Crypto license Czech Republic

The Czech National Bank (CNB) is responsible for the general supervision of the financial market in the Czech Republic. According to authorities, cryptocurrencies are not considered legal tender. Cryptographic data stored on a blockchain is not a claim expressed in traditional national currency issued by a central bank, credit institution, or other payment service provider. Under article 4 (1) of the Payment System Act, cryptocurrencies are not regarded as electronic money. According to Article 2(1)(c) of the Law on the Payment System, they are also not considered funds. Instead, cryptocurrencies are classified as commodities.

Before you start your cryptographic operations in the Czech Republic, you can take advantage of the help provided by local initiatives. Various start-ups and incubators offer support related to crypto product development, marketing and sales. One of them is CzechInvest, a government agency that offers a seven-month CzechStarter incubator program where startups can get funding, as well as access to seminars and expert consultations.

Blockchain Connect Association / Czech Alliance was founded in 2018 to accelerate the development and promote the use of blockchain technology across the country. The Association also seeks to combat fraud and eradicate corruption, which should build confidence in innovative financial solutions.

The Cryptoanarchy Institute, established by a non-profit organization called Paralelni Polis, aims to promote a decentralized economy that includes unrestricted dissemination of information and the widespread introduction of such blockchain-based products and services as cryptocurrencies.

All new and existing crypto companies can use the FinTech CNB contact point, an optimized communication channel created to improve the functioning of financial market participants with an emphasis on innovation. Cryptographic companies can seek regulatory advice by filling out a contact form where it is important to explain why a particular product or service is considered a financial innovation. However, this should not replace professional lawyers. If you would like to receive comprehensive legal advice, please contact us – we will be more than happy to provide guidance.

CRYPTO LEGISLATION IN THE CZECH REPUBLIC

Although there is no reliable national cryptographic regulatory framework that could fully protect investors, Czech crypto companies remain subject to EU law, as stated in the summary “Security of Internet Payments and Cryptocurrency”published in 2018 by CNB.

Czech Republic harmonized its legislation with the EU Fourth Anti-Money Laundering Directive (4AMLD) and the Fifth Anti-Money Laundering Directive (5AMLD)that require cryptocurrency exchanges and crypto purse providers to implement internal AML/CFT procedures such as KYC. In addition, the amended Czech legislation covers a wider range of crypto-related economic activities, as it applies to those enterprises that trade, store, manage, or broker the purchase or sale of virtual currencies or offer other services related to cryptography.

For AML/CFT purposes, digital currency is defined as a digital unit that does not fall into the category of fiat money, but is still accepted as a means of payment for products and services by persons who are not issuers of that unit.

Every Czech company engaged in cryptography-related economic activities is subject to the following laws concerning AML/CFT:

• Law on Combating Money Laundering (Law No 253/2008 Coll.), which sets out measures to combat money laundering/terrorist financing
• Criminal Code (Law No. 40/2009 Coll.), which defines criminal acts
• Law on International Sanctions (Law No. 69/2006 Coll. ), which defines the rules for the imposition of international sanctions

The Financial Analysis Authority (FAU) is the main AML/CTF oversight body, while the CBN is responsible for enforcing other financial market legislation. At present, the authorities have not introduced any complex registration process for companies involved in cryptography-related economic activities, making it relatively easy to enter the market.

Companies engaged in activities related to cryptography should consider the following general laws governing financial services:

• Trade Licensing Act (Act No. 455/1991 Coll.)
• Law on Banks (No. 21/1992 Coll.)
• Act on Obligations on the Capital Market (No. 256/2004 Coll.)
• Law on Management Companies and Investment Funds (Law No. 240/2013 Coll.)
• Law on Insurance (No. 277/2009 Coll.)
• General legislation can help cryptographic companies to understand where their activities should be located within the current regulatory framework of the financial market.

The general legislation requires the authorization of the NSC for the following types of economic activities related to cryptography:

• Trading with crypto derivatives – they have features of investment instruments, so trading with them requires a license from an investment firm
• Managing the assets of investor funds that contain cryptocurrencies, regardless of whether funds are offered to the public or only to a limited group of investors
• Transfer of funds in connection with the organization of transactions with cryptocurrencies (e.g. as part of the crypto-exchange operation, when a person transfers non-cash money or electronic money, and such transfers have features of the provision of payment services, in particular, the transfer of funds from the accounts of clients of such exchange to the payment accounts specified by them)

TYPES OF CRYPTO LICENSES IN THE CZECH REPUBLIC

Currently, most cryptographic companies planning to start economic activities in the Czech Republic must obtain one of the usual trade licenses from the Trade Licensing Register, which allows them to operate within the EU, including the opening of offices in any member country without having to deal with extensive bureaucracy, provided that they notify local authorities in accordance with local regulations.

