Cryptocurrency Taxation in Slovakia

It is important to note that, inasmuch as Slovakia is concerned, all crypto profit, as such, is perceived as a kind of short-term financial asset and not cash. As such, prices for crypto assets are noted on the date of the transaction.

There are various ways forward as relates to tax implications for a business involving cryptocurrency, and further guidance is obtainable from us on the best way in relation to your specific ownership, partnership, or corporation.

General provision

The Ministry of Finance of the Slovak Republic hereby issues, pursuant to section 160 2 of Law No. 563/2009 Coll. On tax administration, amendments to some laws – methodological guidance, the main purpose of which is to ensure uniform interpretation of income tax in relation to the sale of virtual currency in accordance with Law No 595/2003 Coll. On Taxation, herein referred to as “the Income Tax Act,” in like manner as if it were Virtual Transactions in Currency Accounting.

Legal order refers to virtual currency. According to this guide, the definition of virtual currency is: “a digital medium of exchange, which is not issued neither guaranteed by a central bank or public authority, nor necessarily attached to a legal tender; does not have legal status of currency or money, but is accepted by natural or legal persons as a means of payment that can be transferred, stored or traded electronically.

2. The Income Tax Act defines the main terms in the following way: a) it points out what is meant by sale of virtual currency: “the sale of virtual currency is a virtual currency exchange for assets, exchange of virtual currency for other virtual currency, exchange of virtual currency for services or virtual currency conversion.”

Insurance tax act No. 213/2018 Coll., amended and supplemented from 01.10.2018 also the Law on Accounting.

These appendices concerned valuation of a virtual currency in an enterprise unit. Amendment of Accounting Act provides for obligation to convert virtual currency into euros on the day of the case.

The tax question of the virtual currency expense is governed by the regulation of the (19(2) years. § v) Income Tax Act. While determining the total value of the virtual currency on the closing date, one can consider a tax expense up to the amount of income from its sales as an expense.

Entry value concept is defined in the ~ 25b of the Income Tax Act.

The entrance price of virtual currency is, on one hand, the purchase price-when buying-revaluation in the case of exchange of one virtual currency for another.

The Accounting Act also regulates the method of estimating virtual currency-real value. Paragraph 1 of paragraph 25 of the Accounting Act governs what is considered to be real value:

• Virtual currency purchased by payment.
• Virtual currency acquired as a result of mining on the exchange date of another asset or service in exchange for virtual currency, less cash and valuables carried at nominal value, together with service and property received in exchange for virtual currency.
• Virtual currency acquired in exchange for other virtual currencies.

Under the Accounting Act, section 27(13) the real value of the virtual currency shall be the market price on the valuation day in according to 24(1) years. a) determined in the order, set up by the accounting body of the selected public market, using virtual currency. In the reporting period, the subject applies the same way of determination of the real value of the virtual menu.

VAT Act

According to the judgment of the European Court of Justice, trading with virtual currencies is considered a financial transaction; hence, it is exempt from value-added tax within the EU. Contrary to the above, VAT can be charged on virtual currencies in those cases when they are used for paying for goods and services purchased, since such transactions are subject to VAT as if the euro was used as transaction currency.

Private person The gains realized by private persons from the cryptocurrencies are subject to taxation. Therefore, this income from the sale of cryptocurrency is included in “other income” personal income tax return. The minimum which shall be subjected to tax might be reduced by corresponding costs, yet it needs to be stated. On the level of income received, it could be deducted. Concerning other income tax, rates are either 19% or 25%. Whereas the first applies for a total income lower than 35.022,31€, the latter does when this is above.

How do I pay taxes on crypto in Slovakia in 2024?

In 2024, taxation of income from cryptocurrencies is still very topical for investors and users of digital currencies. Slovak tax legislation has determined certain rules for declaring and paying taxes on income received from cryptocurrency transactions. This article will go in-depth into the current status of cryptocurrency taxation in Slovakia, given that this process is rather tricky for any taxpayer to handle independently.

Basics of Cryptocurrency Taxation in Slovakia

The income of a person in Slovakia, which he gets from a cryptocurrency transaction through trading, mining, or exchanging the same for conventional currencies, is treated as income and therefore subject to tax payment. Under national tax law, virtual currency is treated as “other income” for tax purposes.

How to Pay Tax on Cryptocurrency Income

Specifics of Taxation

• Mining: Incomes derived from mining cryptocurrencies are also to be classified as taxable income and hence declared. However, expenses with regard to mining, electricity, and depreciation of equipment are deductible for the determination of tax base.

In Slovakia, correctness is in demand regarding recording and declaration on taxation of incomes derived from cryptocurrencies. While treating cryptocurrency income in Slovakia, two essential parts are in place concerning the requirements of tax law: comprehension and compliance. It is important to declare not only all kinds of revenues correctly but also to calculate correctly the tax subject to possible deductions and special features of taxation with regard to the type of transaction with cryptocurrencies.

In this respect, detailed records of all cryptocurrency transactions should be maintained to maximize clarity and minimize tax risks. It must be performed in such a way that records should be maintained about the dates of transactions, the quantity and value of the cryptocurrency at the time of purchase and sale, and any associated costs that may be deductible.

