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Czech Republic Tax Guide 2023

by
Pratibha Tiwari
Reviewed by
min read
Last updated:

The need for detailed guidance on crypto taxation in the Czech Republic is evident in the Czech Republic, tax authorities rely on European guidelines and rules to tax crypto in the region. Cryptocurrencies aren’t recognized as legal tender, meaning that they are not considered currency and are hence not regulated under payment system laws. The provisions of the existing regulations state that cryptocurrencies are backed by data stored on cryptographic servers called blockchain, unlike currencies issued by the central bank.

Cryptocurrencies are largely unregulated in the Czech Republic and their taxation relies on EU-wide regulations. Unravelling these regulations and figuring out how individual transactions are taxed might be intimidating for investors, that’s why we decided to create a detailed tax guide on crypto taxation in the Czech Republic. In this guide, we will address questions like “How are cryptocurrencies taxed?” “How to file crypto taxes?” “When does one file crypto taxes in the Czech Republic?” “How are mining and staking transactions taxed?” and more. 

This guide is quite extensive and will be updated regularly to accommodate any new rules or guidelines. We suggest revisiting this guide often to make sure you’re not missing out on new updates.

How is Crypto Taxed in the Czech Republic?

Crypto transactions are taxed based on the nature of each transaction. Individuals trading crypto face a 15% tax rate on gains, while businesses in the region pay 19% on similar gains. This creates a contradiction, as businesses' taxes on crypto gains are equivalent to fiat currency compensation, despite crypto not being recognized as a form of currency.

The Czech government cautions investors not to use unclear guidelines as an excuse for negligence. Failure to pay crypto taxes in the Czech Republic carries legal consequences. It is essential to interpret existing guidelines according to individual transactions to assess tax liabilities accurately.

Individuals receiving compensation in crypto must pay income tax on their income, similar to their counterparts receiving compensation in fiat. 

Can the Czech Government Track Crypto?

As an EU member, the Czech government adopted AMLD-5 regulations in July 2018. These regulations require crypto exchanges and other companies to maintain comprehensive KYC records of customers and share investor information with authorities upon request. While AML regulations enhance transparency in investor activity and transactions, the Czech authorities further tightened the rules by directly regulating crypto exchanges and wallets themselves.

The Czech’s AML regulations apply to any entity offering crypto-based services or “those who buy, sell, store, manage, or mediate the purchase or sale of cryptocurrencies or provide other services related to such currencies as a business”

Rest assured that the Czech government is well aware of crypto transactions. Attempting to hide transaction details to evade taxes will likely lead to legal consequences. Transparency is crucial, and adhering to tax regulations is essential to avoid any potential legal issues.

Capital Gains Tax

There is no capital gains tax in the Czech Republic, any gains incurred from trading cryptocurrencies as an individual are taxed at a flat rate of 15%. In other words, capital gains as such aren’t much different from crypto income, the only difference being the progressive tax rates in the case of income. 

Capital Gains Tax Rate 

As mentioned above, any gains incurred from trading crypto assets are taxed at a flat rate of 15%.

How to Calculate Crypto Capital Gains

Although capital gains tax doesn't apply in the Czech Republic, you still need to calculate your gains to identify how much you owe in taxes. Calculating your crypto gains is pretty straightforward. You can use the following formula to calculate your gains:

Capital Gains/Loss = Disposal Amount -  Cost Basis

The cost Basis is simply the acquisition price of an asset inclusive of any additional fees like gas fees or transaction fees. 

Consider the following example: 

Antonin bought 1 ETH for 32,000 CZK

And he decided to sell it 6 months later for 40,000 CZK

Let’s say he paid 1,200 CZK as a transaction fee in the process

Cost basis  = 32,000 + 1,200 = 33,200 CZK

Disposal Amount = 40,000 CZK

Capital Gain/Loss = Disposal Amount - Cost Basis = 40,000 - 33,200 = 6,800 CZK

Crypto Losses

In the Czech Republic, losses from any income source, except employment income, can be deducted from other income within the same year or carried forward for up to 2 years.

However, losses in specific categories, such as trading, have limitations. Only 60% of the gross income from limited trading and entrepreneurial activities, up to 1,200,000 CZK, is tax-deductible in the Czech Republic.

There are no clear guidelines on whether trading crypto assets is categorised under the limited trading and entrepreneurial activities for which deductions are allowed. We suggest seeking guidance from an experienced tax professional to better understand the situation.

Lost or Stolen Crypto

There is no specific guidance on how lost or stolen crypto is viewed from a tax perspective. The status of such assets will likely be reviewed on a case-by-case basis, therefore, we suggest directly contacting the tax authorities and seeking clarification on the status of your assets.

