The Czech Republic has introduced a major tax exemption for Bitcoin and digital assets, exempting them from capital gains tax if held for over three years. The law signed by President Petr Pavel, aligns the country’s crypto taxation policies with those of traditional securities. Set to take effect in mid-2025, the new law aims to make investment more favorable for long-term cryptocurrency investors while also aligning with the EU’s new Markets in Crypto-Assets (MiCA) regulations.
As for income from the sale of securities, the exemption applies only to the annual profits below CZK 40 million (approximately $1.7 million).
For assets held for less than three years, individuals are subject to a capital gains tax rate of 15% on profits up to CZK 1,676,052 (approximately $70,0000). Profits exceeding this threshold are taxed at 23%.
Additionally, individuals are not required to report digital asset transactions in their tax filings if the total sum transacted does not exceed CZK 100,000 (approximately $4,200) annually.
Relevant changes to the Income Tax Act were approved by the Senate of the Czech Republic in January. The Bill on the Digitalisation of the Financial Market also designated the Czech National Bank as the competent authority under MiCA.
The Czech Cryptocurrency Association played a key role in the preparation of the new legislation: "The proposals submitted were completely unthinkable a few years ago, now all legislators have agreed to them. Behind this unprecedented unity of political parties is a huge amount of work not only by the association, but also by the entire Czech crypto community, which we managed to unite ," says František Vinopal, chairman of the Czech Cryptocurrency Association.
While MiCA regulation is a significant step toward a standardized regulatory framework for digital assets in the EU, it is believed that it might slow down innovation in the digital asset industry. New crypto projects in the EU must now obtain regulatory approval before launching, delaying market entry. Existing crypto projects operating in the EU must obtain a license under MiCA to continue their operations. The Czech Republic allowed local companies to utilize the full 18-month transition period allowed under MiCA, permitting entities to operate under existing national frameworks until 1 July 2026.
The latest move underscores the Czech Republic’s commitment to balancing regulation and innovation in digital assets. In lockstep with the new crypto-friendly government, The Czech National Bank is also exploring the possibility of adding Bitcoin to its reserves, although this proposal faces tough resistance from the ECB.