New Taxation Mechanism for Sales of Business Companies

In cooperation with colleagues from the transactional team at Kreston A&CE Group, we have written a brief article reflecting the current situation on the M&A market and the new taxation mechanism on sales of business companies introduced by the consolidation package.

The government has approved a new consolidation package that imposes taxation on revenues from the sale of companies exceeding CZK 40 million, even if the time test is met. This step comes at a time when M&A transactions are slowing down due to high interest rates and economic uncertainty. The impact of the new tax could accelerate some sales, particularly among family businesses dealing with succession.

From 2025 onwards, sellers will be required to calculate tax on the sale, with amounts above CZK 40 million fully subject to taxation. The tax exemption applies to the first CZK 40 million of the sale. To reduce the tax burden, a valuation report will be necessary to determine the company’s value as of December 31, 2024. Experts can conduct the valuation retrospectively, but it is better to have the report prepared close to that date.

Owners planning to sell should consider completing the transaction by the end of 2024 to avoid the new tax. If that is not possible, they should commission a valuation report to determine the company’s value and the tax due. For a successful sale, involvement of legal experts and valuation specialists is recommended.