Crypto Tax Breaks Czech Republic

Although there’s no way to avoid paying taxes entirely. The Czech government offer multiple exemptions that you can avail to lower your tax bill:

  • General personal tax credit: It has been increased from 27,840 CZK to 30,840 CZK in 2023.
  • Child tax credit: The Czech government allows tax exemptions for every child you have. 

             First Child = 15,204 CZK

             Second Child = 22,320 CZK

If an individual's total tax is lower than the corresponding child credit, they will receive a special tax bonus equivalent to the difference between the child allowances and their tax liability. Until 2020, the maximum tax bonus amount was CZK 60,300 per year. However, starting in 2021, this limitation was removed, allowing for a greater tax bonus.

  • Dependent spouse tax credit: You get a tax credit of 24,840 CZK if your spouse lives with you and has less than 68,000 CZK in annual income.
  • Disability tax credit: There are three categories of exemptions based on the severity of the disability CZK 2,520, CZK 5,040, or CZK 16,140.
  • Student tax credit: Regular students up to 26 years of age and university students up to 28 years of age get an exemption of 4,020 CZK (for regular students up to 26 years old and university-level doctoral students up to 28 years old).

Crypto Cost Basis Method Czech Republic

While the Czech Republic doesn't impose a capital gains tax, it's still essential to calculate gains for tax purposes. Real-world transactions can be complex, involving multiple acquisitions of the same asset at various prices, which complicates determining the cost basis for disposal. Precise calculations are crucial to assess the tax owed accurately.

That’s why one needs to use specialised accounting methods to make sure all capital gain calculations are streamlined. The Czech government allows the use of FIFO and the Weighted Arithmetic Average Method for cost-basis calculations. Let’s discuss them one at a time.

  1. FIFO Accounting Method

The FIFO or First-In-First-Out accounting method states that the first asset you buy is the first one you sell. In other words, the acquisition price of the earliest asset you buy is taken as the cost basis for the most recent disposal.

  1. Weighted Arithmetic Average Method

The weighted arithmetic average method states that the cost basis for disposal is simply the weighted average of the acquisition price of all assets in possession. 

Let’s consider the following example:

13/01/22 - Daniel bought 1 ETH for 32,000 CZK

17/03/22 - Daniel bought 2 ETH for 34,000 CZK each

27/05/22 - Daniel sold 1 ETH for 40,000 CZK

As evident from the above ledger of transactions, ETH tokens were acquired in two separate instances. 

We will use both FIFO and Weighted Average accounting methods to calculate the cost basis for the above transactions and compare the result to better understand the effect of using different accounting methods on capital gains calculations.

We will start with the FIFO accounting method.

Since the first acquisition was made on 13/01/22 for 32,000 CZK

Cost Basis = 32,000 CZK

Disposal Amount = 40,000 CZK

Capital Gain = 40,000 CZK - 32,000 CZK = 8,000 CZK

Now, we will calculate the capital gain on this disposal again using the Weighted Average Method.

The weighted average method states that the cost basis is equal to the weighted average of all assets in possession.

Cost Basis = 1*32,000 + 2*34,000 / 3 = 32,000 + 68,000/3 = 100,000/3 = 33,333 CZK

Disposal Amount = 40,000 CZK 

Capital Gain = 40,000 - 33,333 = 6,667 CZK

Note that the capital gain reduces significantly when you use the weighted average accounting method.

Also, once you pick an accounting method to calculate the cost basis for a certain asset, you must stick to it. So make sure you pick the right one.

Crypto Income Tax Czech Republic

In the Czech Republic, receiving crypto assets as compensation for services or product sales incurs income tax. Events like mining, staking, and airdrops also attract income tax.

Unlike capital gains taxed at a fixed rate of 15%, crypto income is now subject to a progressive rate based on the final income tax base. The Czech government shifted to this progressive structure from a blanket tax rate before 2021.

Crypto Income Tax Rate

How to Calculate Crypto Income

Calculating your crypto income is relatively straightforward. Add up the fair market value of all received crypto assets from various sources, such as airdrops, staking, and mining. This sum becomes your taxable income base for reporting.

Tax-Free Crypto Transactions

Following are some tax-free crypto transactions:

  • HODLing crypto assets (as individual investors)
  • Transferring crypto between personal wallets
  • Buying crypto with fiat
  • Buying products or services with crypto

Taxed-Crypto Transactions

The following are taxed crypto transactions:

  • Selling crypto assets for fiat
  • Trading one crypto asset for another
  • Staking crypto 
  • Mining crypto
  • Earning a return from DeFi transactions
  • Receiving tokens from Airdrops and Forks 

Tax on Mining Crypto

The Czech authorities have yet to provide specific guidance on mining rewards' taxation. However, following EU tax regulations, mining rewards are considered miscellaneous income and taxed under existing income tax laws. 

