A family business can be passed to a successor in three ways – gifting the ownership interest, inheritance, or a sale – and Slovakia and the Czech Republic treat them differently. In both countries a gift to a direct relative and inheritance are exempt from income tax. The sale, however, diverges: Slovakia has no holding-period exemption, while the Czech Republic exempts a sale after five years of holding. Czech law also offers a trust (svěřenský fond) as a succession vehicle that Slovakia lacks.
How can a family business be transferred?
The three basic routes are the same on both sides of the border: gifting the ownership interest during the founder’s lifetime, inheritance after death, or a sale of the interest for an agreed price. The Czech Republic adds a fourth option, the svěřenský fond (a trust-like structure), into which the business can be placed and governed across generations. Slovak law has no direct equivalent.
The choice is not only about tax. It also depends on whether the founder needs cash for retirement, how quickly the successor should take over, and whether several siblings are involved but only one will run the company. Clarify the goal first; the tax treatment then follows the intention.
How is a gift of the ownership interest taxed?
Both countries abolished a separate gift tax and fold gifts into income tax. In Slovakia, income acquired by gift is not subject to income tax under Section 3(2)(a) of the Income Tax Act (No. 595/2003 Coll.), so a child receiving a business interest from a parent pays nothing. In the Czech Republic, a gratuitous receipt from a direct relative is exempt under Section 10(3)(c) of the Income Tax Act (No. 586/1992 Coll.). In both cases the classic parent-to-child transfer of an interest is clean and tax-free.
What happens on inheritance?
Inheritance is exempt from income tax in both countries – in Slovakia under the same Section 3(2)(a), in the Czech Republic under Section 4a of the Income Tax Act. The heir pays no income tax on the value inherited. A practical Czech advantage: if the heir later sells the interest, the holding period of the deceased counts toward the five-year test where the inheritance came from a direct relative or spouse.
In both countries the articles of association may exclude the inheritance of a business interest; the heir then receives a settlement payment rather than the interest itself. It is worth aligning the articles with the family’s intentions in advance.
When does a sale make more sense?
A sale fits when the founder wants to extract cash. This is where the two systems part ways. Slovakia treats the proceeds as other income under Section 8(1)(f); the gain is taxed under the progressive personal income tax scale (from 2026 ranging from 19% up to 35% depending on the tax base) and also carries health insurance contributions, with no exemption based on how long the interest was held (only a minor EUR 500 threshold applies). The Czech Republic exempts the sale after a five-year holding test under Section 4(1)(s); a CZK 40 million annual cap applied in 2025, but it was abolished for shares and interests from 2026, so a sale that meets the test is again exempt without an upper limit.
So a long-standing Czech owner can often sell fully exempt once the five-year test is met, while a Slovak owner is taxed regardless of holding period. The difference between selling an interest and selling the whole business is covered in our guide to the share deal versus asset deal.
How to manage a gradual handover?
Succession need not be abrupt. A common approach is gifting the interest in stages while handing over management – the successor first becomes a managing director alongside the founder and takes full control later. In the Czech Republic the svěřenský fond adds a further tool: the interest is placed into the fund under fixed rules and named beneficiaries, keeping the business continuous and separate from personal assets. Before any transfer it pays to run an internal review, much like the buyer’s due diligence before selling a company.
How to protect the company legally during the handover?
Beyond tax, the handover has a strong legal dimension – from the transfer agreement and amended articles of association (or, in the Czech Republic, setting up a trust) to rules for the case where the successor or other shareholders disagree. Well-drafted documents prevent disputes between siblings and stop the interest from leaving the family.
Transferring a family business rests on precise agreements and a clean corporate structure – from the share-transfer agreement and amended articles of association to a trust and provisions for succession among several heirs. The law firm STEINIGER | law firm can help prepare and review them.
What mistakes do families make most often?
The biggest is delay. Leave the transfer “for later” and probate may decide everything – with no agreement, no prepared successor, and often at a stressful moment. The second is an unclear split between siblings: if one runs the company while the others expect an equal share, conflict is almost guaranteed.
The answer is to start early, put the intention in writing, and match the form of transfer to the goal. If the successor is to take over and lead, staged gifting (or a Czech trust) combined with a management handover usually works best; if the founder needs to be paid, a sale with its tax consequences comes into play. A well-timed combination is often the most sensible route for family businesses.
Planning to pass your family business to your children and unsure whether to choose a gift, inheritance, a sale, or a trust? We are happy to model the tax consequences of each route and design a plan tailored to your family.
FAQ
Does a child pay tax on a gifted business interest?
No. In Slovakia income acquired by gift is not subject to income tax (Section 3(2)(a) of Act No. 595/2003 Coll.); in the Czech Republic a gift from a direct relative is exempt (Section 10(3)(c) of Act No. 586/1992 Coll.). In both countries a parent-to-child transfer of an interest is tax-free, unless the gift relates to the recipient’s business or employment.
How is a sale of the interest taxed in each country?
Slovakia taxes the gain as other income under the progressive scale (from 2026 between 19% and 35% depending on the tax base) plus health contributions, with no holding-period exemption. The Czech Republic exempts the sale after a five-year holding test; the CZK 40 million annual cap that applied in 2025 was abolished for shares and interests from 2026, so the exemption again has no upper limit.
What is a svěřenský fond and does Slovakia have one?
The svěřenský fond is a Czech trust-like structure (Sections 1448 ff. of the Civil Code) into which an owner can place a business interest under fixed rules and named beneficiaries, ensuring continuity across generations. Slovak law has no direct equivalent, so Slovak families rely on staged gifting and well-drafted articles of association instead.