Cryptocurrencies are becoming an increasingly popular investment. The taxation of cryptocurrencies is becoming more complex and many users of these digital assets are unable to navigate it. In this article, we will give you an overview of the current tax legislation covering cryptocurrencies in the Czech Republic and advise you on the obligations that await investors and entrepreneurs.
Not sure how to properly assess specific crypto transactions or what to include on your tax return? We will be happy to prepare a clear legal and tax analysis of the procedure according to your situation.
Czech law does not consider cryptocurrencies as legal tender, but they are classified as intangible movable property. As a result, cryptocurrencies are not subject to the same rules as traditional currencies or securities, but are treated similarly to other types of property – for example, commodities. In recent years, the Czech Financial Administration has focused on regulating digital currencies to ensure that they are taxed correctly to the maximum extent possible.
Both exchanges and cryptocurrency exchanges are subject to client identification obligations under the Anti-Money Laundering(AML) Act. While payments in cryptocurrencies are legal, they are not equivalent to payments in crowns or euros.
As far as accounting is concerned, cryptocurrencies are not a financial instrument, but you can account for them as inventory, investments or other intangible assets.
The taxation of cryptocurrencies is a complex topic that raises many questions. However, even with these, you can contact an Affordable Lawyer. Take advantage of our legal advice and get your question answered within 48 hours.
The biggest myth surrounding the taxation of cryptocurrencies is that only the sale of cryptocurrencies is taxable. But that’s not true, because you have to take taxes into account for other transactions as well. So in what cases should you address the taxation of cryptocurrencies?
You do not have to tax the cryptocurrency if you only purchase it and do not exchange or sell it in any way = possession of cryptocurrency is not taxable.
Income from staking, liquidity pools and lending is taxed as other income. The time test does not apply to it as it is an active form of income.
As we have already mentioned, cryptocurrencies are subject to income tax. If you sell cryptocurrency at a profit, then you must report this income on your tax return. The income is taxed as other income under Section 10 of the Income Tax Act, at a rate of 15% or 23% depending on the amount of annual income. The 23% rate applies to annual income exceeding CZK 1 676 052 per year.
However, in February 2025 a new time test came into force which brings an important change:
For shorter holding periods, the standard rules for taxation of profits apply. In order to apply the time test, you will need to provide evidence of holding cryptocurrencies to prove that you have held them for longer than the three years mentioned. Proof can be made, for example, by a stock exchange statement. The introduction of the time test brings cryptocurrencies closer to securities in terms of tax policy and provides investors with more favourable conditions for holding cryptocurrencies over the long term.
We have discussed what cryptocurrencies are, how they actually work or how they are mined in a separate article. Read it and be clear about cryptocurrencies once and for all.
Example:
Peter bought one Bitcoin for 800 000 CZK in 2021. In March 2025, however, he managed to sell it for CZK 1,500,000. Since he held this Bitcoin for more than three years, he does not have to tax this CZK 700,000 profit. However, if he had sold the Bitcoin in 2023, two years later, he would have had to include this gain in his tax return.
If you are an employee, you do not have to file a tax return if you have signed a “pink” taxpayer declaration, if your income is derived only from employment, and if your other income does not exceed CZK 20,000 per year.
If you are self-employed, you can claim the cryptocurrency income exemption through the time/value test. Lump sum expenses do not apply to cryptocurrency income.
Crypto transactions are included among other income from a consideration transfer. Investors must report taxable transactions on their tax return and substantiate their value. You can claim the cost of acquiring cryptocurrency as a tax-deductible expense, which can reduce your tax base. However, it is important to keep records of cryptocurrency purchases and sales, use the market rate on the date of the transaction and calculate the profit correctly, especially for frequent traders.
This is where the most common practical pitfalls are whether the tax return will be correct. It is not enough to know the final profit, but to document the purchase price, time of possession and the nature of each transaction. If you are not sure what still falls within the exemption and what no longer does, it makes sense to have an attorney review the situation before filing the return.
