How not to pay taxes on Crypto and Bitcoin?
- Introduction
- Key Points of the Law Amendment
- Practical Scenarios
- Reporting Obligation
- Holding Period Test: What Does It Mean and How Does It Work?
- How to Record transactions and Witch Documents to Keep?
- Frequently Asked Questions
- Conclusion
1. Introduction
Cryptocurrencies have become a popular investment tool, creating a need for clear tax regulations. In February 2025, an amendment to the Income Tax Act came into effect, introducing significant changes in this area.
2. Key Points
The amendment to the law introduces two key income tax exemptions for individuals:
2.1. Value Limit:
2.2. Holding Period Test:
Income from the sale of crypto assets is tax-exempt if it does not exceed 100,000 CZK in a given tax period.
✅ If you hold cryptocurrency for more than 3 years, the sale is tax-exempt.
❌ If you sell before 3 years, you have a tax obligation.
Income from the sale of crypto assets is tax-exempt if held for at least 3 years.
✅ Applies only to individuals.
❌ The tax exemption is limited to 40 million CZK per year.
3. Practical Scenarios
3.1 Exempt Income
(Held for more than 3 years)
• Selling BTC for 1 million CZK, held for more than 3 years.
• Falls under the holding period test, so the income is tax-exempt.
• No need to pay taxes or report it in the tax return.
• No reporting obligation, as the income did not exceed 5 million CZK.
3.2 Taxable Income
(Held for less than 3 years)
• Selling BTC for 1 million CZK, but held for less than 3 years.
• The holding period test does not apply, so the income is taxable.
• A 15% tax applies to the profit (the difference between the selling and purchase price).
• This profit must be reported in the tax return, and the tax must be paid.
3.3 Exempt Income Over 5 Million CZK
(Reporting Obligation)
• Selling BTC for 6 million CZK, held for more than 3 years.
• Falls under the holding period test, so the income is tax-exempt.
• No need to pay taxes or include it in the tax return.
• BUT: A reporting obligation arises because the income exceeds 5 million CZK.
• You must fill out and submit a notification to the tax authority by the tax return deadline.
4. Reporting Obligation
If you want to apply the holding period test, you must be aware of the reporting obligation when selling. If the amount exceeds 5 million CZK, you must report this to the tax authority by the deadline for filing your tax return.
Failure to submit this notification may result in a fine ranging from 0.1% to 15% of the unreported amount. Additionally, each crypto-to-crypto exchange is assessed separately, so if you trade frequently, your reporting obligations can quickly add up.
Fortunately, there is a form available that you simply need to fill out and submit to the tax office.
Form: financnisprava.gov
Official details: Notification of Exempt Income
5. Holding Period Test: What Does It Mean and How Does It Work?
The holding period test is a mechanism that allows income from the sale of assets to be exempt from income tax if they have been held for a minimum specified period. This principle has long been applied to securities as well.
For cryptocurrencies, this period is set at 3 years.
This means that if an investor holds a cryptocurrency for more than 3 years before selling it, they do not have to pay income tax on the sale.
6. How to Record Transactions and Which Documents to Keep for a Possible Audit?
To properly fulfill tax obligations, it is important to keep transaction records. It is recommended to:
1. Keep records of all purchases, sales, exchanges, and other cryptocurrency transactions, including dates, amounts, and counterparties.
2. Regularly save receipts and download statements of transactions from exchanges, exchangers, or ATMs.
3. Use specialized software to track and record crypto transactions, such as the Czech tool WhaleBooks.
7. Frequently Asked Questions
7.1 How Do Transfers Between Own Wallets Work?
If you transfer crypto between your own accounts/addresses, such as from an exchange to a hardware wallet, it is not a taxable event.
7.2 Is Crypto-to-Crypto Exchange a Taxable Event?
Yes, exchanging one cryptocurrency for another can be considered a sale and is therefore subject to taxation—unless the crypto has been held for more than 3 years.
7.3 Is Purchasing Goods with Crypto a Taxable Event?
Yes, payments with cryptocurrencies for goods or services may be taxed as a sale.
For example, when purchasing from Alza’s e-shop with Bitcoin, it is necessary to record the amount sold and the cryptocurrency’s price at that time, then apply taxation (unless the exemption up to 100,000 CZK per year is used).
8. Conclusion
The amendment to the law brings significant changes and benefits for cryptocurrency investors, including a holding period test and a value limit.
To take advantage of these benefits, it is important to keep detailed transaction records and store relevant documents. Given the complexity of tax obligations, it is recommended to monitor current legislative changes and consult a professional in case of uncertainties.
Well-known tax experts in the Czech Republic include: smpl.cz
Sample notification of receipt:
