Crypto Regulation in Slovakia

These advantages include low company formation costs, competitive and business-friendly tax regime, absence of restrictions on foreign ownership and employees.

The National Bank of Slovakia (NBS) is the central bank of the Slovak Republic and the authority responsible for maintaining the stability of the financial system, including a stable monetary policy framework, and supervising participants in the Slovak financial market. The NBS defines cryptocurrencies as crypto assets or digital assets based on cryptography, decentralized, and using, as a rule, blockchain technology. Other terms are electronic coins or tokens. Mining is explained as the process of making crypto assets.

Crypto Legislation in Slovakia

The general rule is that the legislation applied by the NBS does not define or regulate crypto assets and related economic activities. Therefore, no special requirements are imposed on Slovak companies that supply crypto products or services. For this reason, the authority has no reason to introduce a permit scheme, even in the event of the crypto-activity referring to traditional means of payment—for example, exchange for fiat money.

Since Slovakia has not introduced any comprehensive rules on cryptography, most relevant aspects are covered by EU legislation. Therefore, the NBS often refers to reports and other documents issued by EU institutions.

The general rule is that the NBS and other national authorities shall refer to the relevant legislation, both at the EU and at the national level, when deciding whether or not each individual case may fall within the definition of electronic money, financial instruments or other regulated units.

The NBS is the report of the European Banking Authority, where crypto assets are put into the context of EU legislation. Though the EU has not yet prepared a uniform legislative framework for crypto businesses, it could be that legislation already existing and covering the financial markets might apply. In the event that crypto assets represent electronic money, for example, the second directive on payment services would be relevant.

Another paper the NBS refers to is a report from last year by the European Securities and Markets Authority (ESMA), focused on features and functions of virtual assets as well as necessary amendments of the applicable legislation.

According to ESMA, in cases where crypto assets represent financial instruments, the respective EU legislation listed below should apply to issuers and different types of crypto service providers:

• Directive 2014/65/EU (MiFID II)
• Prospectus regulation
• Market Abuse Directive
• Regulation of Short-selling
• Central Securities Depository Regulation (CFIS)
• Final Settlement Directive

However, under the Slovak legislation according to Act 566/2001 on securities and investment services, crypto-assets are not treated as financial instruments or securities.

In an effort to make the crypto business more transparent and reliable, Slovakia adheres to the AML/CFT norms stipulated by the EU, such as the Fourth Anti-Money Laundering Directive (AMLD4), the Fifth Anti-Money Laundering Directive (AMLD5), and the Sixth Anti-Money Laundering Directive (AMLD6). They have provided a clear legal definition of crypto assets, defined a regulatory framework for companies involved in cryptography-related economic activities.

Furthermore, EU authorities have agreed to new anti-money laundering rules for crypto operations recently, which are believed to bring greater transparency without hindering innovation. Under the new rules, customer identities should be checked for any size of transactions between two regulated digital wallet providers. Unencumbered personal wallets, on their part, would remain out of the scope.

Crypto companies must adhere to following principles in order to be compliant with AML/CFT rules:

• Policies and procedures development and implementation for managing money laundering and terrorist financing risks;
• Training of staff should be adequate, and the personnel capable to undertake risk identification.
• Development and implementation of policies for client identification along with customer due diligence procedures;
• Operation monitoring continuously in congruence with the principles of risk assessment;
• Report suspicious transactions and customers to the competent authorities according to national Law 297/2008 on the Prevention of the Legalization of the Proceeds of Crime and the Financing of Terrorism (Slovak AML Act).

In Slovakia, the Slovak Financial Intelligence Service enforces AML/CFT rules and regulates crypto companies, thus it is allowed to request relevant reports with customer data that eliminate anonymity from crypto activities.

CRYPTO COMPANY FORMATION IN SLOVAKIA

First of all, in order to acquire a cryptography license in Slovakia, one has to establish a Slovak company. In this case, you will enjoy the same rights and be subject to the same rules as a Slovak citizen.

One of the most spread forms of legal types is a private limited-liability company, which can be registered in some weeks on condition that all the documents are well-prepared in advance. Whatever type of legal form you will choose, you’ll be obliged to follow regulations concerning the company’s establishment provided for in the Commercial Code.

Requirements to a private joint-stock company:

• Unique company name (three versions are recommended)
• Minimum share capital – 5000 EUR
• Director resident in Slovakia or other EU country
• 1-50 shareholders
• Local corporate bank account – this takes up to two weeks to open

The following documents are required for the formation of private limited liability company in Slovakia:

• Copies of documents (passports) of founders and directors
• Confirmation of permanent residence of founders and directors (either communal accounts or a document issued by the competent authorities)
• Charter drawn up by a notary
• Detailed business plan including operational structure and principles as well as financial details
• Certificate of criminal record issued by the competent authorities
• High school diploma
• Apostille power of attorney if the company is registered by a third party

Main steps to be taken for the establishment of a Private Limited Liability Company:

• Checking availability and reserving the name of the selected company in the Trade Register
• Applying for a crypto license
• Submitting all the documents to the trade register
• Tax registration
• Registration with the insurance selected by the businessman and the Social Insurance Agency

Crypto activity can be commenced with the issue of a certificate of registration in the Trade Register.

