Strategic Cryptocurrency Taxation 2025

The New Tax Reality for Crypto-Assets: How Have the Rules Changed in 2025?

This change is part of a broader effort to digitalise capital markets and responds to pan-European regulatory initiatives such as the MiCA and DORA regulations. It is important to note that the new rules only apply to income earned from 2025 onwards; income from last year must still be taxed under the old regime.

Tax Exemption for Individuals: The Value and Holding Period Tests

For small investors and individuals who do not hold crypto-assets as part of their business assets, the new legislation introduces two key tax exemption options.

• Value test: Income from the sale of crypto-assets is newly exempt from tax if the total gross income for the calendar year does not exceed CZK 100,000. The key term is gross income, not profit. This means that even in the case of loss-making transactions, the total value of income must be monitored. However, this rule does not apply to stablecoins such as USDT or USDC.

• Holding period test: Income is exempt if at least three years have passed between the purchase and sale of the crypto-assets. In this case, the tax exemption applies up to a total limit of CZK 40 million, which is assessed together with income from the sale of securities and shares. Income above this limit must be taxed, even if the holding period test is met.

The tax exemption rules primarily apply to individuals, not companies. For entrepreneurs, the situation is different, and all income from crypto-assets is subject to tax, unless it involves the management of one's own assets and the company does not have crypto-assets included in its business assets.

This legislative change seeks to create a "cushion" for the easy legalisation of returns for small investors, reducing their administrative burden. On the other hand, it is a clear signal to larger investors and companies that the state is strengthening its oversight. The fact that the new rules differ for companies reflects the assumption that their activities are systematic and professional.

The aim is to legitimise the market, support the digital economy, and at the same time enforce full transparency for large players who might otherwise use the exemption for tax evasion.

Cryptocurrencies in Corporate Accounting: From Commodity to Mandatory Record-Keeping

Although the new legislation brings changes, under Czech accounting standards, crypto-assets are still treated as inventory or other intangible assets. It is therefore essential to keep detailed records of them and to carry out stocktaking. The accounting treatment differs according to the method of acquisition: by purchase (valued at acquisition cost) or by creation through own activities, such as mining (valued at own costs, such as energy and wages).

Determining the Tax Base: Income vs. Expenses

For legal entities, the subject of tax is the positive difference between income and expenses. All profit from sales is subject to tax. The acquisition cost of the crypto-asset and other related costs, such as exchange fees, can be claimed as a tax-deductible expense. It is important to remember that a tax loss cannot be reported, which means that expenses can be claimed up to the amount of income at most.

To determine the purchase price in a partial sale, it is necessary to use methods such as FIFO (first-in, first-out) or the weighted average method. The FIFO method is often more tax-optimal as it allows for the sale of earlier purchased (and usually cheaper) coins, thus reducing the tax base.

Without precise records, a company would have to tax the entire income, not just the profit. The Tax Authority may disallow unsubstantiated expenses and assess additional tax on the entire income, leading to a significantly higher tax liability. Therefore, thorough documentation and professional legal advice are essential for proper tax optimisation.

Because the lawyers at ARROWS regularly deal with this issue and have experience with it, they can prepare internal guidelines and documentation for you that will protect your company from fines and penalties.

Many entrepreneurs mistakenly believe that crypto-asset transactions remain anonymous and beyond the oversight of state authorities. However, this myth is very dangerous. While the blockchain itself is public but anonymous, the gateways to the traditional financial world (such as cryptocurrency exchanges) are subject to strict AML and KYC (Know Your Customer) obligations. These entities collect and share data about their clients, and the Tax Authority has increasingly sophisticated tools for tracing transactions and checking tax compliance.

Income Tax, VAT, and Other Fees: When and What Is Payable?

For legal entities, income from trading crypto-assets is part of the tax base and is subject to the standard corporate income tax (CIT) rate, which is currently 19%. If trading in crypto-assets is a systematic business activity, the income is also subject to social and health insurance contributions.

