Gifting a Share in a Czech s.r.o.: Legal Requirements and Tax Risks

Gifting a business share in a family-owned Czech limited liability company (s.r.o.) may seem like a straightforward way to transfer assets, but in practice it involves a number of legal and tax pitfalls under Czech law. Mistakes can result in the agreement being invalid, additional tax assessments, or unnecessary disputes. We will guide you through the requirements of the transfer, amendments to the articles of association, and the key risks so that your decision remains legally beyond challenge in the Czech Republic.

Quick summary

• An ownership interest in an s.r.o. is transferred by a written share transfer agreement and is governed by specific provisions of the Business Corporations Act (ZOK) under Czech law.
• The share transfer agreement must be in writing and the signatures of both parties must be officially certified. Without this, the agreement is absolutely invalid and the transfer will not take place.
• If the interest forms part of the spouses’ community property (SJM), the consent of the other spouse is required; otherwise, the transfer may be invalid.
• It is often necessary to obtain the consent of the general meeting in advance, especially when transferring to a person who is not yet a shareholder.
• If the value of the gift exceeds CZK 5,000,000, there is an obligation to notify the Czech tax authority (financial office), even if intra-family gifts are exempt from tax in the Czech Republic.

Why gifting an interest in an s.r.o. is legally more complex than a standard gift

When owners of family businesses decide to transfer an interest in an s.r.o. to their children or other close relatives, they often assume that a simple gift agreement will be sufficient. The reality is more complex. A business interest represents a shareholder’s participation in a business corporation and the rights and obligations arising from that participation.

The Business Corporations Act therefore sets stricter formal requirements for its transfer than the Civil Code does for gifting ordinary movable property. In many cases handled by the attorneys at ARROWS, clients prepare the agreement themselves but overlook statutory requirements. The result is an ineffective transfer, which is often discovered only years later when changes are being recorded in the Czech Commercial Register.

Basic legal framework: How to transfer an interest correctly

From a legal perspective, gifting an interest is carried out through a share transfer agreement under Section 207 et seq. of the Business Corporations Act, in which it is agreed that the transfer is free of charge. You therefore cannot use a generic gift agreement template downloaded from the internet. The agreement must comply with the specific rules of Czech corporate law.

If the agreement lacked the requirements mandated by the Business Corporations Act, the Czech registration court would reject the application to register the change of shareholder. It is necessary to pay attention to precise wording and references to the relevant statutory provisions so that the transfer is valid.

Mgr. Petr Valent, LL.M.

associate, partner

• valent@arws.cz

Mgr. Pavel Čech

associate

• pavel.cech@arws.cz

Form of the agreement and certification of signatures

The Business Corporations Act (Section 209(2)) requires that the share transfer agreement be concluded in writing and that the signatures of all parties be officially certified.

Without official certification of signatures (by a notary, at Czech POINT, or by an attorney), the agreement is invalid, and in practice it often happens that families sign the agreement at home with no legal effect.

The effective date is also important. The transfer of the interest becomes effective vis-à-vis the company upon delivery to the company (its executive director(s)) of an effective transfer agreement with officially certified signatures. Only then can the new shareholder exercise their rights.

Key contractual requirements: What must not be missing

For the agreement to be sufficiently certain and valid, it must include identification of the parties (first name, surname, date of birth/personal identification number and address of residence of both the transferor and the transferee) and identification of the company (name, company ID number and registered office). Precise specification of the interest is also required.

It is not enough to write only “my interest”. You must state the size of the interest (typically as a fraction or percentage) and the amount of the contribution corresponding to that interest (e.g., “an interest of 30%, corresponding to a contribution to the registered capital in the amount of CZK 60,000”). If the company has issued common certificates (kmenové listy), they must be handled in accordance with Czech law.

Stating that the transfer is free of charge

For tax purposes and to prevent future disputes, the agreement must expressly state that the transfer is agreed as free of charge. If this provision were missing, interpretative disputes could arise as to whether it was in fact a sale agreement where the price was not agreed.

The wording may be: “The parties agree that the transfer of the interest is free of charge and the transferee does not undertake to provide any consideration.” This prevents doubts about the nature of the transaction.

Spouse’s consent (SJM)

If the transferor is married and the business interest falls within the spouses’ community property (SJM), the consent of the other spouse is required to gift the interest.

Even though Czech law does not explicitly require this consent to be part of the text of the transfer agreement, from the perspective of legal certainty it is highly advisable for the spouse to add their consent to the agreement. Without this consent, the other spouse may invoke the relative invalidity of the transfer.

Procedural steps: How to proceed in practice

Before signing the agreement, it is necessary to review the articles of association of the relevant s.r.o. and the applicable Czech legislation. When transferring to another existing shareholder, consent of the general meeting is generally not required unless the articles of association provide otherwise. However, when transferring to a third party (Section 208 ZOK), the consent of the general meeting is usually required.

1. Transfer to another shareholder: Under Czech law, no consent is required unless the articles of association provide otherwise.
2. Transfer to a third party: Under Czech law, the consent of the general meeting is required unless the articles of association provide otherwise.

If consent is required and has not been granted, the transfer will not take place (the agreement will not become effective). Therefore, the first step is often to convene a general meeting to approve the transfer so that the entire process is legally sound.

Amendment to the articles of association

The change of the shareholder itself does not require an amendment to the text of the articles of association in the form of a notarial deed—this happens automatically based on the transfer agreement.

