Daně a legislativa ČR
Common Mistakes in Investors' Tax Returns: What Costs You Money and Nerves
Key takeaways
- Dividends are taxed at 15% each year regardless of how long you have held the investment; the time test does not apply to them.
- From 2025, gains from securities sales are exempt under the time test only up to CZK 40 million per year.
- A forgotten foreign dividend or an incorrect exchange-rate conversion are the most common mistakes.
- The tax base for securities sales is proceeds minus acquisition cost; broker fees may be deducted.
- Distributions from an accumulating ETF are not dividends — reinvestment is not taxed on an ongoing basis.
The most common mistake investors make in their tax return is confusing the time test with dividends — the time test applies only to gains from selling securities, not to dividends. Dividends are taxed at 15% every year you receive them, without exception.
Mistake No. 1 — Dividends "Hidden" in a Foreign Portfolio
Your foreign broker sends you a statement where dividends blend in with other items. Every dividend payment is, however, taxable income in the Czech Republic. Waiting for "the broker to sort it out" is not enough — LYNX, Saxo, and IBKR will not remit Czech tax on your behalf.
- Dividend from a US share or ETF: a 15% US withholding tax is deducted. The resulting credit against Czech tax depends on the double-taxation treaty.
- Irish ETFs (UCITS): the US withholding is lower thanks to the fund structure, but the Czech 15% tax on dividends received still applies.
- Dividends from Slovak shares or Czech bonds — different rates and treaties; always verify the source.
Mistake No. 2 — Incorrect Currency Conversion
The tax base is calculated in Czech crowns. Use the CNB rate on the date of receipt, not the annual average rate. Each transaction separately — it is laborious but legally required.
Mistake No. 3 — Overlooking the Value Test
Did you sell shares less than three years ago? Do not forget that a value test exists: if total proceeds from securities sales in the entire year did not exceed CZK 100,000, the entire gain is exempt — even without meeting the three-year test.
Mistake No. 4 — Confusing Accumulating and Distributing ETFs
An accumulating ETF does not distribute dividends — it reinvests them internally. No annual dividend tax therefore arises. A distributing ETF pays out dividends and you are required to include them in your tax return every year. More on the difference is in the article accumulating vs. distributing ETFs.
How to Avoid These Mistakes
Keep your own record of every transaction: date, price, quantity, exchange rate, fees. At year-end you can then easily compile Appendix No. 3 to the tax return. Investment calculators or specialist software (e.g. Taxfix or Finbricks) will help, but cannot replace checking your own data from the broker.
This article is not tax advice. Verify the precise conditions of your situation with a tax adviser or read the detailed guide ETF taxes in the Czech Republic.
FAQ
Do I have to pay tax on ETF dividends even if I immediately reinvest them?
It depends on the type of ETF. A distributing ETF pays the dividend into your account — you are taxed at 15% regardless of what you then do with the money. An accumulating ETF reinvests it internally and no tax liability arises in the year of receipt.
Does the three-year time test apply to dividends?
No. The time test (exemption after three years of holding) applies exclusively to gains from selling securities. Dividends are taxed at 15% every year you receive them, without exception.
What is the value test and how do I apply it?
The value test states that if total proceeds from securities sales in the year did not exceed CZK 100,000, the gain is exempt from tax. It applies automatically — just report it correctly in your return.
Which CNB rate do I use for converting a foreign dividend?
The CNB rate on the date the payment is credited to your account — convert each transaction separately. The annual average rate is permitted by law only under certain conditions; consult a tax adviser.