From 2025, the range of taxed sales of ownership interests in companies will be extended for individuals. The change relates to income from the sale of securities and shares, which together exceed CZK 40 million for the relevant tax period. The change concerns income, not profit from sales.
Income taxation includes the income from earlier sales that will also enter the tax regime. If the taxpayer receives the income from sale of securities or shares made before 31 December 2024 and after that date, and the income exceeds CZK 40 million for the tax period, the taxpayer will have to deal with them in his/her tax return.
To the amount of taxable income, the selling individual may apply the purchase price of the share (defined in Section 24 (7) of the Income Tax Act) or the market value of the share, which will be determined under the Valuation Act as of 31 December 2024 or as of the effective date of the transfer agreement (if the transfer took place before 31 December 2024).
Therefore, if a business owner, an individual, plans to sell the company in the future, it is advisable to prepare for the valuation of the company. To do this, it is certainly necessary to choose a quality valuation office and prepare documents for the company’s valuation.
The market value of a security or share determined under the Asset Valuation Act reduces the taxpayer’s tax base, which is subject to a 23 % income tax rate. Therefore, it is worth choosing an expert who will be able to defend their valuation if necessary.
It is recommended to prepare the basis for the valuation of the company at the beginning of 2025, when you have the financial statements as at 31 December 2024, which will be the main basis. In addition to this. it is necessary to add a variety of detailed information from the company’s accounting (e.g. trial balances) and a several documents as to how the company actually operates and where it plans to proceed in the upcoming years (most frequently a financial plan in the form of a plan of individual items of the balance sheet statement and profit and loss account).
Valuation is a discipline based on numbers, so it is advisable to base the created financial plan on real assumptions and describe the story associated with those numbers so that it is understandable even for valuation advisors.