Companies with mining operations entirely for profit must obtain a licence and pay taxes to the social and health fund. For such businesses, mining rewards are taxed at a flat rate of 19%.

Tax on Staking Crypto

Mining and staking are different in the way they add and validate new blocks of transactions on public ledgers (blockchain). Where Proof-of-Work networks like Bitcoin use mining to add new transaction blocks, Proof-of-Stake networks like Ethereum use staking for the same. However, across most European tax jurisdictions, mining and staking rewards are viewed through the same lens when it comes to taxation.

Since the Czech tax system relies on European guidelines for crypto taxation, staking rewards are likely taxed similarly to mining rewards. However, we suggest seeking guidance from experienced tax professionals to better understand the tax implications of the same.

How are Airdrops and Forks Taxed in the Czech Republic

Tokens received from airdrops or hard forks are treated as additional income and subject to taxation under existing income tax laws. Soft forks, where no new tokens are generated or distributed, are not taxable events.

However, it's crucial to recognize that the Czech authorities lack specific guidelines on this matter. The information is based on existing European guidelines. To ensure compliance, seeking advice from an experienced tax professional is highly recommended.

Crypto Gifts and Donation Taxes

Although there’s no specific guidance on how the Czech government views crypto gifts and donations from a tax perspective, we can infer some of the tax implications if we consider them to be the same as fiat gifts and donations.

Unlike most neighbours, crypto gifts aren’t tax-free in the Czech Republic. Since 2014, inheritance and gift taxes are no longer governed separately. They are integrated into income tax, subject to progressive taxation like other personal income. This has resulted in a considerable increase in gift tax compared to previous regulations. Nonetheless, various exemptions, such as exemption from individual inheritance tax, are still applicable.

Crypto donations, on the other hand, are tax-deductible in the Czech Republic. Donations made to specific organisations or individuals to support science, education, culture, etc., are tax-deductible for individuals, up to 15% of the tax base. To qualify for the deduction, the total value of the donations must surpass 2% of the tax base or be at least CZK 1,000.

Crypto Margin Trades, Futures, CFDs

Gains from margin or leverage trades and crypto derivatives are taxed similarly to regular crypto trades. There are no distinct guidelines for separating these types of trades in taxation.

For both individuals and businesses, any gains from such trades are subject to a flat tax rate of 15% and 19%, respectively.

Crypto ICO Taxes 

ICOs are special events in the crypto space that allow investors to own native tokens from unreleased projects in return for mainstream tokens like Bitcoin and Ethereum. They’re similar to IPOs in the traditional securities market.

Although there is no specific guidance on how such transactions are taxed in the Czech Republic, tokens received through ICOs are likely viewed as any other crypto-to-crypto trade as is the case in most European tax jurisdictions and taxed at a flat rate of 15% in case of individual investors.

NFT Taxes

There is no guidance on how NFT transactions are taxed in the Czech Republic. However, it is highly likely that any income from trading or swapping NFTs will be viewed as income and taxed at a flat rate of 15% if you’re an individual investor and at 19% if you’re a business.

Note that these are speculations based on our research, we do suggest seeking guidance from an experienced tax professional to better understand the tax implications of the same.

DAO Taxes

DAOs are member-owned communities with a shared vision. All the decisions in a DAO are made by the members in the absence of central leadership. DAOs are new-age institutions aiming to democratise decision-making and allow people to have a say in decisions that directly affect them. DAOs are often called the soul of Web3 and enable members to earn rewards in multiple ways. DAO contributors are rewarded for their contributions to the organization, similar to how centralized organizations pay salaries to their employees. They also pay out bounties for one-time projects and redistribute any profits generated through operations.

Although there is no guidance on how income from DAOs is taxed, it is likely that compensation for contribution will be viewed as income and will be taxed under the existing income tax laws. We do suggest seeking guidance from an experienced tax professional to better understand the tax implications of such transactions.

DeFi Crypto Taxes Czech Republic

The Czech authorities are yet to declare clear guidance on how gains from DeFi transactions are taxed. But since gains from all crypto transactions are categorised as income, gains from DeFi transactions will likely be viewed through the same lens and taxed under the existing income tax laws.

We suggest seeking guidance from tax professionals to get a clear picture of DeFi taxation.

