Inheritance – Obligation to Report Exempt Income
Have you inherited real estate or securities? Within inheritance proceedings, income is often exempt. Let's see if you need to report this fact to the tax office, and what the deadlines and penalties are.
Did you inherit real estate or securities? Within inheritance proceedings, income is often exempt from tax. Let's look together at whether you will have to report this fact to the tax office or even pay anything.
Some countries have an inheritance tax, and we used to have it in the Czech Republic as well. Currently, inheritance tax does not exist in the Czech Republic, but income from inherited property is taxed under the Income Tax Act.
If the inheritance is in the direct or collateral line, or from a person with whom you have lived in the same household for at least 1 year, the inheritance is exempt from income tax. However, a distant relative or someone outside the family can also inherit, but in that case, the inheritance income is not exempt from income tax.
In the case of exempt income, the obligation to file a Notification of Exempt Income exceeding CZK 5 million arises.
If the exempt income is higher than CZK 5 million, you must submit a Notification of Exempt Income to the tax office. This applies not only to inheritances but also to gifts within the family. The deadline for submitting this notification is the same as for filing an income tax return, i.e., by April 1, May 1, or July 1 of the following year. If you are not obliged to file an income tax return and the obligation to submit a Notification of Exempt Income arises, the deadline for submission is April 1 of the following year.
The reporting obligation does not apply to income about which the tax administrator can obtain data from registers or databases to which it has access and which it publishes on the official bulletin board and in a manner allowing remote access. Such income may be income from the sale of real estate registered in the Land Registry of the Czech Republic.
❗ Watch out for penalties. If you forget to submit the notification within the specified deadlines, you will face high penalties ranging from 0.1% up to 15% of the amount of unreported income.
An important piece of information is that the CZK 5 million limit applies to each type of income separately. For example, if you inherit an apartment worth CZK 4 million and securities worth CZK 3 million, no reporting obligation arises.
In case of any questions, please do not hesitate to contact us.
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