So far, no special crypto tax legislation has been enacted in the Czech Republic. Treatment of crypto companies under tax law depends on the legislative activities at the EU level and on the purpose that the crypto-related economic activity serves, to which different sets of general legislation are applied.
Cryptocurrencies are not considered a form of legal tender but rather as commodities. This position derives from the wording of the current law that has been used to arrive at a solution indicating that crypto information on a blockchain does not represent claims in the national legal currency issued by a central bank or credit institutions or other providers of payment services.
Under Article 4, paragraph 1, of the Payment System Act, cryptocurrencies are not electronic money, and under Article 2, paragraph 1(c) of the Payment System Act, they are not funds.
If providers of non-crypto products or services are paid in cryptocurrencies, they are obliged to pay such taxes as any other business that is paid in fiat money.
In the Czech Republic, taxes are collected and administered by the Tax Offices. Although the tax year coincides with the calendar year, companies can opt for an accounting year as their tax year.
Czech Crypto companies are obliged to pay the following general taxes:
- Corporate Income Tax (CIT) – 19%
- Branch Tax (BT) – 19%
- Capital Gains Tax (CGT) – 0%-19%
- Withholding Tax (WHT) – 15%
- Value Added Tax (VAT) – 21%
- Social Security Insurance (SSI) – 24.8%
- Health Insurance (HI) – 9%
Corporate Income Tax
Crypto products and services shall be liable to pay Corporate Income Tax provided they are a resident taxpayer, on their income sourced in the Czech Republic and abroad. On the other hand, a non-resident company shall be obliged to pay taxes only on the income sourced in the Czech Republic. The company shall be classified as a resident taxpayer if it is either incorporated or its headquarters are located in the Czech Republic.
Since the Income Tax Act does not state the status accorded to the cryptocurrencies, it is advisable to qualify them as other inventory; this is because they are not considered as legal tender. The results derived from such cryptocurrencies should be presented as other revenues.
The taxable income is determined in line with the accounting profits according to the Czech accounting regulations. Other taxable crypto activities include exchanging crypto for another cryptocurrency or for fiat money and vice versa, providing custodian wallets, mining, and receiving cryptocurrencies free of charge as, for example, part of the incentive package. Such activities as buying and holding of cryptocurrencies or transferring funds from one crypto wallet to another are not considered as taxable income.
Generally, this is done within three months from the end of the tax period. Audit firms and companies whose returns are filed through a registered adviser have been granted an extended period of six months.
Tax reliefs and incentives that would help crypto companies offset income tax are available. For example, some Czech crypto firms might qualify for the R&D tax allowance, in which as much as 100% of the qualified R&D expenses incurred during the tax year are deducted from the tax base as a tax allowance. What this means, for tax purposes, is that the costs are deducted twice: once as a regular tax-deductible cost and another as an R&D tax allowance. Also, if the qualifying expenses of the current tax year exceed expenses of the past year, an additional 10% might be applicable as an allowance.
Tax residents can avoid having their income taxed in two countries by taking advantage of approximately 80 international agreements on the avoidance of double taxation.
Value Added Tax
In respect of payment of VAT, cryptocurrency transactions are normally an alternative means of payment and thus subject to exactly the same law as traditional financial activity.
Court of Justice of the European Union (CJEU) ruled out that for VAT purposes, such cryptocurrencies as Bitcoin are treated as traditional currency and therefore crypto exchange services (cryptocurrency to fiat money and vice versa as well as cryptocurrency to another cryptocurrency) are exempt from VAT.
As for the mining of cryptocurrency, VAT is not applied if there is no direct relation between the service provider and a client. In cases where this happens, the VAT tax liability increases, for instance, when the mining equipment is rented.
However, the sales of certain crypto-related services that don’t meet alternative means of payment thresholds are subject to value-added tax, which is why providers need to be registered as a VAT payer. The tax period for newly registered VAT payers is one calendar month.
Withholding Tax
Czech companies are obligated to withhold tax from dividends, interest, and royalties. The rate may vary depending on the residence status and exact location of the recipient. Whichever tax rate the paying company chooses to apply, it must be able to prove to the Czech tax authority that the rate has been applied correctly. Normally, a tax residence certificate of the nonresident recipient and confirmation of the recipient’s entitlement to the payment suffice.
