On December 6, 2024, the Czech Chamber of Deputies approved a draft law on the digitalization of finance, introducing long-awaited regulation of cryptocurrency markets with European values for digital financial market transformation. Alongside this law, an amendment to the Income Tax Act was adopted. It brings relief to cryptocurrency owners by reducing their tax burden.
Currently, income from the sale of cryptocurrencies by individuals is taxed as income from the sale of intangible assets. It is not subject to any tax exemptions. In line with the proposed amendment income from the sale of cryptocurrencies would be tax-exempt under conditions similar to those required for exempting income from the sale of securities.
The proposed amendment introduces significant changes in the taxation of cryptocurrency income.
From January 1, 2025, there should be two possible ways to exempt cryptocurrency income from taxation: a value limit of CZK 100,000 and a three-year time test.
The proposed changes for individuals do not affect the taxation of transactions with cryptocurrencies for legal entities, which remains unchanged.
Exemptions under the below rules also do not apply to cryptocurrencies which would be part of business assets. If cryptocurrencies are used in business activities, the income from their sale will continue to be subject to standard taxation according to self-employment income tax rules.
Value Limit: Transactions up to CZK 100,000 p.a.
One of the new provisions is the exemption of income from the transactions with cryptocurrencies if the total gross income during the taxable period does not exceed CZK 100,000.
For the purpose of this limit, the total gross income from cryptocurrency sales is considered, not net profit. This means that even in the case of loss-making transactions, the total income must be tracked. If the total income does not exceed CZK 100,000, the income is considered tax free and does not have to be reported to the tax office.
Time Test: Three-Year Holding of Cryptocurrencies
If you sell or make transactions with cryptocurrencies for more than CZK 100,000 p.a., you should still be able to exempt the transactions if you held the cryptocurrency for at least three years.
The exemption applies to the total gross income from cryptocurrency sales, with an upper annual limit of CZK 40 million.
We will continue to monitor the situation and keep you informed in case of any changes. For more information contact our team.