Crypto License in the Czech Republic

The benefits of obtaining a crypto license in this jurisdiction include:

Crypto-friendly environment and supporting infrastructure
The Czech Republic is known for its favorable attitude towards cryptocurrencies and blockchain technology. A supportive environment for crypto businesses has been created here. It also has a developed infrastructure in technology, legal services, and financial institutions that can support crypto-businesses in various aspects of their operations.

Access to EU markets
The Czech Republic is a member of the European Union (EU), which provides access to a huge market of consumers and businesses in Europe. A crypto license from the Czech Republic can facilitate access to EU markets.

Remote and fast license process
The Czech Republic stands out from other countries by offering a convenient remote process for obtaining a cryptocurrency license. Entrepreneurs can initiate and complete the procedure without leaving their homes or offices, making it much easier to access for interested parties around the world. In addition, the Czech Republic is renowned for its fast crypto license procedure, minimizing waiting time and providing an accelerated market entry.

No need for work permits for non-resident directors of cryptocurrency companies
The Czech Republic recognizes the importance of international cooperation in the field of cryptocurrencies. Therefore, it does not require non-resident directors involved in cryptocurrency companies to obtain work permits. This opens the door to top talent from around the world.

Clear rules for obtaining a crypto license
Unlike some jurisdictions, the Czech Republic offers the most transparent and understandable process for obtaining a crypto license. Clear instructions and accessible information allow entrepreneurs to confidently navigate the process, which helps develop trust in the Czech regulatory framework for cryptocurrencies.

Wide range of services within the framework of the crypto license
By obtaining a crypto license in the Czech Republic, companies gain access to a wide range of opportunities. From exchange operations to asset management, the Czech regulatory framework covers all aspects of cryptocurrency activity, allowing companies to maximize the potential of this market.

AML/CFT compliance
The regulatory environment for crypto-licensing in the Czech Republic includes anti-money laundering (AML) and countering the financing of terrorism (CFT) requirements. Compliance with these standards helps prevent illegal activities and strengthens the integrity of the crypto industry.

Favorable tax system
The Czech Republic offers a competitive tax system, which can benefit crypto businesses. The use of tax incentives can optimize business operations and financial planning.

Stable environment for crypto business development
The Czech Republic is a country with a combination of financial and political stability, which creates an ideal environment for crypto businesses to thrive in the long term. A strong economy, a developed democratic system, and a favorable investment climate provide a solid foundation for the growth and development of cryptocurrency companies.

The list of basic requirements to obtain a crypto license in this jurisdiction includes:

Company registration
First, you need to register the company in the Czech Republic and ensure its legal operation.

Having a business plan
The business plan must include a description of the complexities and business model for business continuity, as well as detailed financial information.

Availability of a legal address
The legal address of the cryptocurrency company must be located in the Czech Republic.

Legal Compliance
The company must comply with all applicable laws and regulations, especially in the field of anti-money laundering (AML) and combating the financing of terrorism (CFT).

Compliance with AML/CFT requirements
Developing and implementing internal AML/CFT procedures such as KYC and transaction monitoring. It is also mandatory to employ an anti-money laundering officer who will be trained by the company’s operating model and reporting requirements.

KYC software
This includes a description of all devices and software used as part of the planned economic activity, as well as the development of data protection procedures by GDPR and other applicable legal requirements, ensuring that data can be shared with government authorities.

Demonstration of qualification and reliability
Demonstration of the qualifications, reliability, and professionalism of the company’s management and employees.

Financial strength
Confirmation of the company’s financial strength and its ability to fulfill its obligations to customers.

Maintaining accountability
Maintaining detailed records of financial transactions and providing regular reports on activities.

Currently, there is no specific license for cryptocurrency-related activities in the Czech Republic. However, one of the standard trading licenses from the Register of Trading Licenses is required to provide services related to crypto activities. This allows to operate within the EU, including opening offices in any member state without having to go through complex bureaucracy, provided that local authorities are notified of local regulations.

Four types of licenses related to working with cryptocurrencies are available in the Czech Republic:

• classic type license – allows companies to exchange cryptocurrency for a certain fee;
• fiat type license – allows companies to exchange cryptocurrency for cash and back for a certain fee;
• traditional type license allows companies to exchange all types of currencies for a certain fee;
• a specialized license gives companies the right to provide services for the creation and storage of cryptocurrency wallets and customer keys.

If the appropriate license is not in place, a cryptocurrency company may be deemed fraudulent, which can result in fines of up to 500,000 kroner (approximately $21,200) and its closure.

Since there is no specific license for cryptocurrency in the Czech Republic, companies planning to engage in economic activities related to cryptocurrency must follow the general authorization procedures established by the Register of Trade Licenses. The process of obtaining a cryptocurrency license can take up to four months, including the company creation phase.

Applications can be submitted online using a secure electronic signature and sent to the Trade Register’s central electronic database. Along with the application, the company must provide all necessary information about the company and its founders (shareholders), including:

• business plan;
• established AML (anti-money laundering) policies and procedures;
• information on the appointment of a Money Laundering Reporting Officer (MLRO) whose role is to liaise with the Czech National Bank’s financial authority and report suspicious activities.

The evaluation of the application may include the exchange of information with regulators in other countries. If the application is successful, the license is issued only for certain cryptocurrency activities. Note that sometimes a license may be issued with conditions requiring additional conditions to be met by the new licensee before starting operations in the Czech Republic.

Once licensed in the Czech Republic, a cryptocurrency company is required to submit relevant reports (e.g., customer information) to regulatory authorities such as the CNB and FAU. In case of errors or failure to comply with the requirements, the license may be suspended without the possibility of obtaining a new one, as the company will be considered fraudulent.

