETFs in the Czech Republic: The 3-Year Time Test and FIFO Without Mistakes

You bought a few stocks and ETFs, some went up, you sold — and now a question hangs over the spring: do I have to pay tax, and how do I even calculate it? For most beginners in the Czech Republic the answer is more friendly than feared, but only if you understand a handful of rules. This is a plain-language overview of how individuals are taxed on securities, so you walk into tax season knowing what to look at.

A note before we start: tax laws change, and your situation may differ from the typical case. Treat this as general education, not personalized tax advice — for your concrete numbers, verify the current legislation or consult a tax advisor.

1. The 3-year time test (the big one)

The single most important rule for long-term investors: if an individual holds a security for more than 3 years before selling, the income from that sale is exempt from income tax. The clock runs from acquisition to sale. This "time test" is what rewards buy-and-hold investing — the position you held patiently for over three years generally doesn't get taxed when you finally sell it.

The practical consequence: it pays to know the acquisition date of every lot you own. If you're a month away from crossing the three-year line, that month can be the difference between a taxable gain and an exempt one.

2. The 100,000 CZK income threshold

There's a second exemption that helps small and occasional investors. If your total income from the sale of securities in a calendar year does not exceed 100,000 CZK, that income is exempt — regardless of how long you held. Two things to watch:

• It's a limit on income (gross proceeds from sales), not on profit. Sell securities for 120,000 CZK total in a year and you're over the line even if your actual gain was small.
• It's an all-or-nothing threshold for this exemption: once you exceed it, the relevant income becomes taxable (unless another exemption, like the time test, applies to it).

3. FIFO matching when you buy in stages

Here's where beginners trip up. You rarely buy your whole position at once — you add shares over months. When you later sell only part of the position, which shares did you sell? Czech rules let you use FIFO (First In, First Out): the shares you bought first are treated as the ones you sold first.

Why it matters: FIFO decides both your cost basis (which purchase price gets subtracted) and whether the 3-year time test is met (the oldest shares are the ones most likely to have passed it). Get the pairing wrong and you can miscalculate both your taxable gain and your exemption. The alternative weighted-average method also exists, but FIFO is the common, intuitive default — just be consistent.

4. Converting foreign currencies

Most brokers trade you into stocks and ETFs priced in dollars or euros, but your Czech tax return is in CZK. You convert using exchange rates published by the Czech National Bank (ČNB). In practice an individual typically has two options:

• The single annual uniform rate ("jednotný kurz") that the tax authority publishes for the year, applied to all transactions — simple, less precise.
• Daily ČNB rates on each transaction date — more precise, more work.

Pick one approach and apply it consistently across the return. Both buy and sell sides get converted.

5. What is and isn't exempt

A quick mental map:

• Likely exempt: a sale after passing the 3-year time test; total annual securities income under 100,000 CZK.
• Likely taxable: a sale within 3 years where your annual securities income is over 100,000 CZK.
• Different rules apply to dividends (often taxed at source / withholding, sometimes abroad) and to other instruments — they are not the same as capital gains on share sales, so don't lump them together.

6. §10 "other income" and when you file

Taxable gains from securities sales are generally reported as "other income" under §10 of the Czech Income Tax Act on your annual return. As a rule of thumb you file when you have taxable (non-exempt) income to declare. If everything you sold is exempt — fully covered by the time test or under the 100,000 CZK limit — you typically have nothing to report from those sales, though there can be a duty to notify exempt income above certain large amounts. When in doubt about filing obligations, check the current rules.

Časté otázky

Do I pay tax if I held the shares for more than 3 years?

Generally no — the 3-year time test exempts the income from income tax for individuals. Just make sure you can document the acquisition date for the specific shares you sold (this is where FIFO matters).

What counts toward the 100,000 CZK limit — profit or total sales?

It's the total income (gross proceeds) from securities sales in the calendar year, not your profit. Sell for more than 100,000 CZK in total and you're over the threshold even if your gain was modest.

Which exchange rate do I use for dollar or euro trades?

Czech National Bank rates: either the single uniform annual rate published for the year, or the daily ČNB rate on each transaction date. Choose one method and apply it consistently to all conversions.

Is this article tax advice I can rely on for my return?

No. This is general education. Tax laws change and individual situations differ — verify the current legislation or consult a tax advisor before filing.

---

QMA is an analytical and educational tool, not tax or investment advice, and is not a registered investment or tax adviser. The rules above are a general overview and may change; for your specific return, verify the current legislation or consult a qualified tax advisor.

Calculating FIFO by hand in a spreadsheet — matching every partial sale to the right purchase lot and checking the 3-year test on each — is exactly where mistakes creep in. Instead of doing it manually, the QMA trading journal pairs your trades with FIFO, flags which positions have passed the 3-year time test, and exports PDF/Excel ready as supporting documents for your return. See it at /journal.