“Crypto-assets are not yet anchored in Czech legislation, and therefore you will not find a special treatment of their taxation even in the Income Tax Act. This may tempt them to not give it at all. But be careful, this is income like any other that is subject to taxation,” pointed out Marcela Lonková from This One, a company that deals with the digitization of accounting.
The specific situation is with cryptocurrency mining itself. According to the opinion on the website of the General Financial Directorate, it is not subject to, for example, value added tax.
The situation is a little different with corporate income tax. “The same tax regime as for own production will apply. No taxable income is generated when cryptocurrency is obtained through mining. The mined cryptocurrency will be valued at the amount of its own costs,” the opinion states.
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“Taxable income does not arise when cryptocurrency is obtained through mining. In the case of natural persons who are not an accounting unit, the acquisition of a thing by their own activity is involved and the procedure is therefore analogous to the acquisition of a thing by their own activity,” the General Financial Directorate further states.
For natural persons who are an accounting unit, a procedure similar to that for corporate income tax applies.
People become an accounting unit when their turnover for the previous year exceeds 25 million crowns. Then they have an obligation to keep accounts. The accounting unit is also those who are registered as entrepreneurs in the commercial register.
Selling cryptocurrency
“The exchange of crypto for anything else, or the realized profit from this transaction, is then subject to taxation,” Lonková said.
In the case of the purchase or sale of goods or services for cryptocurrency, in the case of personal income tax, according to the Financial Directorate, the transaction is considered an exchange of non-monetary benefits between two parties – the buyer and the seller. “Taxable income is achieved by both contracting parties, on both sides the income is valued according to the legal regulation governing the valuation of property. Income from the exchange of a cryptocurrency for another cryptocurrency is similarly taxed,” the directorate states.
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Income from the sale of cryptocurrency for crowns or another currency is then taxed as income from the sale of intangible movable property.
The same is true for corporate income tax.
Problems with records
“The main problem we see today is that there are companies in the market that want to accept bitcoin as payment, but it’s not their core business, and their existing accountants are horrified because they don’t understand it. There is a lack of information on how to charge and tax in the case of cryptocurrencies,” said Lonková.
According to her, it is absolutely crucial that everyone who deals with cryptocurrencies in any way keeps careful records of all transactions. “This applies to natural and legal persons. In the case of a large number of small purchases, it is very complicated to put all the documents back together, because some stock exchanges and exchange offices do not allow statements to be generated for several years back,” she said.
When people want to sell cryptocurrencies with a possible profit and are unable to prove the expenses associated with their acquisition, they must tax the entire income.
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