Exchange rate differences arise whenever the value of a foreign-currency receivable or payable changes between the moment it is booked and the moment it is settled. Both Slovakia and the Czech Republic record the gain to account 663 and the loss to account 563 and tax both by default, but Slovakia translates using the ECB reference rate while the Czech Republic uses the ČNB rate, and each country offers a different way to keep unrealized differences out of the tax base.
What are exchange rate differences?
An exchange rate difference is the change in home-currency value of the same foreign-currency amount over time. If you invoice in US dollars and the customer pays a month later, the rate will almost certainly have moved, and the gap between the amount originally booked and the amount actually received is the exchange rate difference.
Accounting recognises two moments: a realized difference on settlement of the receivable or payable, and an unrealized difference on revaluation at the balance-sheet date. This matters to anyone trading across the Slovak-Czech border, a setting our Slovak tax advisory overview returns to often.
Which rate do the two countries use?
Slovakia, under the Accounting Act (No. 431/2002 Coll.), translates foreign currency using the ECB reference rate, specifically the rate published on the day preceding the transaction. The Czech Republic, under Accounting Act No. 563/1991 Coll., uses the ČNB rate, and here the entity may choose between the daily ČNB rate and a fixed rate set for a chosen period such as a month or a year.
At the year-end both countries do the same thing: they revalue all foreign-currency receivables, payables and cash at the central-bank rate as at the balance-sheet date, usually 31 December.
How are realized differences recorded?
A realized difference arises on payment. You compare the rate at which the item was originally booked with the rate on the settlement date. In both countries the gain goes to account 663 (exchange gains) and the loss to account 563 (exchange losses). The accounts are numbered identically in the Slovak and Czech charts of accounts, which makes group reporting across the two markets a little easier.
For example, an invoice for EUR 1,000 booked at CZK 25.20 is CZK 25,200; if the customer pays when the rate is CZK 25.60, CZK 25,600 arrives and the CZK 400 gain is posted to 663. Had the koruna strengthened, a loss would go to 563 instead.
What happens at the balance-sheet date?
If unpaid foreign-currency receivables or payables remain at 31 December, both jurisdictions require you to revalue them at the year-end central-bank rate even though no payment has occurred. The resulting difference is unrealized: it is only an estimate of value that can still change before settlement, yet it flows through profit or loss via accounts 563 and 663.
Because these paper amounts affect the year-end result, they should not be overlooked when reading the financial statements, whether the business keeps Slovak or Czech books.
How are exchange differences taxed?
In principle both countries treat exchange gains as taxable income and exchange losses as a deductible expense, included in the tax base in the period they are booked. Historically this applied to unrealized differences too, meaning a company could be taxed on a paper gain from year-end revaluation that it had not actually received, which strains cash flow.
Both tax systems have therefore created a way to defer that charge, though the mechanics differ, as the next section explains.
Can unrealized differences be excluded from tax?
Slovakia lets a company leave unrealized differences on uncollected receivables and unpaid payables out of the tax base under Section 17(17) of the Income Tax Act (No. 595/2003 Coll.), taxing them only when the item is actually settled, provided it flags this treatment in its tax return. The Czech Republic introduced a formal exclusion regime from 2024 under Sections 23i and 23j of Income Tax Act No. 586/1992 Coll., which a taxpayer opts into by notifying the authority within three months of the start of the relevant tax period. Both align taxation with real cash flow, but the Czech version is a formal, time-bound election, so the decision is worth modelling before you commit, ideally with the support of a professional accounting team.
Do you invoice or buy in a foreign currency and are unsure whether your exchange rate differences are booked and taxed correctly in Slovakia or the Czech Republic? We will review your receivables and payables, set up the translation and year-end revaluation and assess whether excluding unrealized differences is worth it for you.
FAQ
Which exchange rate should I use?
In Slovakia you use the ECB reference rate published on the day preceding the transaction. In the Czech Republic you use the ČNB rate, either the daily rate or a fixed rate set for a chosen period. At the balance-sheet date, usually 31 December, both countries revalue foreign currency at the central-bank rate as at that date.
Which accounts record exchange differences?
In both the Slovak and Czech charts of accounts the gain is posted to account 663 (exchange gains) and the loss to account 563 (exchange losses). This applies to realized differences on payment as well as unrealized differences from revaluation at the balance-sheet date, and both flow through profit or loss.
Do I have to tax an unrealized exchange gain?
By default yes, an unrealized gain from year-end revaluation enters the tax base in the period it is booked. Slovakia lets you exclude it under Section 17(17) of the Income Tax Act by electing this in the tax return, and the Czech Republic under its 2024 exclusion regime (Section 23i). In both cases the gain is then taxed only when it is actually realized.