If you would like to avoid paying tax on cryptocurrencies, we strongly advise against it. The IRS can trace crypto transactions thanks to the public blockchain and cooperation with exchanges.
Ms Sedlak contacted us when she was preparing her tax return and found out that she had sold bitcoin several times during the year, exchanging part of her portfolio into ether and at the same time had staking income. She assumed that she would only tax the transfers to her bank account and did not address the other transactions.
We first reviewed the history of transactions from exchanges and wallets with her and categorized them according to their true tax nature. We then assessed which income could fall within the exemption and where, on the other hand, the income needed to be properly declared. At the same time, we set up a summary of the records so that the client would be able to substantiate her conclusions in the future.
As a result, the client filed her return correctly and on time, without the risk of inadvertently omitting some taxable transactions. In cases like this, it is the mistaken belief that only withdrawals to an account are taxed, or that all crypto-taxes are automatically covered by the timing test, that we most often address.
Entrepreneurs and companies using cryptocurrencies must include their transactions in their accounting. They can report cryptocurrencies as inventory, financial investments or receivables. Companies must therefore pay corporate income tax on cryptocurrencies. They are also able to deduct costs associated with mining or managing cryptocurrency portfolios.
Corporations must tax cryptocurrencies acquired by selling, exchanging for other assets, mining or staking. Cryptocurrencies received as payment for goods or services are treated as ordinary income.
If a company can prove that it has incurred costs associated with the purchase, management and sale of cryptocurrencies to earn, provide or maintain taxable income, then those costs are tax deductible.
TheEuropean Court of Justice has ruled that the exchange of cryptocurrencies is not subject to VAT. However, certain activities related to digital assets may be subject to VAT.
It is not only online shopping that has been inundated by unfair business practices in recent years. What’s over the line and when do you have the right to complain about a trader? Find out in our article.
For cross-border transactions, you need to keep an eye on the differences in tax regimes, which vary widely. Some countries, such as Germany, offer even more favourable tax conditions than the Czech Republic (exemption after one year of holding). On the other hand, the US has strict regulation and tax obligations even for exchanging cryptocurrencies between each other.
Further tightening of regulation of cryptocurrency exchanges can be expected in the coming years. It is also possible that global taxation of cryptocurrencies will be introduced under the auspices of the OECD. Currently, however, the new time test brings positive changes, especially for long-term investors. If you are unsure how you should tax your cryptocurrencies, we recommend consulting a tax advisor and/or our attorney specializing in digital assets on the matter.
Taxation of cryptocurrencies today no longer rests on the simple question of whether you sold something at a profit. Whether it was a sale, an exchange, a crypto payment or an active staking or lending return is also a deciding factor. For investors, it is essential that from 15 February 2025 the law explicitly provides for the exemption of income from the transfer of cryptoassets for consideration up to CZK 100,000 per year, as well as a three-year time test, while the common limit of CZK 40 million must be observed for exempt income. At the same time, however, it remains important to keep proper records, document the period of possession and distinguish cases where the exemption does not apply. Incorrect records or incorrect classification of transactions are the most common problems in practice.
No. The actual acquisition and possession of cryptocurrency is not commonly taxed. Tax is typically only dealt with on transfer, exchange or other monetisation.
Yes. Exchanging crypto for crypto can be a taxable transaction from a tax perspective, even if you are not sending money to a bank account.
It is an exemption of income from the transfer of cryptoassets for a consideration up to an annual total of CZK 100,000 if the statutory conditions are met. However, the exemption is not assessed in the same way for all types of income.
If more than 3 years elapse between the acquisition and the transfer for consideration of the crypto-asset, the income may be exempt from tax, but again only if the statutory conditions are met.
Typically, not as much as a simple sale of a held cryptoasset. These returns need to be considered separately.
Yes. Without records of purchases, sales, exchanges, transfers and purchase prices, it is very difficult to prove the correct calculation of the tax base and any exemptions.
The most common idea is that only withdrawals to a bank account are taxed. In practice, however, exchanges between cryptocurrencies or the separate assessment of staking and other revenues are often forgotten.
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