Over the summer, the Czech Financial Administration announced that it had commenced an inspection campaign focused on the taxation of income related to cryptocurrencies, i.e. primarily Bitcoin and Ethereum.
When trading in cryptocurrencies, taxable income is the difference between the sale and acquisition cost of a cryptocurrency. In contrast to income from the sale of securities, in the case of profit on the sale of cryptocurrencies it is not possible in the Czech Republic, even for natural persons, to apply any targeted exemption conditional, for example, on a time test or a minimum value of profit.
During its inspection campaign, the Financial Administration based actions on an analysis of data from 2019 and 2020, and used data from an exchange of information with tax administrations in other countries. According to official information, the difference between ascertained income and data claimed by tax subjects on income tax returns for natural persons and legal entities –including cases where a tax return has not been filed at all –allegedly amounts to hundreds of millions of koruna.
The Financial Administration subsequently called on the affected entities to report their tax liability. In some cases, they did so also for fiscal years other than those that were the subject of the inspection campaign. The Financial Administration also selected taxpayers where they suspect that they have not recognised income from trading in cryptocurrencies. The area of cryptocurrencies will continue to be subjected to inspections. The Financial Administration has published explanatory material on its website that should help taxpayers to familiarise themselves with their respective tax duties.
Determining the amount of required capital of self-governed investment funds
As of 1 August 2022, an amended decree of the Czech National Bank states that when determining the amount of capital of a self-governed investment fund, only items and deductions that do not concern investment activities of a self-governed investment fund or sub-funds created by it are used.
Until now, there could have been doubts regarding the calculation of a SICAV’s capital, and in the relevant reports sometimes regulatory capital was calculated for a self-governed investment fund as a whole. This means that the sub-fund and founder’s part items were added together. Regulatory capital therefore included other equity account items containing the fund capital of the investment part (or sub-funds). This approach, however, does not make sense, as assets and capital in the case of the founder’s part and in the case of the investment part (or sub-funds) have an independent purpose and a separate asset and accounting regime.
Regulatory capital should be placed only in the founder’s part of self-regulated investment funds creating sub-funds (or self-governed investment funds with an investment and non-investment part). It is equity that should enable the proper management of investment funds and constant performance of activities. Assets and capital in the investment part (or in sub-funds) do not belong to the manager (founder’s part or non-investment part of a self-governed investment fund) and are not assets and capital serving its activities.
When determining the amount of capital in a self-governed investment fund, the following now applies:
- A SICAV that creates a sub-fund cannot now include elements concerning the sub-fund;
- A SICAV that does not create a sub-fund cannot include elements concerning the investment part;
- In the case of a SICAF (close-ended investment fund), items and deductions cannot concern investment activities.
The decree does not contain transitory provisions. Limits on the minimum amount of capital for a self-governed investment fund in accordance with the new rules therefore need to be complied with as of 1 August 2022.
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