Exemption of income from sale of crypto-assets approved by senate

Under the new legislation, income arising from certain transactions with crypto-assets, which was previously subject to personal income tax as other income, will now be tax exempt. The assessment of eligibility for the exemption is to be based on two rules, similar to those for securities, namely the income threshold test and the time test:

Ambiguities in interpretation

The passed amendment to the Income Tax Act brings several technical and interpretative ambiguities in relation to the introduction of the personal income tax exemption, such as the absence of a definition of crypto-assets for the purposes of the Income Tax Act or no interruption of the time test for certain exchanges of crypto-assets. These ambiguities, which may complicate the application of the provisions in practice, were discussed in detail in our October 2024 issue of Tax and Legal Update.

Expected effect of the new provisions

The law is set to take effect on the day following the date of its promulgation in the Collection of Laws. This general effectiveness also applies to the amendment to the Income Tax Act. It will now depend on when the president signs the law and when it is subsequently promulgated in the Collection of Laws.

In the absence of transitional provisions, the exemption applies to transfers of crypto-assets made for consideration after the effective date of the amendment, including the crypto-assets acquired before that effective date. For the purposes of the income threshold test and the exemption limit of CZK 40 million, only transfers made after the amendment came into effect are to be taken into account.