Czech Republic hasn’t currently introduced any crypto-specific tax laws. The tax treatment of crypto companies is dependent on EU legislation and the purpose of the crypto-related economic activities, which may fall under different sets of general law.
Cryptocurrencies aren’t recognised as legal tender. Instead, they’re categorised as commodities. The approach is based on the provisions of the existing legislation which has led to the conclusion that crypto data stored on the blockchain doesn’t constitute claims denominated in the legal national currency issued by a central bank, credit institutions, or other payment service providers.
According to Article 4(1) of the Payment System Act, cryptocurrencies aren’t treated as electronic money and pursuant to Article 2(1)(c) of the Payment System Act, they aren’t considered funds either.
On the other hand, when providers of non-crypto products or services get paid in cryptocurrencies, they’re liable for paying the same taxes as businesses accepting payment 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 subject to paying 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 product and service providers are subject to paying Corporate Income Tax on their income sourced in the Czech Republic and abroad, provided that they’re resident taxpayers. Non-resident companies are only required to pay taxes on the income sourced in the Czech Republic. If a company is incorporated or its headquarters are located in the Czech Republic, it’s considered a resident taxpayer.
The Income Tax Act doesn’t stipulate rules for the treatment of cryptocurrencies, but since they aren’t considered legal tender, it’s advised to classify them as other inventory. Revenues sourced from cryptocurrencies should be recorded as other revenues.
The taxable income is calculated in accordance with the accounting profits, based on the Czech accounting regulations. Taxable crypto activities include crypto exchanges (cryptocurrency into another cryptocurrency or into fiat money and vice versa), provision of custodian wallets, mining, and receiving cryptocurrencies free of charge as, for example, part of the incentive package. Such activities as the purchase and holding of cryptocurrencies or transfer of cryptocurrencies from one crypto wallet to another aren’t considered taxable income.
Generally, tax returns are made within three months of the end of the tax period. For audited companies and companies whose tax return is filed by a registered advisor, the period is extended to six months.
To reduce income tax, crypto companies can avail of tax reliefs and incentives. For instance, certain Czech crypto companies may be eligible for the R&D tax allowance, where up to 100% of qualifying R&D expenses incurred during the tax year are deducted from the tax base as a tax allowance. This means that for tax purposes, the costs are deducted twice – as a regular tax-deductible cost and as an R&D tax allowance. Moreover, 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 protect their income from being taxed in two different countries by availing of around 80 international agreements on the elimination of double taxation.
Value Added Tax
When it comes to paying VAT, cryptocurrency transactions normally qualify as alternative means of payment and are therefore subject to the same law as traditional financial activities.
The 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.
In the case of cryptocurrency mining, VAT doesn’t apply when there’s no explicit relationship between the service provider and a client. VAT tax liability rises in such instances as rental of the mining equipment.
However, sales of certain crypto-related services that don’t qualify as an alternative means of payment are subject to VAT, which is why their providers have to register as VAT payers. The tax period for newly registered VAT payers is a calendar month.
Withholding Tax
Czech companies are obligated to withhold tax on 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 non-resident recipient and a confirmation of the recipient’s entitlement to the payment suffice.
Although crypto-related economic activities are largely unregulated in the Czech Republic, using cryptocurrencies for tax evasion or unknowingly disregarding taxation rules will undoubtedly lead to prosecution as the Czech government has made it its priority to eliminate tax evasion through the anonymity of cryptocurrency owners.
If you’re looking to have a clear picture of your crypto company’s tax obligations, or you wish to optimise your taxes in the Czech Republic, our experienced and dynamic team of Regulated United Europe (RUE) is here to help. We offer consultations on crypto taxation and accounting, as well as guide entrepreneurs through the process of company formation and crypto licensing. We constantly monitor and very well understand European legislation, and are therefore well-prepared to design a solid tax planning strategy for your company. The experienced lawyers at Regulated United Europe (RUE) will be happy to guide your company through the entire cryptocurrency licensing process in Czech Republic and familiarise you with all cryptocurrency regulations of Czech Republic.
Crypto Taxes in the Czech Republic in 2023
In the Czech Republic, the tax rates and policies largely remain the same which is an advantage if we consider the backdrop of an increase in the European tax rates due to inflation. Also, in 2022, the Czech Republic ranked 5th in the International Tax Competitiveness Index, thanks to low marginal tax rates and minimal factors causing economic distortions. However, it must be pointed out that some changes might occur when the country decides to transpose certain policies and recommendations introduced by the OECD and supported by the EU.
Corporate Income Tax
The standard Corporate Income Tax remains at 19% and is generally levied on all business profits. A slightly reduced 15% rate applies to the dividend income of Czech tax resident companies from non-resident companies. A 5% rate applies to the income sourced from certain investment funds. A 0% rate applies to pension funds. These rates also cover all capital gains since there is no separate capital gains tax.
Crypto exchanges, the provision of crypto wallets, mining, and receiving cryptocurrencies free of charge as, for example, part of the incentive package render taxable crypto income. The purchase and storing of cryptocurrencies or transfer of cryptocurrencies from one crypto wallet to another aren’t considered taxable income.