However, an amendment to the articles of association (before a notary) is necessary if, in connection with the next generation joining, you want to adjust the company’s governance rules, for example:

• change the number of executive directors,
• restrict or expand the executive directors’ powers,
• create different types of interests (e.g., non-voting interests for inactive family members),
• adjust inheritance rights relating to interests.

The general meeting decides on changes to the content of the articles of association, typically by a two-thirds majority of the votes of all shareholders. The resolution is certified by a notarial deed.

Tax and financial implications

Under Section 10(3)(c) of the Income Taxes Act (ZDP), a gratuitous receipt (gift) is exempt from tax if it takes place between relatives in the direct line or the collateral line, or between spouses.

In the context of the usual transfer of a family business from parents to children, the transfer is therefore tax-neutral and no income tax is payable in the Czech Republic. The exemption also applies to persons living in the same household for at least one year prior to the gifting.

Notification obligation towards the tax administrator

Please note one administrative obligation. If the value of the gifted interest exceeds CZK 5,000,000, the recipient is required to file a notification of exempt income with the Czech Financial Office.

This obligation applies even if the income is fully tax-exempt under Czech legislation. Failure to submit this notification may result in a fine of 0.1% (or potentially higher) of the unreported income amount, which for multi-million interests can mean tens of thousands of Czech crowns.

Valuation of the interest

For the purposes of notifying exempt income (i.e., whether the CZK 5 million threshold has been exceeded), an expert valuation report is not strictly required, but the taxpayer must be able to credibly substantiate the value. For example, a professional estimate based on the company’s equity may be sufficient.

If there is a risk that the value is around the CZK 5 million threshold, we recommend obtaining at least a simplified valuation or an expert report. This helps avoid a request to remove doubts from the Czech Financial Office.

Table of risks and solutions

Common practical mistakes

A common mistake is not so much a legal defect as differing expectations and failures in intergenerational communication. Parents often expect to retain influence even after gifting the interest, while children expect full autonomy. A legal solution exists, for example by splitting interests into those with voting rights and those without.

Before the transfer itself, we recommend concluding a so-called family constitution or a shareholders’ agreement (SHA), where you clearly set the rules. This step helps prevent future misunderstandings that could jeopardise the company’s operations.

Missing review of the legal status of the interest

The acquirer should verify whether the interest is pledged (e.g., to a bank), whether an enforcement order has been issued against it, or whether it is affected by another restriction on transferability. The transferor’s statement in the agreement that the interest is legally unencumbered is a standard that should not be omitted.

Errors in details for the Commercial Register

Register courts are formalistic, and any error in the details leads to problems. A typo in the birth number, in the company ID number (IČO), or in the company name in the registration application leads to a request for correction or rejection of the application. This delays the entire process by weeks.

Step-by-step process with ARROWS

1. Analysis: We will review your articles of association and determine whether general meeting consent is required and whether the interest falls within the community property of spouses (SJM).
2. Preparation of documentation: We will draft the interest transfer agreement, a draft general meeting resolution, and any required affidavits.
3. Signing and verification: We will arrange signatures with official verification.
4. Delivery and effectiveness: We will ensure delivery of the agreement to the company, upon which the transfer becomes effective.
5. Registration in the Commercial Register: We will file the application to register the change of shareholder in the Czech Commercial Register.
6. Tax advisory: We will draw attention to the notification obligation, if it applies to you.

FAQ – Most common legal questions on gifting an interest

1. Can I gift an interest in an s.r.o. without income tax?
Yes, gifting between close relatives (parents, children, siblings, spouses) is exempt from Czech personal income tax. If the value of the gift exceeds CZK 5,000,000, you must file a notification with the Czech Financial Office, otherwise penalties may apply.

2. Do I need to amend the articles of association before a notary with every transfer?
No. If the content of the articles of association is not changing (e.g., the number of executives, registered office, rules for interests) and only the shareholder is changing, a notarial deed on an amendment to the articles of association is not required. An interest transfer agreement and subsequent registration in the Commercial Register are sufficient.

3. Do I need an expert valuation report?
An expert valuation report is not required by law for the validity of the transfer agreement. However, it may be necessary for Czech tax proceedings to prove the value of the gift (due to the CZK 5 million threshold) or in disputes over the value of a settlement share.

4. How long does registration in the Commercial Register take?
The statutory time limit for the court to make the entry is 5 business days from the filing of a flawless application. If the entry is made directly by a notary (so-called direct entry), the change can be registered practically immediately after all conditions are met.

“Notice: The information contained in this article is of a general informational nature only and is intended for basic orientation in the topic. Although we take maximum care to ensure accuracy, legal regulations and their interpretation evolve over time. To verify the current wording of the regulations and their application to your specific situation, it is therefore necessary to contact ARROWS advokátní kancelář directly (office@arws.cz). We accept no liability for any damages or complications arising from the independent use of the information in this article without our prior individual legal consultation and expert assessment. Each case requires a tailored solution, so please do not hesitate to contact us.”

Read also:

• Transferring Shares in a Czech s.r.o. to Family: Legal and Tax Essentials
• Transferring Assets to a Shareholder: A Faster Alternative to Liquidation
• From limited to joint-stock: Restructuring Czech companies under EU Law
• Transfer Pricing in Czech Holding Structures: Agreements That Withstand Audits
• Tax aspects of large inheritances 2026: Hidden tax risk when selling inherited property