Flat sales tax: personal versus cooperative ownership

Are you planning to sell your apartment and wondering how to tax this income? The procedure for selling a condominium is different from selling a privately owned unit. We'll explain how to properly tax the income from the sale of a personal and cooperative apartment and when you can avoid this tax altogether.

Taxation of income from the sale of a freehold flat

Income from the sale of a freehold property, whether it's a flat or a house, naturally falls within your total income - just like wages from employment or income from a business.

The good news is that tax is not paid on the sale price in this case, but on the profit (if you made a profit on the sale). So you simply subtract the purchase price of the flat from the price you have now sold it for. If you have made a profit, you include it in your tax return.

Exemption from tax for privately owned flats

As an individual, you don't have to pay tax on the income from the sale of a personal dwelling if:

  1. you meet the "time test" - you have owned the flat for at least 5 years (for property acquired after January 2021, the longer period of 10 years applies);
  2. you prove actual residence - you have lived in the flat for at least 2 years before the sale, but you do not have to be a permanent resident;
  3. you plan to buy a new property soon - you use the funds to buy a new home, renovate, build or pay off a home loan within 1 year of the sale.

If you are in business (sole trader or company) and the flat sold was part of your business assets, the exemption described above does not apply to you. As a business, you will always pay income tax on the sale of the property.

TIP: We have studied the law for you and written a summary of the conditions for exemption from paying tax when selling property.

Taxation of income from the sale of a condominium

However, when you own a condominium, it is not your personal property, but a share in a condominium association, which is a legal entity. The sale of a cooperative flat is therefore not a sale of the property as such, but a transfer of your share in the housing cooperative. And such a transfer is subject to different sections from a tax point of view.

You will calculate the gain to be taxed in a similar way as for a freehold flat. On the one hand there is the income from the sale of the share, on the other hand there is the purchase price of the share in the housing association (generally the historical purchase price).

However, no extra expenses can be added to this purchase price - typically e.g. real estate agency fees or advertising costs, notary fees or attorney's fees, or even provable expenses for the reconstruction of the apartment, as confirmed by a recent ruling of the Supreme Administrative Court.

Exemption from taxes for condominiums

As an individual, you are only entitled to a tax exemption on the sale of a cooperative apartment if you meet the so-called time test. If you have owned the cooperative flat for at least 5 years, all gains from the transfer of your share in the cooperative are exempt from income tax under Section 4(1)(q) of the Income Tax Act.

Unfortunately, the law does not allow you to use the other grounds for tax exemption that can be applied to privately owned flats here. Similarly, the tax exemption does not apply to entrepreneurs who had a share in a housing cooperative classified as business property.

What about returns for exempt income?

Once your income is exempt, you do not have to include it in your tax return or file it specifically for that income.

However, you will need to send a notice to the tax office if your exempt income exceeds the CZK 5 million threshold. The notice should definitely include:

  • the amount of the income (even if it is exempt);
  • the date on which the income was earned;
  • a brief description of how it was earned.

You can send the notice by post or electronically by data box. The deadline is the same as for a regular tax return.

Tax returns in practice

Did you sell your flat last year and know that it is not exempt income? Then include it in your tax return as other income (Section 10).

Our practical guide will help you fill in the form correctly - or have our specialists prepare your tax return for you. Just write to us using the form below.

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