The purpose of this information is to inform tax entities using cryptocurrency (virtual currency or digital currency or also transfer tokens) with the tax obligations arising from activities involving cryptocurrency.
For the sake of simplicity, this material relies primarily on the cryptocurrency bitcoin for examples, because it was the first, is the most widely used and is the most well-known. However, the focus of the material is general application to all other cryptocurrencies.
The following categories of activities are essential for the assessment of tax liability and will be discussed below developed from a tax perspective:
A. Cryptocurrency mining,
B. Purchase and sale of goods/services with cryptocurrency,
C. Exchange of cryptocurrency for fiat1
currency,
D. Other implications.
Value added tax
In terms of the application of value added tax, cryptocurrencies are treated according to the applicable domestic and European legislation, including relevant CJEU rulings.
For VAT, it is necessary to view cryptocurrencies within the meaning of CJEU judgment C-264/14 Skatteverket v. David Hedqvist as they constitute alternative means of payment.
The subject matter of value added tax is regulated under section 2 of the VAT Act.
VAT is imposed on the acquisition of goods from another Member State and on the importation of goods from a third country, the supply of goods or services for consideration by a taxable person within carrying out an economic activity with the place of performance in the domestic territory. Unless at least one of the conditions defined in Section 2 of the VAT Act is met, such supply is not subject to tax. In deciding whether a particular transaction is subject to whether or not a transaction is subject to VAT, its objective nature is always assessed (i.e. whether the goods were actually physically supplied or whether the service was actually provided). In order to assess whether the transaction is subject to VAT, there must be a contractual legal relationship under which whereby, on the one hand, the goods or services are supplied and, on the other hand receipt.
Source Financnasprava.cz (in Czech)
