Czech Republic to Exempt Long-Term Bitcoin Holdings from Capital Gains Tax Starting 2025

• Starting January 1, 2025, long-term crypto holdings in the Czech Republic held for over three years will be exempt from capital gains tax.
• The law aligns with the EU’s MiCA framework and applies rules similar to securities, incentivising long-term investments but raising concerns over unclear guidelines.
• Despite concerns, the unanimous approval showcases the Czech Republic’s support for crypto innovation, joining nations like Switzerland and UAE in favourable crypto taxation.

The Czech Republic has introduced a new tax exemption law stating that crypto transactions can be excluded from personal taxation as long as they do not exceed CZK 100,000, which is US$4,000 (AU$6,248).

The new framework will be effective January 1, 2025, and establishes new conditions for crypto assets that are quite similar to those applied to securities. 

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The firm BDO explained that the legislation parallels exemptions granted to securities transfers. For instance, digital assets sold after being held for over three years are exempt, so holders have a long-term investment incentive. But these cryptocurrencies must also not have been part of business assets for three years after ceasing self-employment to qualify.

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Prime Minister Petr Fiala also shared the news on X, discussing how the new law will “simplify” life for crypto holders and support technological innovation.

Not So Simple After All

The proposal comes amid efforts to provide more robust guidelines for digital asset taxation, but the lack of transitional provisions raises a few concerns. For instance, it is unclear what sort of treatment crypto assets will have before 2025. 

There is currently no definition for cryptocurrencies under the country’s Income Tax Act, which significantly broadens the scope. The lack of detail on how to verify the ownership period or address technical ambiguities makes things more complicated because no memorandum accompanies the legislation.

Nevertheless, according to BTC Prague, the proposal received unanimous approval, so there’s support for fostering crypto laws within the country. I guess we can call it a step forward?

In any case, Czech authorities have yet to issue detailed guidance on implementing the new framework, so taxpayers and regular users must rely on general practices.

Related: Bitcoin Surges Through US$100k Mark for First Time Ever

Note that this reform aligns with the European Union’s Markets in Crypto-Assets (MiCA) framework, which establishes standardised regulations for cryptocurrencies across the EU and takes full effect on December 30, 2024. The Czech Republic now joins countries like Switzerland and the UAE to offer long-term cryptocurrency holders favourable tax policies. 

But at least some guidance would be much appreciated.