Even though the so-called crypto-related economic activities are largely unregulated in the Czech Republic, using cryptocurrencies for tax evasion, or unknowingly disregarding the rules of taxation, will doubtless lead to prosecutions, as the Government of the Czech Republic has made it its priority to eliminate tax evasion through the anonymity of cryptocurrency owners.
We provide consultations on crypto taxation and accounting, together with guiding entrepreneurs in the process of company formation and crypto licensing. Professional and energetic, Regulated United Europe (RUE) is ready to help if you need to outline a clear picture of tax obligations of your crypto company or optimize taxes in the Czech Republic. We closely follow and thoroughly understand European legislation. Therefore, we can be of excellent service in developing a solid tax planning strategy for your company. Experienced lawyers from Regulated United Europe (RUE) will gladly lead your company through the entire crypto licensing procedure in the Czech Republic and introduce you to all the peculiarities of crypto regulation of the Czech Republic.
Crypto Taxes in the Czech Republic in 2023
Basically, in the Czech Republic, tax rates and policies remain big time the same, an advantage considering the increase in European tax rates due to inflation. Also in 2022, it has ranked 5th due to the International Tax Competitiveness Index, because of low marginal rates and minimal factors that potentially cause economic distortions. But at the same time, it has to be underlined that some shifts may happen in a situation when this country will decide to transpose certain policies and recommendations introduced by OECD and supported by EU.
Corporate Income Tax
Standard Corporate Income Tax The standard corporate income tax is 19% and is usually levied on all profits of the business. A limited 15% tax rate applies to the dividend income of a Czech tax resident company derived from non-resident companies. The income sourced from certain investment funds is taxed at a 5% rate. A 0% rate is levied on pension funds. The rates cover all the capital gains since there is no separate capital gains tax.
Crypto exchanges, facilitation of crypto wallets, mining, and receipt of cryptocurrencies free of charge as for instance part of the incentive package, form part of the taxable crypto income. The buying and holding of cryptocurrencies or the transfer of cryptocurrencies from one crypto wallet to another do not fall within the ambit of taxable income.
Value Added Tax (VAT)
During 2023, the standard VAT rate is 21%, and generally, it is applied for the goods and services sold in the Czech Republic. Since crypto deals are treated as alternative means of payment for the purpose of VAT, crypto exchange services are not subject to this tax. Similarly, cryptocurrency mining will be out of the scope of VAT if there is no relationship between the service provider and its client. Where such relationship does appear-for example, when there is a rental of mining equipment-VAT tax liability increases. The tax liability further rises when the company sells other crypto-related products and services that do not qualify as an alternative means of payment.
Personal Income Tax
In the Czech Republic, crypto companies are not obliged to open an office and employ local labor. However, in case you still would want to conduct your business processes while being resident in the Czech Republic, the other tax involved is the Personal Income Tax. The rate fluctuates between 15% and 23%, depending on the size of the employee’s salary. In 2023, the two tax rates are differentiated based on the threshold in view of the average wage amounting to 40,324 CZK approx. 1665 EUR), being higher than the average wage used for 2022 of 38,911 CZK approx. 1607 EUR).
Withholding Tax
The Withholding Tax remains applied to the said payments of dividends, interest, royalties, and directors’ fees. The standard rate of 15% shall apply to those domiciled in the Czech Republic, residents of the EU, EEA, as well as countries which the Czech Republic has agreements on the exchange of tax information with, while all other recipients are charged at a 35% rate.
Social Security and Health Insurance
The statutory rate for Social Security Insurance for the employer stays at 24.8%; Health Insurance – 9%: the contribution-withholding rates for employees are 6.5% and 4.5%, respectively. If your Czech crypto company employs local labor, you may be interested to learn that as of February 2023, you will pay the reduced rate of 5% for those employees who, first, come from a specific social group—for instance, persons taking care of a child below 10 years of age, students, and persons with disabilities—and, second, are employed on a part-time basis.
New Global Tax Transparency Framework
The Czech Republic is a member of the Organization for Economic Cooperation and Development, one intergovernmental organization composed of the 38 most developed countries in the world. In 2022, the organization issued a new international tax transparency framework entitled Crypto-Asset Reporting Framework, or CARF for short. It would provide improved automatic tax reporting and information exchange about cryptoassets across its member countries. This framework represents a response to the rapid adoption of cryptoassets for investment and other financial purposes. Given this, it is very likely that, within a very short period of time, the Czech Republic will transpose these recommendations into its national legislation.
