Czech Crypto Residency - Radim Kozub

Transcript

[Music] Hello everyone and uh thank you N for introduction. So um today you are here to uh hear from me something about the Czech crypto residency. Uh soon I'm going to explain what I mean by Czech crypto residency. However, in the very beginning, um, one, well, hopefully you enjoy Prague, you like it here, but, uh, one thing you probably probably haven't noticed yet is that you're actually in the middle of, um, European tax haven, which can sound pretty weird because

Czech Republic is not like typical offshore destination or something like BVI or or other similar country. However, um in my presentation, you will see like uh how many uh tax uh benefits, reliefs and so on we have here. So hopefully uh I'm going to persuade you that uh this is the correct description uh of Czech Republic from the tax perspective.

So um what is it? I already started it. What is it? So we're going uh we're going to talk about taxes here today. Uh check crypto residency. We mean it's a check tax domicile or check tax residency. Um the correct term is the tax domicile. What is it? It is actually the regime that applies to uh uh everyone uh sitting here and every person uh everyone almost everyone is actually subject to some tax law in some country and uh uh primarily your world your incomes uh worldwide incomes are

taxed in the country where you're missiled in unless there is there are some exemptions for example U let's say that you are a tax resident in Germany. Uh you'll own a flat for rent here in Prague. U so most probably you will be taxed uh you will be taxed uh uh in relation to this rent here in the Czech Republic. Uh this is one of the exemptions but more or less uh tax domicile is your personal tax regime governed by the laws of uh particular state. Uh the laws are uh both national tax law. So if your tax do a check,

there are Czech tax laws that uh uh set out the rules how you become the Czech resident, who is the Czech tax uh resident, but also uh there are double taxation treaties between many countries, not between all countries, it's rather bilateral type of treaties, international treaties. uh but by the end of the day they are part of the tax law of particular countries. So for example we have a double taxation treaty between Czech Republic and Germany. Uh we have also the national tax law of Germany and Czech Republic but in like both of the uh legal uh systems the

double taxation treaty uh is part of it. Uh also it's uh important to know that you can be the tax resident in multiple countries especially if you are somehow related to two countries that don't have the double taxation treaty but you definitely don't want to be the tax res because that that means that you might be taxed twice in some cases. Now, what are the tax benefits in Czech?

Uh long story short, uh if you're freelancer or like independent contractor, uh if you own crypto, um this is actually the or if you're uh investor only, uh this is actually the the the best situation for uh actually reason moving your tax domic here to the Czech Republic. As you can see, it's capital gains relief for crypto shares, other securities. Um, securities mean something. If you're Czech speaking, it's tennapir. Uh, if you're German speaking is papia, um, and in English,

English u common culture is securities. Uh, capital gains really for real estate. I'll explain the detail of it. for movable assets. Uh then there is also intraolding income relief uh which you might know from other EU uh uh laws are legal regimes from EU states. Uh also going to u uh explain the detail and and that very important there is a favorable tax conditions for freelancers and independent contractors. Yeah. So it's not only about the reliefs, it's also about the the conditions uh how you are actually taxed u how your

income is taxed if you're in this position. So this is the summary and now let me explain the important details of each of the uh reliefs or regimes crypto shares and other securities. Um I'm talking about this group of instruments together uh because the rules here applies together. So first of all uh the capital gain relief here is u uh designed for holding these instruments not for income. Typically uh you're a trader uh and um uh generate alpha if you're

lucky. Uh so in such a case uh your income here is obviously taxed. Yeah. So let's say you made u uh €1,000 a month just to make it simple. Uh so this €1,000 euro a month in Bitcoin are going to be taxed according to your income tax uh regime or income tax law. However, once taxed, if you hold this bit, if you hold the Bitcoin for more than three years, then the uh uh tax relief here will apply. Yes. So be careful. It's necessary to distinct between uh between the uh the income itself even in crypto.

Yeah. Or you can be you can get a salary. You can uh you can get paid in crypto for your services for a product. Uh and uh holding it for certain period or up to certain value. Then uh for these instruments there are like two uh relief regimes here. First you always start with the um oh it doesn't work with the value treasure thresh threshold test. So, uh, if you spend your crypto or sell your shares, whatever, up to, uh, 4,000, uh, euro a year, which is like 100,000 uh,

check rounds, but I think it's better to uh, better to mention the euro value. Uh, up to this limit uh, a year, you won't be uh, you won't be taxed for it. Yeah. So always you start start with this. Once you exceed the limit then the question is have you exceeded it with uh crypto that you own hold let's call it hold for more than three years. Yes or not? If yes, then the holding period test applies to you and applies to uh 1,600,000 euro a year. If not, your taxs

again uh according to like the regime that applies to you. So let's say in general here in the Czech Republic it's going to be uh 15% u uh up to uh something like uh uh 80 80,000 euro and above that it's going to be 23%. Yeah. If if for example you don't hold the crypto for three years. Yeah. But if yes, then up to the amount uh which is mentioned here, uh you're relieved. So this is basically the uh the big news of Czech tax law of this year that you probably heard of it and

