In the Czech Republic, there is a law on income tax that regulates the conditions and method of taxation of income for individuals and legal entities. Besides social benefits, pensions, and healthcare insurance payouts, some other income is exempt from income tax, such as gifts from family members, the sale of real estate sold after five years, or the sale of real estate with the proceeds used for housing needs.

The sale of real estate owned by an individual for more than five years is exempt from income tax. However, if an individual sells real estate owned for a shorter period than five years, they must pay income tax. An exception applies if the individual sells real estate and uses the proceeds for housing needs, such as purchasing a new property. In this case, the sale of real estate is exempt from income tax. However, if an individual earns income exempt from income tax in an amount exceeding 5 million Czech crowns in a calendar year, they are required to report this income to the tax office.

This obligation applies to individuals with permanent residence in the Czech Republic who earn such income, whether from the Czech Republic or abroad. Reporting concerns income earned in the previous calendar year, for example, in 2022, an individual should report income exempt from income tax in 2021 if it exceeded the threshold of 5 million Czech crowns.

Reporting income exempt from income tax is done electronically or by letter to the tax office, including through the tax portal. Individuals are required to report income by the deadline for submitting a tax return for the given year.

If an individual fails to comply with this obligation, they may face a fine or lose the right to exemption.

In case of any uncertainties or questions regarding the obligation to report income exempt from income tax exceeding 5 million Czech crowns, individuals can contact the tax office or a tax advisor.