Cryptocurrencies – Targeted Tax Audit

Published:
11. July 2022
Branch:

On 11 July 2022, the Financial Administration of the Czech Republic published a press release on the implementation of targeted inspection of cryptocurrency transactions. The General Financial Directorate of the Czech Republic (GFD) conducted an analysis of available data for tax entities that carried out transactions with cryptocurrencies in 2019 and 2020. The GFD notes that a large number of taxpayers have been detected, who have not properly fulfilled their tax obligations. The total income, on which income tax was not paid by these tax entities, amounted to hundreds of millions of CZK.

The tax administration has a high success rate in additional assessment of tax liability. Among other things, the audits have identified other tax entities suspected of failing to declare income from cryptocurrency transactions.
 
The area of transactions with cryptocurrencies will probably continue to be subject to control activities, and will probably cover cryptocurrency exchangers, crypto exchanges, entities operating cryptocurrency mining and providers of selected types of services specifically related to cryptocurrencies as well. International cooperation between tax authorities in this area is also highlighted.
 
Following

  • GFD Information from 31 March 2022 on the tax assessment of transactions with cryptocurrencies (e.g. bitcoin), declaring to the general public the manner (or necessity) of taxation of cryptocurrencies,
  • this press release publicly announcing targeted tax audits of cryptocurrencies that have already taken place and are planned; and
  • the Czech state budget deficit,

we believe that the period of a certain “tolerance” of non-taxation of cryptocurrencies (or the absence of targeted controls) is definitely over and all holders of cryptocurrencies should address potential taxation of transactions performed.
 
Author: Michal Hlaváč, Petr Němec

Author: Petr Němec, Michal Hlaváč