Crypto exchange services, including those providing cryptocurrency transfer services for retail payment transactions, will fall within the scope of the CARF framework, together with entrepreneurs and persons. The framework might also apply to online and offline crypto wallets. This means that tax-related information regarding crypto will have to be filed legally with the national authorities, which, by default, will further share the crypto transaction and taxpayer information with their foreign counterparts. Regulations do not affect cryptocurrencies that are not designed to be used either for payments or as an investment, neither centralised stable coins.
How do I pay crypto taxes in the Czech Republic in 2024?
In 2024, the issue of taxing income using cryptocurrency is still actual for most countries, including the Czech Republic. It set up its vision of regulating and taxing cryptocurrencies in such a way that it could ensure fairness in taxation but at the same time create an incentivizing environment for innovative economy development. This article will elaborate on the procedure of paying taxes on incomes derived from cryptocurrency in the Czech Republic in 2024 in detail.
Basics of taxation of cryptocurrencies in the Czech Republic
The Czech Republic does not regard cryptocurrencies as legal tender. Still, they made them an asset that could result in a tax liability. Cryptocurrencies are taxed depending on whether their income takes the form of a personal investment or a business activity.
Taxation for individuals
As far as the individuals are concerned, income from cryptocurrency trading comes in the form of capital gains, normally taxed at the rate of 15%. The profit derived from selling the cryptocurrency against a fiat money and the profit made through the sale of one kind of cryptocurrency for another falls under this category.
The correct payment of the taxation in its right perspective is made by the following:
- Documentation of all transactions: All transactions have to be documented with the dates of buying and selling, the value in CZK at the date of transaction, and the realised profit or loss.
- Calculation of profit: The total profit or loss from all transactions during the tax year needs to be determined with a view to calculating the base of taxation.
- Tax filing: Info related to income from cryptocurrency must be attached to the annual tax return and should be filed with the tax office.
Taxation for business
When the activity of cryptocurrency is done within a company, that income turns into business income and falls under corporate taxation at a rate of 19%. There needs to be transparent differences between personal investment and business activities; it will bring the difference in the method of taxation.
VAT and cryptocurrencies
On the lines of European Union practice, the transactions involving the supply of cryptocurrencies against fiat money will be exempt from VAT. The provisions of services related to cryptocurrency may be subjected to normal VAT rules depending on the nature of services involved.
In the Czech Republic, such income from virtual currency gives rise to the need to pay taxes, and it is highly recommended that this process be executed with extreme caution regarding proper documentation and knowledge of the existing rules of taxation. Tax laws can change, and usually it is advisable to consult the latest information, and if necessary, a tax expert. Only by so doing is the possibility of penalties for incorrect declaration of income avoided, and one is sure to remain in compliance with the stated tax legislation.
Table with the main tax rates in the Czech Republic
| Type of tax | Tax rate |
| Personal income tax | 15% (tax on income up to a certain threshold), 23% for income above the threshold |
| Corporate tax | 19% |
| VAT (standard rate) | 21% |
| VAT (reduced rate) | 10% and 15% for certain goods and services |
| Tax on dividends | 15% for individuals; 15% on outgoing dividends for non-residents (with possible exceptions under tax treaties) |
| Social insurance | Employee’s contribution about 11%, employer’s about 34% of the employee’s salary |
Also, lawyers from Regulated United Europe provide legal support for crypto projects and help with adaptation to MICA regulations.
Additional Information:
FREQUENTLY ASKED QUESTIONS
How is cryptocurrency regulated?
Cryptocurrencies aren't considered money under Article 4(1) of the Payment System Act, nor are they considered funds under Article 2(1)(c) of the Payment System Act.
As for businesses accepting payment in fiat money, they're liable for paying taxes when they get paid in cryptocurrencies.
It is the Tax Offices in the Czech Republic that are responsible for collecting and administering taxes. Companies can choose to have their tax year be an accounting year rather than a calendar year, even though the tax year coincides with the calendar year.
What are the tax rates in the Czech Republic?
