Pushing for Crypto Tax Reform: Czech Republic’s Breakthrough in the Crypto Currency
Related News:
On February 6, 2025, the President of the Czech Republic officially signed a bill aimed at advancing the country’s cryptocurrency tax reform. The core provisions of the bill stipulate that, starting from January 1, 2025, ordinary cryptocurrency holders will be exempt from capital gains tax when selling crypto assets they have held for over three years. Additionally, individual investors with an annual transaction volume of less than 100,000 CZK (approximately $4,136) will not be required to report their transaction records. Furthermore, the bill designates the Czech National Bank as the regulatory authority for the cryptocurrency market and mandates that cryptocurrency service providers comply with specific professional competency requirements, including the obligation to maintain bank accounts.
This bill is part of the Financial Market Digitization Act, which incorporates several EU laws into the Czech legal framework, including regulations from the Markets in Crypto-Assets (MiCA) framework.
However, the reform has not received unanimous support. Prior to the bill’s passage, several key figures in the Czech cryptocurrency industry publicly predicted that its implementation would be challenging, and some government regulatory agencies expressed concerns that the policy might be exploited for tax fraud.
Click here now! Manage your assets and file your taxes for free with FinTax!
FinTax Commentary
This legislation addresses both taxation and regulatory aspects of cryptocurrency. From a taxation perspective, the Czech Republic does not impose a separate capital gains tax; rather, capital gains are taxed as part of general income. Before this bill, individuals in the Czech Republic had to pay a 15% personal income tax on crypto trading profits, while businesses were subject to a 19% corporate tax. Under the new law, non-professional cryptocurrency investors will be exempt from taxation on crypto assets held for more than three years, and regular cryptocurrency users will no longer need to report their transaction records. This significantly reduces the tax burden and reporting costs for long-term and retail crypto investors, signaling the Czech Republic’s intent to simplify its crypto tax system and encourage long-term investment.
However, when compared to recent policy shifts in other European countries, the Czech Republic’s move appears somewhat unconventional. For instance, in October and November 2024, Denmark and France announced plans to tax unrealized cryptocurrency gains, while Italy significantly increased its capital gains tax on crypto assets in October 2024. These countries have taken such measures primarily to increase tax revenue and ease fiscal pressures. In contrast, the Czech Republic’s decision to offer tax incentives for cryptocurrencies underscores its commitment to fostering the growth of the crypto industry.
From a regulatory standpoint, the Czech Financial Market Digitization Act aims to align the country’s financial regulations with EU digital finance laws and provide a more structured framework for the domestic cryptocurrency industry. Key provisions of the bill include:
● Crypto issuers’ asset reserves and entrusted funds, along with related earnings, will be protected from compulsory enforcement;
● Crypto service providers must submit an annual audit report and financial statement to the Czech National Bank, ensuring sufficient protective measures for entrusted funds;
● The Czech National Bank is granted oversight authority over the cryptocurrency sector.
The Czech government’s increasing support for cryptocurrencies may be directly linked to the country’s ongoing battle with inflation.
In 2022, inflation in the Czech Republic surged to a peak of 17.5%, driven by factors such as the COVID-19 pandemic, the Russia-Ukraine conflict, soaring energy and food prices, and the depreciation of the Czech koruna. By December 2024, inflation had dropped to 3%, yet it remained above the Czech National Bank’s 2% target. The government’s latest initiatives suggest that it may view cryptocurrency adoption and long-term investment incentives as potential tools to counter inflation.
At the same time, this may also be part of the Czech government’s broader strategy to embrace digital finance trends and foster the growth of its crypto sector. Regardless of the underlying motivations, these regulatory breakthroughs are expected to have a significant impact on both the Czech and European cryptocurrency markets. By offering tax incentives and improved regulatory clarity, the Czech Republic seeks to balance innovation incentives with risk management.
Furthermore, while aligning with the EU’s MiCA framework to attract international capital, the country is also injecting new momentum into its domestic crypto ecosystem. This approach highlights its strategic goal of leveraging “compliant innovation” to establish itself as a leading fintech hub in Central and Eastern Europe, particularly in an era of high inflation and digital transformation.