Classification of activities:

• Transactions subject to notification may take place immediately upon notification
• Authorized activities may be carried out after a concession has been granted on the basis of a special commercial license if it is necessary to fulfil certain conditions (e.g. relevant professional experience or education)

Depending on the purpose of using the cryptocurrency, the company may apply for any of the following licenses:

• The Classic – Sharing Among Cryptocurrencies for a Fee
• Fiat – exchange between cryptocurrencies and fiat money on commission
• Traditional – currency exchange intermediation of all kinds
• Specialized – specific products and services related to cryptography (crypto-wallets, encrypted client keys, etc.)

If the crypto company does not receive the appropriate license, it risks being identified as a fraudster, fined up to 500,000 CZK (ca. 20,204 EUR) and be forced to close.

Advantages

HOW TO START A CRYPTOGRAPHIC COMPANY IN THE CZECH REPUBLIC

To obtain one of the four licenses, a cryptographic company must be registered in the Czech Republic. Limited Liability Company (SRO) is one of the most popular legal business structures in the Czech Republic due to such advantages as low minimum equity requirements, a small number of founders and the possibility to be exempt from financial audit. It may be registered within three weeks, provided that all necessary documentation is submitted in due course.

The main requirements for a cryptographic company:

The main steps for opening SRO for cryptographic operations are:

• Verification of the name of the new company
• Receipt of a criminal record statement issued by the competent authority which proves that there are no impediments to engaging in crypto-related economic activities
• Obtaining a legal address for at least one year
• Opening a corporate bank account
• Transfer of the minimum share capital, which is only 1 CZK (approx. 0,04 EUR)
• Obtaining a compulsory trade license from the Trade license Registry
• Preparation and notarization of the founding contract
• Payment of state fees related to registration – 6000 CZK (ca. 243 EUR)
• Registration of the company in the Register of Enterprises and Tax Authorities
• Registration of a company with the FAA for AML/CFT reporting purposes

All necessary documentation must be submitted in the Czech language. If you need a certified translator, our team here in Regulated United Europe (RUE) will be more than happy to help.

You can also opt for a remote company formation, in which case you need to sign a power of attorney that allows your representative to act on your behalf throughout the process of creating your crypto company.

CRYPTO LICENSING PROCESS IN THE CZECH REPUBLIC

Since there’s no crypto-specific license in the Czech Republic, companies planning to engage in crypto-related economic activities are required to follow general authorisation procedures, stipulated by the Trade Licensing Register. Crypto licensing process may take up to four months, which is inclusive of the company formation.

Generally, a crypto company has to submit an application to one of the general Trade Offices in Czech language containing all the essential information about the company and its founders (shareholders). It should be accompanied by the business plan (including strategy and operations) and various background documentation.

Applications can be submitted online using a secure electronic signature and sent to the central Electronic Filing Room of the Trade Register. Submissions are processed by a competent Trade Licensing Office indicated by the applicant.

The assessment of the application may include information sharing with foreign regulatory authorities. If the application is successful, a license is issued only for specific crypto activities. It’s worth keeping in mind that at times the license might be conditional, which means that a new licensee may be required to meet additional conditions before starting to operate in the Czech Republic.

Once a crypto company is licensed in the Czech Republic, a licensee is obligated to share relevant reports (e.g. client information) with such authorities as the CNB and the FAU. In case of errors or refusal, the license might be suspended without a possibility to obtain a new one, as such a company would be considered fraudulent.

CRYPTO TAX IN THE CZECH REPUBLIC

No matter what trading license you choose to apply for, your crypto company will become a common taxpayer in the Czech Republic. Taxation is carried out by the tax authorities. The tax year coincides with the calendar year, but companies can choose the accounting year as the tax year.

The tax regime of crypto companies varies depending on the purpose of the cryptography activity, but does not differ from other businesses unless the EU enacts specific legislation. For example, the Court of Justice of the European Union (CJEU) has ruled out that, for VAT purposes, cryptocurrencies like Bitcoin are treated as traditional currency and therefore cryptographic exchange services (cryptocurrency for fiat money and vice versa, as well as cryptocurrency for other cryptocurrency) are exempt from VAT.