This also will prevent possible mistakes and allow adherence to all requirements concerning taxes. A tax advisor who knows the details of cryptocurrency taxation in Slovakia will be able to give extremely useful advice on how to optimize the tax burden.

Conclusion: Even though the process of taxation of cryptocurrencies in Slovakia might seem very complicated, after having gone through all the procedures and requirements, a taxpayer can avoid legal obstacles and the respective fines. Active participation in the process of tax management, together with exploiting resources and advice available, will make the process more transparent and manageable.

The following is a general overview of the major tax rates applicable in the Slovak Republic for the year 2024, along with the prevailing personal income tax rate, corporate income tax rate, value-added tax rate, and a short statement regarding the tax position of cryptocurrency-derived income.

Our company is a team of experts who will help you open a company and obtain a cryptocurrency license in Slovakia. We provide legal guidance and ensure strong preparation for business and licensing applications, working hand in hand with our clients to help them navigate the administrative side of their business with confidence. The experienced lawyers at Regulated United Europe (RUE) will be happy to familiarise you with all cryptocurrency regulations in Slovakia.

Crypto Taxes in Slovakia in 2023

Slovakia ranked 13 out of 38 countries in the 2022 International Tax Competitiveness Index, which indicates that the country’s taxation framework is reasonably structured and can therefore be advantageous for businesses engaging in economic activities in Slovakia.

The tax rules applicable to crypto activities remain liberal and relatively easy to navigate. For tax purposes, cryptocurrencies continue to be treated as short-term financial assets other than legal tender, and they’re priced at market value at the time of the trading activity or sale.

Corporate Income Tax

The standard rate of Corporate Income Tax ranges from 15% to 21% and will continue to be levied on profits generated by local companies, and branches of foreign companies. A reduced 15% rate applies to taxpayers with annual taxable revenue below 49,790 EUR and those who don’t enter into transactions with related parties.

Crypto companies can still avail of such incentives as allowances for production, expansion, or modernisation of shared service centres and research and development (R&D) tax relief. Slovak taxpayers can again deduct 100% of R&D annual expenses. Also, it’s now possible to depreciate investments in “Industry 4.0” assets up to 155% of the acquisition value.

Value Added Tax (VAT)

In 2023, the standard VAT remains 20%, but it’s not levied on every crypto activity. According to the ruling of the European Court of Justice, cryptocurrencies for VAT purposes are still treated as fiat money, which makes crypto exchanges VAT-exempt.  However, other types of crypto-related products and services are normally taxed since they involve transactions between a supplier and client of taxable products and services.

As for the upcoming changes, the Slovak Parliament has recently approved an amendment to the Value Added Tax (VAT) Act, with effect from January 2023. The amendments pertain to the correction of the deducted tax in the case of unpaid liabilities, correction of the tax base in the case of uncollectible receivables, correction of the tax base in the case of theft goods defined by law, and adjustments to mandatory VAT registration when the turnover of 49,790 EUR is exceeded. If you wish to dive deeper into the changes and their applicability to your crypto business, please book a personalised consultation with our team of experts, and we’ll be delighted to share more actionable insights with you.

Withholding Tax

The Withholding Tax still ranges from 0% to 35%. A 7% rate applies to particular taxable dividend payments to individuals. Interest or royalties are normally subject to a 19% rate. Taxpayers from non-cooperative jurisdictions (e.g., where there’s no agreement on tax information sharing) are subject to a 35% rate. The latter rate also applies when the beneficial owners of the income can’t be identified, and that includes payments of taxable dividends.

Social Insurance Contributions

In Slovakia, Social Insurance Contributions are paid by employers, including cryptocurrency businesses, at a rate of 25.2% of the employee’s gross salary.

The Slovak retirement pension system is set to improve in 2023 and includes the following changes to the three pension pillars:

• The first pension pillar pertains to the elimination of the retirement age cap and the option for early retirement after 40 years of service, as well as parental pension
• The entry to the second pillar will now be automatic and is related to the change in conservative (guaranteed) funds under the age of 54 and new joiners who will be automatically placed in the non-guaranteed (index) funds
• To make the option of the third pillar more attractive, the fees of supplementary-pension companies will be reduced

New Global Tax Transparency Framework

Slovakia is a member of the Organization for Economic Cooperation and Development (OECD), an intergovernmental organisation consisting of 38 most developed countries, which has recently introduced a new international tax transparency framework, entitled Crypto-Asset Reporting Framework (CARF). Its purpose is to enhance crypto taxation and reporting standards by eliminating tax inconsistencies pertaining to crypto businesses and administrative siloes across its member countries. To solve these issues, the OECD has essentially proposed automatic tax reporting and taxpayer information sharing between international authorities. The proposed recommendations will eventually be transposed into Slovakian legislation.

The CARF regulations will apply to companies and individuals that provide crypto exchange services, and cryptocurrency transfers (including retail payment transactions), and it may soon include online and offline crypto wallets. Every crypto business will be required to report tax-related information to the relevant national authorities whose role will be to automatically exchange the information on crypto transactions and taxpayers with their counterparts abroad. These rules don’t apply to cryptocurrencies that aren’t used as a means of payment or as an investment, as well as centralised stablecoins.

Also, lawyers from Regulated United Europe provide legal support for crypto projects and help with adaptation to MICA regulations.