uh it applies to every uh tax resident uh of the Czech Republic. Um there is one more condition uh the uh these instruments must not be part of your business business asset. So if for some reason you included it in the your business assets um it's not possible to use it or or there are some rules uh specific rules for it. Um obviously this is like the this is the nice part and then there is uh part uh a more problematic more uh difficult part uh especially with non KYC crypto. Yeah. Uh right now um we are actually part of the

group together with Czech uh cryptocurrency association that is trying to set out the specific rules um that will be applied by the tax authorities here in order not to discriminate uh nonbase users or at least to let's say find some solution for them. So hopefully it will happen. Yeah. because uh for crypto is is not that obvious and easy as with shares. Yeah. Because shares are uh either uh hard copy the paper one or they register in a certain register. So uh there there can be no doubt at least here in the Czech Republic who is the owner there or for how long do you own it? Um and with

crypto obviously might be different. real estate. Um well uh let's uh if you own the real estate for at least 10 years then uh there is some let's say general tax exemption. However, if you own it for uh let's say uh non-defined period, you live in it really like in fact lived in the uh real estate property, then you sell it with some profit and you use this profit to buy uh the new property you're going to live in. Uh it's again relief without

the period. And uh if you don't want to use the profit for the new uh house or for the new apartment, then you need like 2 years of living in your apartment to get this relief. Uh movable assets. Uh there are some special rules as you can see for cars, for ships. U again for for some u uh for the property that's been included uh in the business assets. uh and beside of that there is no like period for this exclusion intraolding tax relief. Uh basically it means uh if if you have a parent and subsidiary company

if the parent company has 10% at least 10% in a subsidiary uh company for at least 12 months uh the the transfers uh um means if you have a dividend for a subsidiary company to the parent company or if you or any similar income or if you sell the share in the subsidiary company, the income uh again is uh is relieved from taxes. Uh why you might be interested in it? Uh basically uh this regime allows you uh to let's say build up something in the subsidiary company and then to uh take

out the money to another company and then it's up to to decide what you're going to do with them. Yeah. But you might sell it with some property for you might have for example the apartment uh that is owned by the subsidiary company. Yeah. Or you can conduct some business that you wish to sell. So uh it's more specific but still it it's uh there are many use cases you can use it for. Uh now um the most favorable uh regime for freelancers and and independent contractors here is so-called flat rate tech scheme pan who understands check uh as you can see uh we are talking about

something between 7.5% up to 10% a month. Yeah, there are different levels uh we can use it and um it covers your uh income tax, your health insurance and your social security. So I would say it's pretty uncomparable to like uh regular regimes even here in the Czech Republic. And um if you combine it yeah the health insurance health insurance with the fact that the public health system is at very good level uh in the Czech Republic and uh on the top of that uh if you want to

have let's say something quicker and more client oriented uh within the health uh sector you can pay up to something like 200300 euro a month for some extra uh for some e for some private uh provider. Just one example, Canadian Medical for example. So this is the company that owns their own clinics that they're actually paid from uh the public insurance but you pay some extra fee.

Yeah. To have some premium access. So by the end of the day uh it works I would say on the like level of private uh private uh health the private hospitals private uh uh se private health sector all around the world and uh it's still very cheap. There are some uh there are some u conditions uh to get this regime. uh you uh actually cannot be you cannot for example rent out uh the apartment uh if the rent exceeds like €2,000 a year. So there are some disad disadvantages but

uh still uh still even like for locals here it's very popular option. So now um well if you're not a Czech citizen, if you're not already the Czech tax resident, um how can you do it or what are the criterias? Um you can see the uh main criterians for uh acquiring the residency. However, there are not basically specific for the Czech Republic. Yeah, there are uh these are the criterions that are um standard for most of the double taxation treaties or most of the countries. Yes. So almost

always you start with the permanent home then you have the center vital interest habitual abote um and I'm going to explain it in more detail. Uh definitely um as I mentioned before, you should find a way how to eliminate or or at least limit uh the domical in another country and uh once you meet the criterians for it then uh there is a there is an option to apply for a tax resident certificate which brings you some clarity uh regarding your regime here. So permanent home um this is first and uh maybe most

important uh criterion. The problem is very often the case law uh is pretty strict about it. So it doesn't mean that you have your own apartment where only you and your family live. It can be even the the room at your parents house for example. So you should be pretty cautious about how to how to define how to let's say structure it in order to be sure that your permanent home is exactly in the state where you would like to be doiciled in and not in another state because you might have permanent home in u basically any uh state all around the

world. So 180 I don't know how many states are now but but many and uh then this is an issue because once you have more than one permanent homes uh there there is another criterion that is decisive let's say and this is the center of vital interest but again it's um what is it so it's actually the uh the country uh that you are tied most intensely with especially personally and from the economic perspective. So as you can see again familiar location u your residence where you spend your time your business employment

um it's not like obvious like usually it's not easy uh to uh to say I I have the center vital interest uh only in one state. So to to get to this position it needs some preparation and and some steps and effort uh to get there. Well, and again if you have a center of vital interest in more than one countries, uh then the question is where is your habitable habitual abode?