Companies supplying various types of cryptographic products and services must register as VAT payers. The tax period for newly registered VAT payers is a calendar month.

Standard tax rates in the Czech Republic:

• Corporate Income Tax (CIT) – 19
• Tax on branch (BT) – 19%
• Capital Gains Tax (WCL) – 0%-19%
• Value Added Tax (VAT) – 21
• Social Insurance (SVP) – 24.8
• Medical insurance (SA) – 9

Resident companies are taxed on the basis of their income, while non-resident companies are taxed only on income earned in the Czech Republic. If the company is headquartered in the Czech Republic, it is considered a resident taxpayer. The taxable income is calculated according to the accounting profit based on the Czech accounting rules.

Cryptocurrency licensees and their partners must ensure that they are able to operate within the existing tax system, despite the novelty of their activities. For example, the following rules should be considered:

• If employees pay in cryptocurrency, they and their employer are obliged to pay general taxes
• While cryptocurrency companies may be exempt from VAT when there is no vendor-customer relationship, typically their income from operating fees is taxable at the standard corporate income tax rate
• If ordinary product and service providers get paid in cryptocurrencies, they are taxed the same way as those who get paid in fiat money

Although crypto-related economic activity in the Czech Republic is largely unregulated, the use of cryptocurrencies for tax evasion or unconscious disregard of tax rules will certainly lead to prosecution, because the Czech government has made it a priority to eliminate tax evasion through the anonymity of cryptocurrency owners. If you want to have a clear idea of your crypto company’s tax liability, our tax experts will be happy to give you advice.

The good news is that cryptographic licensees can also access existing tax benefits and incentives. For example, eligible Czech cryptographic companies may be able to benefit from the R&D tax credit, where up to 100% of the relevant R&D expenditures incurred during the tax year are deducted from the tax base as a tax credit. This means that expenses are deducted twice for tax purposes – as normal tax-free expenses and as a tax credit for R&D. In addition, if the qualifying expenses of the current tax year exceed those of the previous year, a further 10% may be applied as a supplement.

REPORTING REQUIREMENTS

Crypto licenses should be aware that they should constantly meet strict corporate reporting requirements, which are closely matched with the International Financial Reporting Standards (IFRS).

Annual financial statements must contain a balance sheet, income statement and notes. Companies, which audited financial statements are mandatory for, must supply a statement of cash flows and statement of changes in equity. Annual financial statements are published in the Business Register and must be filed along with the tax return.

Auditing is mandatory for the companies that meet at least two of the following criteria:

• Turnover exceeds 80 mill. CZK (approx. 3,234,413 EUR)
• Total assets exceed 40 mill. CZK (approx. 1,617,206 EUR)
• Average number of employees is over 50

If you’ve decided to obtain a crypto license in the Czech Republic, our highly experienced and dynamic team of Regulated United Europe (RUE) is here to guide you through the process. We offer assistance in crypto company formation and licensing, as well as accounting services. Furthermore, we’ll be delighted to advise on taxation and corporate reporting. Rest assured, we guarantee efficiency, confidentiality as well as meticulous attention to every detail that impacts your business success. Contact us now to book a personalised consultation.

Purchasing a company in the Czech Republic that already has permissions to operate a cryptocurrency exchange

Acquiring a company in the Czech Republic that already holds licences to operate a cryptocurrency exchange is a strategic move for entrepreneurs looking to quickly enter the cryptocurrency market. This process requires detailed planning, knowledge of local legislation and careful attention to the legal aspects of the transaction. In this article, we will look at the main stages of buying such a company, the requirements for buyers and the estimated timeframe for the realisation of such a project.

Step 1: Preliminary analysis and selection of the target company

The first step is to thoroughly analyse the market in order to identify potential companies for purchase that already have permits to operate a cryptocurrency exchange in the Czech Republic. It is important to assess the financial condition, reputation, history of operations and the effectiveness of current management. The preliminary analysis should also include a review of all licences and permits, as well as their compliance with current legislation.

Step 2: Conduct a legal and financial audit

Once a target company has been selected, an in-depth due diligence should be conducted. The purpose of this stage is to identify possible risks associated with the acquisition, including debts, liabilities, disputes and other potential problems. The due diligence should also confirm that all licences are legitimate and up to date.

