The amount of relevant information a serious investor faces when contemplating to branch into the crypto market can be overwhelming. There are market trends, technical analysis, geo-political background and many more factors to take into consideration. However, there is an aspect of investing that every investor dreads and it is all things tax related. This is why, if you happen to live in Czechia, it might be useful for you to have Czech Republic crypto laws explained at least in brief before embarking on this journey.

Cryptocurrency Laws in Czech Republic

Even though the availability of Bitcoin in the Czech Republic dates back to 2009, it was not until 2017 that the government of Czechia passed legislation regarding the regulation of cryptocurrencies. Before that point, the only legislative regulations available were those applied to Czechia as a member of the EU. 

As the European Parliament just voted against the ban of PoW blockchain use, the question of how to buy Bitcoin in Europe remains intact, at least for the time being. This only shows that the regulatory legislation in this area will be a dynamic subject in the years to come. 

Currently active Czech Republic laws do not recognize crypto as currencies, but rather as commodities. As such, cryptocurrencies can be used in transactions. However, they are not yet accepted as official means of payment, nor do they succumb to the legislature on payment systems. 
Further, the commodity status of crypto assets results in regulation with a “light-touch, liberal approach”. What this means is that the laws of Czech Republic do not ban or hamper the development of cryptocurrencies, nevertheless, they do not promote cryptos nor protect the investors. This stance comes from the associated risk with crypto market investments, which is in their view comparable to the risk of casino gambling.

Czech Republic Cryptocurrency Regulation for Businesses

All of the EU members are required to have AML regulations in place which pertain to cryptocurrency exchanges and wallets. Czechia has even gone a step further by imposing regulations on all businesses which provide any service related to crypto. 

Companies which provide crypto related services need to obtain an adequate license for their specific enterprise. There are four types of cryptocurrency related licenses:

  • Classic – allows trade of one cryptocurrency for another;
  • Fiat – allows exchange of crypto for fiat currency and vice versa;
  • Traditional – allows all transactions covered by Classic and Fiat licenses;
  • Specialized – allows control of crypto businesses activity. 

For those contemplating starting a cryptocurrency exchange business in Czechia, there are a few steps a company must first meet in order to register.

  • The enterprise needs to notify the appropriate state department of the business name and have that name verified.
  • The proprietor of the company has to provide an identification document and proof that they have not been involved in any criminal activity.
  • The proprietor must provide evidence of legal residency in Czechia for at least a year.
  • The proprietor needs to make all the necessary logistic arrangements to start the enterprise. These include obtaining essential hardware and software, hiring the staff and any other relevant preparations. 
  • The final step is to submit all of the necessary paperwork and the proof of paid fees to the proper state department.

Regulation of Czech Republic Cryptocurrency Tax

The cryptocurrency tax Czech Republic imposes on its citizens will depend on the use of cryptocurrency. When it is used to sell services or goods, income tax has to be paid on those transactions. Traders are required to pay the rate of 15% on the profits they make from the trade. Employees who opt to be paid in crypto instead of fiat are taxed in a similar manner.

Czech Republic cryptocurrency companies are required to pay taxes which are higher than those paid by the individuals. Namely, the rate for companies which handle crypto for business purposes are taxed at the rate of 19%. As noted earlier, these enterprises need to hold an adequate license for their services and make sure to pay taxes to the Health as well as the Social fund.

Mining is considered to be an act of using cryptocurrencies for business purposes since it generates profit. This is why the miners have to pay the same tax rate of 19% like all cryptocurrency related businesses. 

Czech government is aware of tax evasion attempts in the crypto market. That is the reason behind mandatory customer identification by all financial services providers which handle cryptocurrency transactions. As all businesses are obligated to provide the government with any relevant paperwork upon request including the customer identification records, it is easy for the government to trace any transaction to a specific individual.

Regardless of whether you are a trader, miner or have a business, it is crucial to make sure that you understand the taxation laws in the country of residence. Tax evasion is not something to be taken lightly as it can bring upon serious legal repercussions. If you need Czech Republic crypto laws explained in greater detail, it is probably best to contact a tax accountant near you.