The process of registering a cryptocurrency company in the Czech Republic may seem complicated, but with Fast Offshore Licenses, everything becomes much easier. Our team of experienced professionals will take care of all the hassle of registering and obtaining the necessary licenses, ensuring that your company is established by Czech law.

The Czech Republic does not have separate legislation regulating cryptocurrencies. However, the country is guided by European Union (EU) directives in this area. In 2015, the Czech National Bank published a report “Security of Internet Payments and Cryptocurrencies”, in which it confirmed that EU regulations apply to virtual currencies.

Investors wishing to start a cryptocurrency company in the Czech Republic must comply with both Czech laws and EU anti-money laundering (AML/CFT) directives. This means that cryptocurrency exchanges and wallet providers must implement internal AML/CFT procedures such as KYC procedures

Under Czech law, crypto assets in this jurisdiction are treated as “goods” and defined as digital units. This means that they are neither paper money nor securities, but can be freely used to pay for goods and services. The circulation of cryptocurrencies is not subject to government control but is not prohibited. If crypto-assets resemble securities such as bonds or stocks, they may be subject to relevant financial regulations. In addition, any transactions utilizing virtual currency must comply with anti-money laundering regulations.

Every Czech company engaged in economic activities in the field of cryptography is obliged to comply with the laws related to anti-money laundering and countering the financing of terrorism:

• Act on Combating Money Laundering (Act No. 253/2008 Coll.);
• Criminal Code (Law No. 40/2009 Coll.), which defines criminal acts, including activities related to money laundering and terrorist financing;
• The Law on International Sanctions (Law No. 69/2006 Coll.), establishes the rules for the imposition of international sanctions.

Companies engaged in cryptocurrency-related activities are also required to comply with the following general laws regulating financial services:

• Trade Licensing Law (Law No. 455/1991 Coll.);
• Banking Act (No. 21/1992 Coll.);
• Law on Business Activities (No. 256/2004 Coll.);
• Law on Investment Companies (Law No. 240/2013 Coll.);
• Insurance Law (No. 277/2009 Coll.).

The establishment of a cryptocurrency company in the Czech Republic is characterized by the fact that there are no specific requirements for its registration in the legislation. Unlike traditional financial institutions controlled by the Czech National Bank (CNB), cryptocurrency companies are not subject to a standardized process for obtaining a crypto license in the Czech Republic. Instead, they fall under the jurisdiction of the Financial Analytical Office (FAÚ), and must strictly comply with Czech AML regulations.

Regardless of your choice of trading license, your cryptocurrency company will be obliged to pay taxes in the Czech Republic as a regular taxpayer. The tax regime for cryptocurrency companies differs depending on the purpose of their activities, but in general, it is similar to the tax regime for other businesses, except in cases where the European Union adopts special laws. For example, the Court of Justice of the European Union (CJEU) has held that for VAT purposes, cryptocurrencies such as bitcoin are treated as ordinary currency, which means that cryptocurrency exchange services (e.g., exchanging cryptocurrency for cash and vice versa, and exchanging one cryptocurrency for another) are exempt from VAT. The tax year is the same as the calendar year, but companies can choose a different tax period.

Basic tax rates in the Czech Republic:

• corporate income tax (CIT) – 21%;
• personal income tax (BT) – 19%;
• capital gains tax (WCL) – 0%-19%;
• Value Added Tax (VAT) – 21% (standard rate);
• social insurance (SIC) – 24.8%;
• health insurance (SA) – 9%.

In the Czech Republic, companies with formally employed employees are required to pay payroll taxes. This includes social and health insurance contributions, as well as contributions to the pension fund.

Taxation of companies in the Czech Republic also depends on their residency status. Resident companies are taxed based on their entire income, while non-resident companies are taxed only on income earned in the Czech Republic. If a company is headquartered in the Czech Republic, it is considered a tax resident.

Cryptocurrency licensees and their partners must ensure compliance with the existing tax system despite the innovative nature of their activities. For example, the following rules should be considered:

• if employees are paid in cryptocurrency, both they and their employer are liable for general taxes;
• although cryptocurrency companies may be exempt from VAT if there is no direct supplier-customer relationship, income from transaction fees is generally taxed at the standard corporate income tax rate;
• if regular suppliers of goods and services are paid in cryptocurrency, they are taxed in the same way as those who are paid in regular currency.

The good news for cryptocurrency companies with a license is that they can take advantage of existing tax breaks and incentives. For example, Czech cryptocurrency companies that meet certain criteria can receive tax relief for research and development (R&D) expenses. This means that up to 100% of R&D expenses for a tax year can be deducted from the tax base. These expenses are counted twice for the tax deduction: as ordinary expenses and as an R&D tax credit. In addition, if qualified expenditures of the current tax year exceed those of the previous year, an additional tax credit of 10% can be claimed.

Cryptocurrency licensees must continuously comply with strict corporate reporting requirements that are directly linked to International Financial Reporting Standards (IFRS).

Annual financial statements must include a balance sheet, income statement, and notes. If audited financial statements are required for a company, it must also provide a statement of cash flows and a statement of changes in shareholders’ equity. The annual financial statements are published in the Commercial Register and filed with the tax return.

Auditing is mandatory for companies that meet at least two of the following conditions:

• turnover exceeds CZK 80 million (about $3.4 million);
• total assets exceed CZK 40 million (about USD 1.7 million);
• the average annual number of employees exceeds 50 people.

If you have decided to obtain a license for cryptocurrency activities in the Czech Republic, Fast Offshore Licenses is always ready to assist you in this process.