The following general taxes must be paid by Czech crypto companies:
- Corporate Income Tax (CIT) – 19%
- Branch Tax (BT) – 19%
- Capital Gains Tax (CGT) – 0%-19%
- Withholding Tax (WHT) – 15%
- Value Added Tax (VAT) – 21%
- Social Security Insurance (SSI) – 24,8%
- Health Insurance (HI) – 9%
Corporate tax principles: what are they?
Providing crypto products and services is subject to Corporate Income Tax in the Czech Republic and abroad, provided that the company is a resident taxpayer. The Czech Republic only taxes non-resident companies on their Czech-sourced income. Residents of the Czech Republic are companies incorporated there or with headquarters there.
It is suggested to classify cryptocurrencies as other inventory since they are not considered legal tender under the Income Tax Act. The revenue derived from cryptocurrencies should be recorded as other revenue.
Are all cases subject to this rule?
Tax reliefs and incentives are available to crypto companies for reducing income taxes. Several Czech crypto companies may qualify for the R&D tax allowance, which entitles them to a 100% deduction from their tax base for qualifying R&D expenses incurred during the tax year. Therefore, the costs for R&D are tax deductible twice - once as a regular deductible expense and once as a R&D deduction. Additionally, if current year expenses exceed last year's expenses, an additional 10% might be allowed.
In approximately 80 international agreements on eliminating double taxation, tax residents can protect their income from being taxed twice.
In the Czech Republic, is it possible to run a crypto business without registering for VAT?
Transactions involving cryptocurrency are normally treated as alternative means of payment for VAT purposes, and are therefore subject to the same rules as traditional financial activities.
For VAT purposes, cryptocurrencies such as Bitcoin are treated as traditional currencies by the Court of Justice of the European Union (CJEU), so crypto exchange services (crypto exchange to fiat money and vice versa, as well as cryptocurrency exchange to another crypto) are exempt from VAT.
A service provider and client cannot have an explicit relationship when it comes to cryptocurrency mining. In cases such as renting mining equipment, VAT tax liability rises.
Is there a way to calculate withholding tax?
Dividends, interest, and royalties are subject to withholding tax in Czech companies. There may be a difference in rate depending on the recipient's location and residence status. Paying companies must prove to the Czech tax authority that they have applied the correct tax rate, regardless of which rate they choose. The recipient's entitlement to the payment is normally confirmed by a tax residence certificate.
It is clear that using cryptocurrencies for tax evasion or disregarding taxation rules unknowingly will lead to prosecution in the Czech Republic, even though crypto-related economic activities are largely unregulated. The Czech government has made it a priority to eliminate tax evasion by ensuring cryptocurrency owners remain anonymous.
Can you tell me if there have been any changes in the Czech crypto industry?
As a result of an increase in the European tax rates as a result of inflation, the Czech Republic's tax rates and policies remain relatively unchanged. Furthermore, based on low marginal tax rates and minimal factors causing economic distortions, Czech Republic ranked 5th in 2022 in the International Tax Competitiveness Index.However, it is important to note that OECD and EU-sponsored policies and recommendations may cause some changes when a country transposes them.
Can you tell me more about Social Security Insurance?
Employers remain responsible for paying 24,8% of the Social Security Insurance premium and 9% of the Health Insurance premium. Employers withhold 6.5% of employees' contributions, whereas employees withhold 4.5%.Your Czech crypto company might be interested to know that employers will begin paying a reduced 5% rate beginning in February 2023 for employees who are part-time and belong to eligible social groups (e.g., caring for children under 10, students and individuals with disabilities).
If you could tell me more about the legal framework, that would be great.
An intergovernmental organization consisting of the 38 most developed countries in the world, the Organization for Economic Cooperation and Development (OECD) includes the Czech Republic. By 2022, it will introduce the Crypto-Asset Reporting Framework (CARF), an international tax transparency framework aimed at improving and automating tax reporting for crypto assets across member countries. A variety of investments and financial uses are being made possible by crypto assets, hence the need for this framework. There is a very good chance that it won't be long before the Czech Republic adopts these recommendations.
In addition to providing crypto exchange services (including retail payment transactions), the CARF framework will apply to individuals and companies that facilitate cryptocurrency transfers. Crypto wallets, both online and offline, may be affected by this. Information about crypto transactions and taxpayers will be automatically shared by national authorities with their counterparts abroad as a legal requirement. Coins that aren't used for payments or investments, as well as stablecoins that are centrally controlled, don't fall under these rules.
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