Legal Q&A · Company & shareholders

Do I pay income tax when transferring or selling a business share in an s.r.o.?

Law as at 10 September 2026

Answered by , Czech and Slovak attorney, admitted to the Slovak and Czech Bars (SAK 300422 · ČAK 19654).

Short answer

For an individual selling a business share, the difference between proceeds and acquisition cost or contribution is taxed as other income under Section 8 of the Income Tax Act. For shares acquired from 1 January 2004, the holding period alone generally does not confer an exemption; older shares are assessed under transitional Section 52(21). The standard exemption up to €500 and any historical limit must be checked against the date and method of acquisition. A legal entity has an exemption under Section 13c after holding at least 10% for 24 months. A gratuitous transfer is generally outside the recipient's income tax, and a business share transfer is not subject to VAT.

How is an individual’s share sale taxed?

If an individual sells a business share in an s.r.o., the proceeds are other income under Section 8(1)(f) of Act No. 595/2003 Coll., the Income Tax Act. Tax applies to the difference between income and expenses, rather than the full amount received. Under Section 8(7), the expense is the contribution or acquisition cost. For an inherited or gifted share, the value determined under Section 25 at acquisition is used. Selling at acquisition cost produces no taxable gain. Only a positive difference enters the individual’s tax base and is subject to income tax, generally with health insurance contributions to consider too.

Is there a holding-period exemption for business shares?

This is the commonest misconception. Securities admitted to a regulated market have an exemption after one year of holding (Section 9(1)(k)). For a business share acquired from 1 January 2004, the holding period alone generally does not confer a general exemption. Shares acquired before that date must be assessed under Section 52(21), which preserves the historical five-year exemption where the conditions of Section 4(1)(h) of Act No. 366/1999 Coll. are met. The acquisition date may also affect the transitional value limit. Under the ordinary current regime, aggregate annual net income after expenses from these transfers is exempt up to €500 (Section 9(1)(i)). Above that amount, only the excess is taxed. The exemption does not apply to a share that was a business asset.

If a legal entity sells the share, income may be exempt under Section 13c if (a) it arises no earlier than 24 months after acquisition of a direct holding of at least 10% of share capital, and (b) the taxpayer performs substantial functions in Slovakia, manages and bears risks, and has the necessary personnel and material resources. The exemption does not apply if the company or seller is in liquidation, bankruptcy or restructuring. This is often confused with the non-existent three-year test for individuals. They are different matters, so the ownership structure deserves advance planning, for example through a holding structure.

Gifts and VAT

In a gratuitous transfer or gift, the donor receives no consideration and therefore has no taxable income. The recipient’s income acquired by gift is generally outside the scope of income tax (Section 3(2)), except gifts connected with business or employment. If the recipient later sells the share, the expense is its value under Section 25 at acquisition. The business share transfer itself is not subject to VAT.

This is a general explanation of the legal and tax framework, rather than tax advice for a particular case. The outcome depends on acquisition cost, the transfer form and your circumstances. We assess taxation alongside preparation of the business share transfer or as part of a company sale or acquisition.

This answer provides general information on the law as at 10 September 2026. It does not constitute legal services or replace an assessment of an individual case. The details of your situation may differ. Book a consultation to discuss them.

More legal questions

All questions and answers
  1. Must a managing director have a service agreement, and what happens without one? No. Without a service agreement, mandate agreement rules apply as appropriate between company and director. A mandate is remunerated by law, but the general meeting decides directors’ pay, so entitlement is uncertain without its decision and payments may be challenged. Benefits, exit payments, post-office confidentiality and stricter non-compete duties lack contractual support. The agreement must be written and approved by the general meeting to be relied upon.
  2. The managing director signed a contract above the limit set by the memorandum of association. Is the company bound by it? Generally yes. A restriction on the managing director imposed by the memorandum of association or the general meeting is, under the Commercial Code, ineffective against third parties even where it has been published, so a contract above the limit generally binds the company. Exceeding the limit is a breach of the director’s duties: if the company suffers damage, the director must compensate it and the general meeting may remove him. What does operate externally is the manner of acting entered in the Commercial Register, for example joint action by two directors. A separate assessment is needed where the director exceeds the powers that the law confers, or permits to be conferred, on the statutory body.
  3. We have two managing directors and they disagree on an important matter. Who decides? Managing directors decide on business management by majority, and with two directors that means the consent of both; a refusal by one blocks the decision. Towards third parties, however, each director may act individually unless the memorandum of association provides otherwise, so a signature given without the other’s consent will generally bind the company and the dispute shifts to the question of liability. The general meeting may reserve the decision for itself, but where the shareholders hold equal interests and both attend, the deadlock merely moves up one level. The solution belongs in the memorandum of association and the shareholders’ agreement before a dispute arises.
  4. Does a procuration holder need a contract with the company, and is he liable for damage he causes? Procuration is only authority to act for the company externally and says nothing about the holder’s remuneration or liability. Those are governed by the internal relationship, in Slovakia usually an employment contract or a mandate agreement, and without one both the entitlement to remuneration and the scope of duties remain uncertain. An employee is liable for damage under the Labour Code, which caps compensation in cases of negligence; a mandatary is liable under the Commercial Code rules on damages. In Czechia, the law expressly imposes on the procuration holder the care of a prudent manager.

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Mgr. Patrik Tulinský, LL.M. Czech and Slovak attorney · SAK 300422 · ČAK 19654

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