Step 3: Negotiating the terms of the transaction

At this stage, the buyer and seller discuss the terms of the transaction, including the purchase price, terms of transfer of assets and liabilities, and any other important aspects. It is important to pay special attention to the terms of transfer of licences and permits to ensure the continuity of the exchange’s operations after the change of ownership.

Step 4: Legalisation of the transaction and transfer of rights

Once the terms and conditions of the transaction have been agreed, the legalisation of the purchase follows. This includes the preparation and signing of the sale and purchase agreement, transfer of ownership rights and fulfilment of all necessary registration procedures with the relevant Czech authorities. At this stage, the services of a notary and registration of changes in the commercial register may be required.

Step 5: Integrate and launch operations

Once the legal formalisation of the transaction is complete, the new owner begins to integrate the acquired company and launch operations. This may include updating internal procedures, retraining staff and implementing a new development strategy.

Requirements for the buyer

• Financial solvency: Sufficient funds to purchase the company and maintain its operations.
• Reputation: Clean business reputation and no negative history in business.
• Compliance with regulatory requirements: Ability to comply with all local statutory and regulatory requirements.

Timing of company incorporation

The timeframe may vary depending on the complexity of the transaction, the time required for the audit and the speed of the registration procedures. On average, the process of buying and re-registering a company can take from several months to six months.

Conclusion

Buying a company in the Czech Republic with licences to operate a cryptocurrency exchange requires a careful approach and attention to detail at every stage. This process represents a unique opportunity for quick entry into the cryptocurrency market, but requires the buyer to have in-depth knowledge of finance, law and cryptocurrencies.

Navigating Crypto Compliance: The Path to a Crypto Exchange License in Czech Republic 2024

The cryptocurrency sector is rapidly expanding, and the Czech Republic stands out as a strategic entry point for businesses aiming to tap into the European market. This article serves as a comprehensive guide to obtaining a crypto exchange license in Czech Republic, shedding light on the regulatory landscape, the application process, and the advantages of becoming a licensed operator.

Regulatory Framework for Crypto Licensing in Czech Republic

In the Czech Republic, cryptocurrencies are overseen by the Czech National Bank (CNB) and fall under the broader EU regulations concerning financial technology. Businesses seeking to operate legally must navigate a series of regulatory requirements, including but not limited to anti-money laundering (AML) directives and the newly implemented EU frameworks for crypto assets.

Types of Crypto Licenses in Czech Republic

Several types of licenses cater to various crypto operations:

• A crypto exchange license in Czech Republic allows businesses to facilitate the buying and selling of cryptocurrencies.
• Crypto broker license in Czech Republic: Permits brokering deals on behalf of clients.
• Crypto trading license in Czech Republic: Specifically for trading activities.
• VASP crypto license in Czech Republic: Covers a range of services including but not limited to exchange services and custody solutions.

Requirements for Obtaining a Crypto License in Czech Republic

Applicants must provide thorough documentation, including business plans, AML policies, and proof of economic capabilities. Stringent checks on operational security and compliance are also a prerequisite to ensure protection against cyber threats and financial crimes.

Costs Involved in Crypto Licensing

The crypto exchange license in Czech Republic cost varies depending on the type of license and the scope of operations planned. While costs are significant, they are competitive compared to other EU jurisdictions, making the Czech Republic a financially viable location for crypto businesses.

Benefits of Holding a Crypto License in Czech Republic

Securing a license enhances a company’s credibility, facilitates smoother interactions with global financial systems, and positions the business for scalable growth within and beyond the Czech borders.

Investment Opportunities in Czech Crypto Market

The Czech crypto market is ripe with opportunities, not least because of the cheapest crypto license in Czech Republic. New entrants can capitalize on favorable economic policies and a vibrant tech community.

How to Purchase an Existing Crypto License

For those looking to enter the market more swiftly, purchasing an existing crypto exchange license in Czech Republic for sale may be an attractive option. This route demands careful legal scrutiny to ensure full compliance with all regulatory requirements.

Conclusion: As the Czech Republic continues to refine its cryptocurrency regulations, the pathway to obtaining a crypto exchange license in Czech Republic represents a crucial step for businesses aiming to establish a legitimate presence in the European crypto market. Compliance, thorough preparation, and understanding the legal landscape are key to leveraging the opportunities presented by this dynamic sector.