A sole trader can sell their business as a going concern – in Slovakia under Section 476 of the Commercial Code, in the Czech Republic under Section 2175 of the Civil Code. In both countries assets, rights, debts and employees pass to the buyer, the trade licence is non-transferable, the sale of a business is outside the scope of VAT, and the proceeds are taxed as business income. The principle is the same; the legal basis differs.
What does selling a sole trader’s business mean?
A business is not just equipment and stock, but an organised set of assets, rights and liabilities serving the operation – inventory, receivables, contracts, know-how and customer base. Selling the business transfers this economic unit as a whole to a single buyer, in writing. The alternative is an asset deal, where individual items are sold separately and taxed item by item.
The difference between selling a business and selling a company share is explored in our guide on share deal vs asset deal.
Business sale or asset deal?
Selling the business as a going concern preserves continuity: contracts, employees and supplier relationships pass across and the buyer can carry on without interruption. The price is driven by the value of the assets net of debts, and often includes the value of an established client base. This route suits a buyer who wants the whole operation rather than selected items.
An asset deal is simpler when the buyer only wants certain assets – stock, a vehicle or machinery – sold and taxed item by item. The trade-off is clear: the going-concern sale carries the VAT and continuity advantages described below, while the asset deal is easier to execute but usually subject to VAT. Which route is better depends on the buyer’s intentions and the tax impact for both sides, so the structure is worth modelling before signing.
Why is the trade licence not transferable?
In both Slovakia and the Czech Republic the trade licence is tied to the person of the entrepreneur and cannot be sold with the business. The buyer must hold or obtain their own licence for the relevant activities, and must arrange their own tax and VAT registrations. Contracts requiring the other party’s consent do not pass automatically either.
How is the sale taxed for the seller?
The proceeds are business income for the individual – under Section 6 of the Income Tax Act in Slovakia and Section 7 in the Czech Republic – included in the tax base for the year of sale. Against it, the seller claims related costs, mainly the tax residual value of depreciated assets and the cost of inventory sold. Because this is a one-off high income, timing should be planned in advance, as it can affect the tax rate and contributions.
Why is the sale usually outside VAT?
In both jurisdictions, the sale of a business (or an independent part of it) is not a supply of goods or services and is therefore outside the scope of VAT – provided the buyer is or becomes a VAT payer and continues the business. The seller does not charge VAT. This contrasts sharply with an asset deal, where most individual items would normally be subject to VAT.
What happens to employees, contracts and creditors?
Employment relationships pass to the buyer, so employees continue on unchanged terms. Receivables and debts related to the business transfer as well, and creditors are notified. Importantly, the seller remains a guarantor for the assumed debts in both countries, so selling the business does not fully release the original owner from old liabilities. A careful review of liabilities and receivables before signing is essential – see our guide on what buyers check before a sale.
Selling a business has a strong legal dimension alongside tax – from the sale contract itself through the transfer of contracts and employees to liability for assumed debts. The law firm STEINIGER | law firm can help prepare and review them.
Planning to sell or buy a sole trader’s business and want the contract, taxes and employee transfer under control? We will prepare a tax-efficient and legally clean solution tailored to your case.
FAQ
Can a sole trader sell their business?
Yes. A sole trader can sell the business as a whole – under Section 476 of the Commercial Code in Slovakia or Section 2175 of the Civil Code in the Czech Republic. Assets, rights, debts and employees pass to the buyer, but the trade licence does not: it is tied to the person, so the buyer needs their own.
Is VAT charged on the sale of a business?
The sale of a business or an independent part of it is outside the scope of VAT in both Slovakia and the Czech Republic, provided the buyer is or becomes a VAT payer and continues the business. The seller does not charge VAT. An asset deal sold item by item is treated differently and is usually subject to VAT.
How are the sale proceeds taxed?
For an individual they are business income – Section 6 of the Income Tax Act in Slovakia, Section 7 in the Czech Republic – included in the tax base for the year of sale, reduced by related costs such as the residual value of assets and the cost of inventory. As a one-off high income, timing should be planned ahead.