Daně a legislativa ČR
The 3-Year Time Test: How to Exempt Your Sale Gains from Tax
Key takeaways
- Time test = holding beyond 3 years from each individual purchase.
- FIFO method applies: the oldest purchased units are sold first.
- From 2025, a CZK 40 million income cap applies — gains above this limit are taxable.
- Dividends are not exempt under the time test — they are always taxed.
- Regular investing (DCA) extends the average time until the test is met.
The time test states that a gain from selling securities is tax-exempt if you held them for more than three years. It is one of the two main ways to legally reduce the tax burden from investing in the Czech Republic.
How exactly to count the test
The three-year period is counted from each individual purchase. When you sell, the FIFO (first in, first out) method applies — you sell the oldest purchased units first. If you invest monthly, each purchase has its own three-year stopwatch.
Example: you buy an ETF in January 2023, February 2023, and March 2023. In February 2026 you sell part of the position. The January 2023 purchase has met the condition (> 3 years), the February 2023 purchase meets it exactly in February 2026, the March 2023 purchase has not yet met it. The proceeds from the units where the test is not met are taxable.
The CZK 40 million cap from 2025
From 2025, a new restriction applies: the time-test exemption only covers sale proceeds up to CZK 40 million per year. Proceeds above this threshold are taxable even if the three-year test was met. This primarily concerns investors with very large sale volumes — details in the article the CZK 40 million cap from 2025.
What the time test doesn't cover
The time test does not apply to dividends. A dividend, whether received after one year or twenty, is always taxed at 15%. This is why accumulating ETFs are attractive from a tax perspective — instead of dividends they reinvest returns inside the fund, so no annual dividend income arises. You are taxed only upon sale, when the time test may apply. See accumulating vs. distributing ETFs.
- Keeping a record of purchases (date, price, number of units) is your responsibility.
- Your broker may provide a transaction history but is not required to calculate your tax liability.
- Foreign-currency purchases: use the Ministry of Finance uniform rate or the CNB rate — we recommend verifying the current methodology.
More on the full taxation system in taxes on ETFs in the Czech Republic. This article does not constitute tax advice — verify current rules or consult a tax advisor.
FAQ
Exactly when does the three-year time test start?
From the purchase date of each individual unit (transaction). Under the FIFO method, the oldest purchases are deducted upon sale. You can find the date in your broker's transaction history.
Does the time test apply to both stocks and ETFs?
It applies to securities in general — both ETFs and stocks. The conditions are the same: more than 3 years holding, FIFO, and the CZK 40 million cap from 2025.
Do I need to report the exempt portion in a tax return?
If all your sale proceeds are exempt and you have no other reason to file a return, you don't need to. When in doubt, consult a tax advisor.