When to Report Crypto Taxes in the Czech Republic

The standard filing and payment deadline is April 3rd of the year following the tax period. If filing electronically, an automatic extension until May 2nd has been allowed for 2023. Additional extensions may be granted upon request. The same deadlines apply for payment. Tax refunds are processed within 30 days if the tax return is approved by the authorities.

How to File Crypto Taxes in the Czech Republic

You can either file your taxes offline using traditional tax forms or through various service providers that let you file your crypto taxes online. We suggest filing your taxes online as you get a deadline extension, and it’s much more convenient than using physical forms. 

Some of the online service providers are CzechTaxesOnline and NeoTax.

What Documents Will the Czech Government Want?

Although the authorities haven’t published an official list of documents crypto investors should maintain, it would be prudent to maintain the following documents:

  1. A detailed record of all transactions in chronological order
  2. A record of the type of transactions
  3. Date, time and volume of assets traded in each transaction
  4. The Fair market value of all assets in CZK
  5. A record of any fees paid while buying, selling, or trading assets

How to File Crypto Taxes Using Kryptoskatt?

Now that you’re aware of how your crypto transactions are taxed and what forms you need to fill out to complete your tax report, here’s a step-wise breakdown of how Kryptoskatt can make this task easier for you:

  1. Visit Kryptoskatt.com and sign up using your email or Google/Apple Account
  2. Choose your country, currency, time zone, and accounting method 
  3. Import all your transactions from wallets and crypto exchanges
  4. Choose your preferred report and click on generate report option on the left side of your screen and let Kryptoskatt do all the accounting.
  5. Once your Tax report is ready, you can download it in PDF format.

If you still need clarification regarding the integrations or generating your tax reports, you refer to our video guide here.

How to Avoid Crypto Taxes in the Czech Republic

The Czech Government offers several exemptions and allowances that you can use to lower your tax bill:

  • You can use the General personal tax credit that has been increased from 27,840 CZK to 30,840 CZK in 2023
  • You get tax credits for each child you have in the Czech Republic

First Child: 15,204 CZK

Second Child: 22,320 CZK

  • There’s a special tax bonus if the total tax is lower than the child credit, with no maximum limit since 2021
  • You get a spouse credit of 24,840 CZK if the spouse's income is < 68,000 CZK
  • There are exemptions based on disability severity: CZK 2,520, CZK 5,040, or CZK 16,140
  • There’s also a student tax credit where regular students up to 26 years of age and university students up to 28 years of age get a 4,020 CZK exemption

FAQs

1. Is Crypto Legal in the Czech Republic?

Cryptocurrencies are indeed legal in the Czech Republic, as they are recognized as digital representations of value. The country has adopted a generally positive and progressive stance towards their use and the underlying blockchain technology. Despite not being considered legal tender, cryptocurrencies are widely accepted as a means of payment for goods and services.

While the Czech Republic has not imposed stringent regulations on cryptocurrencies, it's essential to remain vigilant as the regulatory landscape can evolve. As a crypto expert, staying updated on any developments is crucial to provide accurate information.

Regarding taxation, cryptocurrency transactions such as buying, selling, and trading are subject to applicable taxes. The Czech Republic treats cryptocurrencies as assets for tax purposes, and capital gains tax may apply to profits generated from cryptocurrency trading.

2. How is the holding period for cryptocurrencies taken into account for taxation? 

The Czech Republic does not have a specific holding period for cryptocurrencies. Regardless of how long you hold your cryptocurrencies, the gains are taxable when they are realised (e.g., sold or exchanged for fiat currency or other assets).

3. What happens when you don’t pay taxes in the Czech Republic?

Not paying taxes in the Czech Republic leads to serious consequences. The tax authorities take it seriously, and you could face penalties, interest, or even legal action. They have the power to garnish wages, seize assets, and freeze bank accounts to collect unpaid taxes. Non-compliance may also result in the loss of benefits and negatively impact your credit rating, making it harder to secure loans or credit in the future. To avoid these issues, it's essential to fulfil your tax obligations and seek professional advice if needed.

4. How can Kryptoskatt simplify crypto taxes for you?

We’ve already discussed how to file your crypto taxes in the above sections of the guide offering a stepwise breakdown of the entire process. However, we agree that it is unreasonably complicated even for someone with a fair amount of prior knowledge. Although there’s an easy way to file your crypto taxes using a crypto tax software called Kryptoskatt.

Where all you need to do is log in on the platform, add all your trading accounts, wallets, and DeFi accounts and sip coffee while Kryptoskatt does all the heavy lifting for you. The platform can auto-fetch all your transactions from the tax year and generate a legally compliant tax report within a matter of minutes while also suggesting ways to lower your tax bill. It works like magic, all you need to do is try it once.