Value Added Tax (VAT)
In 2023, the VAT rate remains at 21% and is levied, as usual, on products and services sold within the Czech Republic. Since for VAT purposes, cryptocurrency transactions are considered alternative means of payment, crypto exchange services aren’t subject to VAT. Cryptocurrency mining is also VAT-exempt when there’s no relationship between a service provider and a client. When such a relationship emerges (e.g., in the case of the rental of the mining equipment), VAT tax liability rises. It also rises when a company sells other crypto-related products and services that don’t qualify as an alternative means of payment.
Personal Income Tax
In the Czech Republic, crypto companies aren’t obligated to open a physical office and hire local staff but if you still choose to carry out your business operations from within the Czech Republic, the Personal Income Tax is another tax you need to be aware of. Its rate varies between 15% and 23%, depending on how big the employee’s salary is. In 2023, the two tax rates are separated by the threshold based on an average wage of 40,324 CZK (approx. 1665 EUR) which is an increase from 38,911 CZK (approx. 1607 EUR) in 2022.
Withholding Tax
The Withholding Tax continues to be levied on payments of dividends, interest, royalties, and directors’ fees. The standard rate of 15% applies to residents of the Czech Republic, and residents of the EU, EEA, as well as countries which the Czech Republic has agreements on the exchange of tax information with. Everyone else is subject to a 35% rate.
Social Security and Health Insurance
The standard Social Security Insurance rate for the employer remains at 24,8%, and the Health Insurance rate is still 9%. The contribution, which is withheld by the employer, rates for employees are 6,5% and 4,5% respectively. If your Czech crypto company employs local staff, you’ll be interested to know that from February 2023 employers will pay a reduced 5% rate for employees that belong to eligible social groups (e.g., persons caring for a child under 10 years of age, students and persons with disabilities) and 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 (OECD), an intergovernmental organisation consisting of the 38 most developed countries in the world. In 2022 it introduced a new international tax transparency framework, entitled Crypto-Asset Reporting Framework (CARF), which should facilitate improved and automatic tax reporting and exchange of information about cryptoassets across the member countries. This framework is a response to the rapid adoption of cryptoassets for a variety of investments and financial uses. It’s highly likely that it’s only a matter of time before the Czech Republic transposes these recommendations into national legislation.
The CARF framework will apply to companies and individuals that provide crypto exchange services and facilitate cryptocurrency transfers (including retail payment transactions). It may apply to online and offline crypto wallets. It will be a legal requirement to report tax-related information to the national authorities who’ll automatically share the information on crypto transactions and taxpayers with their counterparts abroad. These rules exclude cryptocurrencies that aren’t used as a means of payment or as an investment, as well as centralised stablecoins.
How do I pay taxes on crypto in Czech Republic in 2024?
In 2024, the issue of taxation of cryptocurrency gains remains a hot topic for many countries, including the Czech Republic. The Czech Republic has developed its approach to the regulation and taxation of cryptocurrencies, seeking to ensure fair taxation while maintaining incentives for the development of an innovative economy. This article will provide a detailed overview of the process of paying taxes on cryptocurrency income in the Czech Republic in 2024.
Basics of cryptocurrency taxation in the Czech Republic
Cryptocurrencies are not considered legal tender in the Czech Republic, but they are recognised as assets that may be subject to taxation. The taxation of cryptocurrencies depends on whether the income from them is the result of personal investment or business activity.
Taxation for individuals
For individuals, income from trading cryptocurrencies is generally considered capital gains and is taxed at a rate of 15%. This includes profits derived from selling cryptocurrency for fiat money, as well as from exchanging one cryptocurrency for another.
To pay the tax correctly, you need to:
- Documentation of all transactions: Records should be kept of all transactions, including the dates of purchase and sale, the value in CZK at the time of the transaction, and the profit or loss realised.
- Calculation of profit: The total profit or loss from all transactions for the tax year must be calculated to determine the taxable base.
- Tax filing: Information about cryptocurrency income must be included in the annual tax return and filed with the tax office.
Taxation for business
If cryptocurrency activity is carried out within a business, the income is considered part of business income and is subject to corporate tax at a rate of 19%. It is important to distinguish between personal investment and business activities, as this will determine the method of taxation.
VAT and cryptocurrencies
In accordance with European Union practice, transactions involving the exchange of cryptocurrencies for fiat money are exempt from VAT. However, the provision of services for cryptocurrency may be subject to normal VAT rules, depending on the nature of the services.
Conclusion
Paying taxes on cryptocurrency income in the Czech Republic requires careful documentation and understanding of the applicable tax rules. It is important to note that tax laws can change, so it is advisable to keep up to date with the latest updates and consult a tax professional if necessary. This will help ensure compliance with tax legislation and avoid potential penalties for incorrect income declaration.
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.
FREQUENTLY ASKED QUESTIONS
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Is the Czech Republic a good place to start a cryptocurrency business?A crypto-specific tax law has not yet been introduced in the Czech Republic. Depending on the purpose of crypto-related economic activities, tax treatment of crypto companies is governed by EU legislation and general law.
There is no legal tender status for cryptocurrencies. It is instead classified as a commodity. Based on the existing legislation, the approach concludes that crypto data stored on a blockchain does not constitute claims issued by a central bank, credit institution, or other payment service provider denominated in the legal national currency. -
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%
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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.
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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).
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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.
Additional Information:
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