Czech Republic Proposes Crypto-Friendly Tax Rules

Key Takeaways

• The country plans to exempt digital asset sales from capital gains tax if the assets are held over three years. 
• Under the rules, taxpayers don’t need to report crypto transactions that generate less than 100,000 Czech koruna (approximately $4,200) annually.

The Czech Republic is moving toward a more streamlined tax framework for crypto transactions with proposed pro-crypto legislative changes. Prime Minister Petr Fiala announced plans to exempt digital asset sales from capital gains tax if the assets are held for more than three years. The proposal, supported by Jiří Havránek, a member of the Chamber of Deputies, further seeks to reduce reporting requirements for smaller transactions.

Under the draft rules, taxpayers don’t need to report crypto transactions that generate less than 100,000 Czech koruna (approximately $4,200) annually. In a statement on X (formerly Twitter), Fiala noted, “A new time test will apply, guaranteeing that if you hold cryptocurrencies for more than three years, their sale will not be taxed. We make life easier for people and support modern technologies.”

The proposed changes build on existing exemptions for securities in the Czech tax code and mark a departure from the current capital gains tax rates on cryptocurrency profits, which range from 0% to 19%. To qualify for the exemption, investors must meet two conditions: holding the assets for more than three years and keeping the total annual income from crypto sales under 100,000 koruna.

The legislation has received widespread support, passing with 169 votes in the Czech Parliament. Advocates of the reform, including Pavel Rusnak, co-founder of SatoshiLabs, view it as a significant step toward fostering a more crypto-friendly environment in the country. However, specifics on the implementation remain unclear, as the legislation does not yet define digital assets within the Czech Income Tax Act.

This move comes as governments worldwide grapple with how to regulate and tax cryptocurrencies effectively. In the United States, capital gains tax on digital assets varies between 15% and 20%, depending on income levels. Meanwhile, Russia has classified crypto as taxable property, taxing mining income based on market value and capping personal income tax on crypto earnings at 15%.