As a business operating with a Slovakia cryptocurrency license, all crypto profits are deemed short-term financial assets, and not cash. At the moment of the transaction, prices of crypto-assets are noted.
There are different tax implications for businesses working with crypto currency, and we can advise you as to the best route regarding your sole proprietorship, partnership, or corporation.
The Ministry of Finance of the Slovak Republic (hereinafter referred to as “MF SR”) issued pursuant to Section 160 2 of Act no. 563/2009 Coll. on tax administration the amendment of some laws, a methodological guideline whose main objective was to ensure a uniform interpretation of the taxation of income in connection with the sale of virtual currency under Act no. 595/2003 Coll. (hereinafter referred to as the “Income Tax Act”) as in the case of virtual currency accounting operations.
The legal order uses the term virtual currency. Under this guidance, a virtual currency is defined as a “digital bearer of value that is not issued or guaranteed by a central bank or public authority, nor is it necessarily linked to legal tender, has no legal status of currency or money but is accepted by certain natural or legal persons as a payment instrument and which can be transferred, stored or electronically traded.”
The Income Tax Act contains, in § 2 a definition of basic terms, (a) determines what is meant by the sale of virtual currency: “virtual currency selling is the virtual currency exchange for assets, the exchange of virtual currency for another virtual currency, the exchange of virtual currency for the provision of the service or virtual currency conversion.”
Act No. 213/2018 Coll. on the tax on insurance, amended and supplemented also the Act on Accounting with effect from 01.10.2018.
The additions concerned the valuation of the virtual currency in the accounting unit of the entity. The amendment to the Accounting Act sets out the obligation to convert virtual currency into euros on the day of the accounting case.
The issue of tax expenses in relation to virtual currency is regulated in § 19 (2) let. (v) of the Income Tax Act. As a tax expense, expenditures may be used to the total amount of virtual currency entry prices in the taxable period in which they are sold up to the amount of the revenue from their sales.
The concept of entry price is clarified by § 25b of the Income Tax Act.
The entry price of virtual currency is, on one hand, the acquisition price (on purchase) and the revalue (in the case of exchange of one virtual currency for another).
The Act on Accounting also regulates the method of valuation of virtual currency, the real value. What is considered to be a real value is regulated by § 25 par. (1) h) of the Act on Accounting:
- virtual currency acquired by payment;
- the virtual currency acquired by mining at the date of exchange for another asset or service;
- a service and property acquired in exchange for virtual currency, except for cash and valuables valued at nominal values;
- virtual currency acquired in exchange for another virtual currency;
Under Section 27 (13) of the Act on Accounting, the real value of the virtual currency is the market price on the valuation day according to § 24 (1) let. a) determined in a manner set by the accounting entity from the selected public market with a virtual currency. During the accounting period, the entity uses the same method of determining the real value for the given virtual menu.
Trading with virtual currencies is considered a financial transaction, and as such is exempt from value added tax in the EU, based on the judgment of the European Court of Justice. Despite the above statement, VAT may be applicable to virtual currencies if they are used to pay for purchased goods and services, since such transactions are subject to VAT as if the euro was used as the transaction currency.
For private individuals, profits made from cryptocurrencies are taxable. Thus, income from the sale of cryptocurrencies is listed under “other income” in personal income tax return. The taxable minimum can be lowered by corresponding costs, but it has to be noted. It is possible to the level of the income obtained. As for other income, the tax rates applying are either 19% or 25%. Whereas the first applies for a total income lower than 35.022,31€, the latter if the total income is above this.
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.