We would like to draw attention to one of the key issues that has been announced as part of the recovery package, but has not received as much media attention.

The government has proposed to completely abolish the exemption of income from the sale of securities and shares if such income exceeds CZK 40 million. The income will not be exempt even if the time test is met, as has been the case so far. As a result, such income will be taxed using the 23% rate (as it almost always exceeds 36 times the average wage).

For a better idea, we have summarised the proposed scheme clearly in a table:

At present, there is no codified wording of the proposed changes, and therefore we are not yet able to confirm with certainty if only income above CZK 40 million will be taxed or if the entire income will be taxed if it exceeds this threshold, or if this is a limit per year, per transaction or even per security/share.

In our view, this change will have a significant impact on tax planning for a number of clients and there is only a limited amount of time to implement appropriate measures. We therefore recommend that you consider whether or not your current ownership structure is suitable and, if necessary, start taking steps to optimise it as soon as possible.

If you are considering changes in ownership relationships within your business on the level of individuals (i.e. sales and transfers of shares and ownership interests) or if you are planning on significant personal investments, please do not hesitate to contact us so that we can find a suitable solution together, taking into account the above-mentioned changes as well.

Author: Jiří Jakoubek, Zuzana Kalincová