Value Added Tax (VAT)

The exchange of a cryptocurrency for a fiat currency or another cryptocurrency is itself considered a financial activity that is exempt from VAT, with no right to deduct. However, this does not end all VAT obligations. The nature of the activity must be carefully assessed, as some related services, such as pool mining, may be subject to VAT.

This fact may give rise to an obligation to register for VAT, even if the supply itself is exempt. Companies must also be wary of the risk of being held liable for VAT if the supplier has not paid the tax. Our lawyers specialise in legal advice on VAT and are ready to help you meet your obligations to avoid penalties.

The new legislation brings great relief to cryptocurrency companies – a clear right to a bank account. In the past, banks often refused to provide services to these businesses due to the high risk of money laundering. The current regulation opens the door to the traditional financial world for them, but at the same time forces them to be as transparent as possible. The right to a bank account is thus balanced by increased obligations in the fight against money laundering (AML/CFT).

Thanks to the ARROWS International network and our daily experience with international elements, we know that tax regulations vary significantly across jurisdictions. For example, in Germany, profits of individuals from the sale of crypto-assets can be tax-exempt after just one year of holding. These differences create opportunities for legal tax optimisation through a well-chosen international structure.

Regulation and Compliance: Key Obligations for Entrepreneurs

From a legal perspective, trading and mining crypto-assets are business activities that require the appropriate trade licence. For trading and services related to virtual assets, it is necessary to obtain an unregulated trade licence in field no. 81. For cryptocurrency mining, an unregulated trade licence in field no. 56 (Provision of software, consultancy in the field of information technology...) is required.

Omitting this obligation is a major risk. Unauthorised business activities can lead to fines of up to CZK 500,000 and, in extreme cases, even criminal prosecution with the threat of imprisonment. The need for a trade licence is a direct consequence of the AML Act, which imposes a number of strict obligations on cryptocurrency firms and exchanges, as they are considered so-called obliged persons.

Key obligations include:

• Client identification and due diligence (KYC): Verifying identity and determining the origin of assets.

• Screening for Politically Exposed Persons (PEPs): Determining whether a client holds a significant political office.

• Reporting suspicious transactions: The obligation to notify the Financial Analytical Unit (FAÚ) of transactions that show signs of money laundering.

Failure to comply with these obligations can result in extremely high penalties for companies, including fines of up to CZK 130 million, and serious damage to their reputation. These strict AML and compliance requirements are not just an administrative burden, but are becoming a key risk factor and, at the same time, a kind of licence fee for entering the legitimate crypto business. The absence of quality legal advice to help implement the right internal processes exposes the company to an almost unbearable risk.

Our lawyers have extensive experience with AML legislation. We can provide expert training for your employees and management to help you avoid fines that can reach up to CZK 130,000,000. Get a tailor-made legal solution, write to consultation@arws.cz.

Why is the Role of a Legal Advisor Key? Turn Challenges into Opportunities

The new legislation for the taxation and regulation of crypto-assets brings significant changes for both entrepreneurs and investors. As our analysis shows, this is a complex issue that includes not only taxes, but also accounting, VAT, trade licences, and strict AML obligations. Navigating these regulations is key to minimising risks and effectively managing your digital assets. Ignoring these obligations can lead to high fines, additional tax assessments, or even criminal prosecution.

The lawyers at the ARROWS law firm regularly deal with this issue and have practical experience with it. Our portfolio includes more than 150 joint-stock companies, 250 limited liability companies, and 51 municipalities and regions, which attests to our deep understanding of both the corporate and public sectors. We pride ourselves on speed and high quality to find tailor-made solutions for you. Thanks to our ARROWS International network, which we have been building for ten years, we can also provide you with comprehensive services with an international element.

Our clients include investors and companies with global ambitions, and we are therefore happy to connect clients who have interesting investment or business opportunities. And we are also happy to listen to interesting entrepreneurial or business ideas. Don't be caught off guard by the new rules and turn legislative challenges into a competitive advantage.