Crypto license in Czech Republic

Taxation of crypto companies and crypto transactions in the Czech Republic

If you are planning to open a Czech cryptocurrency company, it is necessary to study cryptocurrency taxes in the Czech Republic. As in other European countries, taxation is regulated by the state tax authority. According to the generally accepted rules, the tax year must correspond to the calendar year, but the company may define the reporting year as the tax year.

Taxation for a crypto company may vary based on the services provided, but not from the standard regimes of other businesses, provided that the European Union government does not enact special legislation. Example: The CJEU (Court of Justice of the EU) has ruled that when paying value-added tax, cryptocurrency (such as BTC) is treated as traditional, and therefore the exchange services provided are exempt from VAT

Moreover, in 2007, the Czech government introduced an additional obligation for banks: cryptocurrency exchanges and other providers of virtual financial services are required to identify customers. This was aimed at the transparency of cryptocurrency and creating conditions where the use of cryptocurrency by anonymous taxpayers would be difficult for tax evasion.

Cryptocurrency transactions are generally not subject to VAT but can be passed on to cryptocurrency buyers if the government wants to collect tax on the transaction. This happens very rarely, mostly the buyer is exempt from paying this tax.

That said, crypto companies that provide different types of services and products need to get registered as VAT payers.

Czech companies must pay the following tax rates:

• Corporate Income Taxes (CIT) - 19%
• Taxes on profits (BT) - 19%
• Capital Gains Taxes (WCL) - 0% to 19%
• Value Added Tax (VAT) - the basic rate of 21%
• Social Security (SVP) - 24.8%
• Health insurance (SA) - 9%

In addition, if the company has officially employed employees, it is necessary to pay social insurance, and health insurance, and make contributions to the pension fund Companies that are Czech residents are taxed based on their profits, while non-resident companies are taxed only on profits that have been earned in the Czech Republic. However, if the main office of the company will be located in the Czech Republic, this company gets the status of a resident taxpayer Remember that evading any state-mandated crypto tax payments in the Czech Republic entails liability.

Legal acts applicable to crypto companies in the Czech Republic

In the course of crypto-relate activity in Czech republic, the following legal acts shall be taken into account:

• Act on Certain Measures Against the Legalization of Proceeds of Crime and the Financing of Terrorism – established grounds of AML/CTF framework in Czech Republic and defines virtual currency, as well as obligations of Czech VASPs
• Criminal Code – describes criminal offences and penalties, including activities related to money laundering and terrorist financing
• International Sanctions Implementation Act – implements international sanctions regimes (incl. UN and EU) into Czech jurisdiction
• Trade Licensing Act – establishes grounds for acquisition of license in certain field of activity
• Business Corporations Act – Czech law on companies, regulating their incorporation, management, etc

Client’s identification requirements for Czech VASPs

Czech crypto companies have an obligation to identify clients in case when volume of transaction(s) performed with the client exceeds 1 000 €. It’s applicable for one or more crypto exchange operations during the client’s lifetime (without term). Also, the same obligation exists, if there’s business relationship (long-term contract) is established with the client. It is applicable when VASP opens a crypto wallet for the client or makes an account on the platform.

Client's identification should be performed in the course of a face to face personal meeting with the client. It means real meeting, not video or any other procedure. Nevertheless there's some exceptions for avoiding personal meetings with a client. First exception is to use eIDAS means – it is in use in some EU countries, however there’s no many people outside the EU who have such means. Second option is using Bank ID – a specific solution, developed for the Czech market and used by Czech banks.

If these 2 options are not available, there's also another exception which exceptions for avoiding personal meetings with the client. They require to collect at least 2 documents confirming identity (e.g. passport & ID card or driver’s license), conclude contract in writing and perform 1stpayment in the course of service provided through an account opened on the name of the client in the European Economic Area (EEA) payment institution. It also may create additional issues for clients, who are not residents of EEA: usually it may be problematic to open an account in EEA payment institution for such clients. It’s important to note that verification procedure (incl. making payment through the relevant account) shall be performed before starting other interactions with the client (e.g. opening crypto wallet, performing crypto to crypto exchange, etc.). This approach creates additional issues for VASP, which are not involved in transactions with fiat currencies (e.g. DAOs, DEX, ICO with only crypto funding).