Um long story short, uh let's say this is the famous 183 days. It's not that uh uh not always you can use only this this uh rule but let's say this is it. Yeah. So what does it mean? If you want to uh if you want to be sure that you're tax resident only in the Czech Republic, you should have permanent home only in the Czech Republic. You should have a center of vital interest only in the Czech Republic. and you should spend at least 183 days here. Uh which is actually from the perspective of national law. Uh it is the the hard criterion because the

check uh income uh tax law says this is you're either permanent resident or you spend this amount of time here. Uh well then uh as I mentioned u there is a chance to apply for a text do certificate. Um I would definitely do it once you're sure you will you will you will get it. Yeah because you don't want to uh show yourself in front of the authorities and end up with them saying no we don't think that you're the resident here. It's like better to to uh come there well prepared. Yeah. and to get it because once you get it um you have much

more clarity once you file the tax return here in the Czech Republic especially if you uh if you target some uh tax relief. Um now if as an example, yeah, uh if you uh fall under the flat rate tax and uh you would actually uh use the capital uh gain relief for crypto up to €200,000 euro a year. You don't even have to file the uh uh tax return. Yeah.

Which is sounds crazy but it's like this. However, if you exceed it, if you exceed this limit, even if you are in the flat flat rate tax regime, you need to file because uh from like this limit uh and uh uh above this limit uh you are obliged to declare in your tax return that you had this income even if it was relief from tax. So that's uh for taxes and uh if you decide to live uh live in Czecha, what does it mean? Uh what to expect here? So um beside of the beautiful city of

Prague and and the beauties of the country itself, uh there's also uh pretty low crime rate. It's very safe here because uh it's like top 10 uh safest countries from this perspective. uh the public transport is is is not even excellent, but it's also very cheap. For example, for uh the whole Prague uh uh for for one year ticket uh you pay something like uh €150 for one year. Uh also regarding the costs, well uh the rents are rising here. However, still uh recently I talked to one of our clients from London and he was still like pretty happy about

what he pays here for uh for his apartment uh healthare healthcare system. I already mentioned that uh with the little effort you can get like like excellent service for really nice money. Uh there is a like I would say good network of private schools, preschools. So even for people with families it's it's doable. Crypto communities as you can see the Ethereum one, the Bitcoin one uh and many others. And um uh what is also important there are expert communities and the level of uh English uh language here is rising. So uh especially in big cities Prague, Berno

uh you can you can find like more and more people you can communicate with even if you're not check speaking. So call to action if you decide to to go for it. Uh what you should do? So first of all uh um you should assess your individual situation. Uh it's always pretty individual believe me. Uh it might sound that uh it's more or less the same but everyone has uh like some specifics as you could see from the criterions that are important. Uh yeah the the the the detail is important just need to focus on it. Uh because uh imagine that that you spend uh I don't know two three 400,000 euro

in crypto and you're you're targeting the tax relief. So you want to be sure that you're targeting it here. So you are the tax resident of the Czech Republic and you are eligible for the uh for the relief. Then it's about the step plan. So what we going to do first? What then like what is the endgame? Um so it's the physical relocation. It um often makes sense to set up the LTD company here which is pretty quick and and cheap. uh obviously to avoid the double taxation uh uh I would strongly recommend it and uh then it's about the communication strategy with tax

authorities and finally the preparation of all the documentation. Thank you for your attention. If you guys uh considering moving here and and apply for a tax uh tax domic in Czech Republic, you can you can contact me uh or you can also check our website of our law firm uh where you can find more or less the summary what I what I've told you uh today. Uh thank you very much and if you have some time for questions.

Thank you. Thank you Rajim. Yeah, we have time for one question. So if there is any Thanks for the introduction uh redeem. Great to see Czech Republic uh offering such good conditions. Uh quick question. I'm really sorry if I missed that in the beginning. How do you position the Czech regulator for the crypto environment uh comparing to others uh other countries experience any good bad? Thank you. you mean especially in terms of Mika and like the yeah recent development um as far as we know right now and I must really say we're in very very beginning yeah I I will be like

responsibly I'll be able to uh answer this question in two three years right now right now as far as we know uh they keep they keep uh uh their prom is I think um we we're not going to help and we we're not going to protect somehow. Yes. So, uh they stick stick with the with the law. Yeah. They are definitely going to be or trying to be somehow friendly or find a way how to attract more businesses here. on the other hand um they're not crazy like in terms of ah we want to like avoid

everything related to crypto so it's something in between yeah and um as I said we will we will see what happens also what happens in another EU member states yeah because for example comparing to the approach of Slovak regulator uh especially be uh before the mika came into effect they were much more helpful, open to discussion, discussions, preparation and so on. And also now as as we can see they seem to be more open, more open to kind of compromises, but I really want to say that with with caution because it's it's

very early actually. Great. Thanks. So please everyone give one big warm round of applause for Rajim and thank you for the great present.