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Taxation of ETFs in the Czech Republic: the time test, CZK 100,000 and the CZK 40 million cap
Key takeaways
- Dividends in the Czech Republic are taxed at 15 % every year; the time test does not apply to them.
- Gains on disposal are exempt after more than three years of holding (the time test).
- Or when total proceeds from selling securities in a year do not exceed CZK 100,000 (the value test).
- From 2025, the time-test exemption is capped at CZK 40 million of disposal proceeds per year.
- Accumulating ETFs are the most tax-clean option for long-term growth.
Good news for Czech investors: long-term holding of ETFs is highly tax-friendly. You do need to distinguish between two different types of income — dividends and disposal gains. Each is taxed differently.
1. Dividends: 15 % tax, always
If you hold a distributing ETF that pays you regular dividends, that income is taxed at 15 % in the Czech Republic — every year in which you receive a dividend. The time test does not apply to dividends, so holding for longer will not spare you this tax.
2. Disposal gains: this is where it gets generous
A capital gain (selling higher than you bought) is exempt in the Czech Republic if you meet one of two tests:
- Time test: you held the security for more than three years → the gain is exempt from income tax (subject to the cap below).
- Value test: your total disposal proceeds from securities in the year did not exceed CZK 100,000 → exempt regardless of holding period. Note that this is proceeds (total sale amount), not profit.
Why accumulating ETFs win on tax
Accumulating ETFs do not distribute dividends — they reinvest them internally. You therefore have no annual dividend income to tax and only pay tax when you sell. And if you sell after more than three years, you pay nothing. In practice this is the cleanest way to let money grow without tax friction.
A detailed comparison of both types can be found in the article on Accumulating vs. distributing ETFs. Note — this is a general summary of the rules, not tax advice; for larger amounts it is worth consulting a tax adviser.
FAQ
When do I pay no tax on an ETF?
On disposal after more than three years of holding (time test), or when annual disposal proceeds from securities do not exceed CZK 100,000 (value test).
Do I pay tax on an accumulating ETF every year?
No. You are taxed only on disposal; after meeting the three-year time test, the gain is typically exempt.
Do I need to declare dividends in my tax return?
Foreign dividends yes, at 15 %. The exact procedure and any credit for foreign withholding tax should be discussed with a tax adviser.