HOW TO GET A CRYPTO LICENSE IN SLOVAKIA

While crypto-licensing is out of the scope of interest of the NBS, it is mandatory for all Slovak crypto companies that are going to provide either cryptocurrency services—clause including cryptocurrencies and fiat money—or crypto wallets to register with the Trade Licensing Authority prior to the commencement of their economic activities in Slovakia. This obligation arises from Law No. 279/2020 Coll., amending Law No 297/2008 on prevention of legalization of proceeds of crime and financing of terrorism.

Since these crypto transactions fall under the category of regulated transactions, in addition to general requirements—at least 18 years, proven legal capacity, and no criminal record—crypto-entrepreneurs must meet requirements on education and others, financial market participants are subject to.

Basic Requirements that Need to Be Fulfilled by All the Applicant Companies:

• Data protection model development
• Creation of internal AML/CFT policies
• CPC procedures for customer identification

How to Obtain a Trading License:

• Start a company with a legal address in Slovakia
• Apply in Slovak, either by visiting one of the local branches of the Trade Licensing Authority next to your address or online through the Central State Administration Portal
• Pay government fees (5 euros for unregulated trade or 15 euros for regulated trade)

Documents needed:

• Statutes
• Proof of premises obtained for registered office in Slovakia, virtual office is permissible
• This may be either a lease agreement which clearly states the commercial purpose or written consent of the owner of the property signed by a notary
• Certificate of the government of the country of residence confirming the lack of a criminal record issued no earlier than 90 days ago
• Proof of the appropriate qualifications of your representative or representative to perform crypto activities

All the documents must be translated into the Slovak language by an interpreter certified by the Ministry of Justice of the Slovak Republic. If this is something you need, we are happy to arrange it on your behalf.

The authority issues the license within three working days provided that all the information and documentation are submitted correctly. Any changes in the structure or activity of the licensee are to be reported to the Trade Licensing Authority. Relevant documents reflecting this change should be submitted within 15 days of the day of its introduction.

TAXES ON CRYPTOCURRENCIES IN SLOVAKIA

In this respect, most of the general taxes are applied to crypto companies in Slovakia, just like other businesses. For tax purposes, cryptocurrencies represent a short-term financial asset other than fiat money and are valued on a market-value basis upon the moment of transaction.

All Slovak companies engaged in crypto-related economic activities are obliged to register with the tax authorities collecting and collecting taxes in Slovakia. As any other company, they can either opt for a standard tax year coinciding with a calendar year or select some other 12-month period.

As a rule, Slovak crypto companies are under obligation to pay the following taxes:

• Corporate Income Tax – 21%
• Value Added Tax – 20%
• Withholding Tax – 0%-35%
• Social Insurance Contributions – 25.2%
• Health Insurance Contributions – 10%

The tax regime of cryptocurrencies was put into perspective in a manual issued by the Ministry of Finance in 2018. According to the authorities, income derived from cryptocurrency will be subject to taxation, and any type of exchange with respect to cryptocurrencies – for instance, exchange of virtual currency for other virtual currency or goods and services – is subject to taxation.

In an effort to ensure consistent interpretation regarding the taxation of income from the sale of virtual currencies, the Ministry of Finance issued Amendments to the Law on Tax Administration and the Law on Income Tax. Under these Laws, it defined virtual currency within the category ‘other income’ and introduced new rules concerning taxation with respect to income from the sale of virtual currencies.

The same documents define virtual currency as a digital representation of value, other than legal tender, not issued or guaranteed by a central bank or public authority, not necessarily tied to a legal tender of any country, but accepted by natural or legal persons as a means of exchange that can be transferred, stored or sold.

Also, virtual currencies shall be considered as sold when they are exchanged for other types of virtual or traditional currencies or when used as a consideration for the provision of services or the virtual exchange of currencies.

These activities below are deemed to yield an income that shall be subjected to tax levies:

• The exchange of virtual currencies for other kinds/sets of virtual currencies
• The exchange of virtual currencies for service provisions;
• The exchange of virtual currencies for assets

Under the amended Income Tax Act, the code partially excludes some crypto-transactions from the tax base, which is the income received from virtual currencies acquired in connection with mining during the tax period of its use. It shall be included in the tax base of the tax period for the sale of virtual currencies.

The Income Tax Act also regulates tax expenditures on virtual currencies. As a tax expense, the costs can be included in the total entry price value of virtual currencies in the relevant period in which these are being sold, up to the amount of the proceeds from their sale. The entry price of a virtual currency is represented by the purchase price (in the case of purchase) and the real value in the case of exchange with other virtual currencies.

Worth noticing, too, is that the Slovak crypto companies can take advantage of already existing tax incentives and discounts. For example, they may use an R&D discount of 200 per cent in cases where expenditures of an R&D project are deductible from the tax base twice.

Slovakia has approximately 70 international agreements on the avoidance of double taxation which enable taxpayers to protect their income against double taxation in various countries.

Crypto regulation in Slovakia overview

REQUIREMENTS PERTAINING ACCOUNTING AND AUDITING

In 2018, the Accounting Act was amended in order to define accounting rules related to virtual currencies and to the companies that develop economic activity related to cryptography. Among the obligations is the conversion of virtual currencies into euros on accounting day.

The Accounting Act also governs the procedure of valuation of so-called actual value of virtual currencies. Actual value of the virtual currency means market price for the day of valuation, which is determined by the accounting company by using the selected public market of virtual currencies. Within the reporting period, the company shall apply one and the same method while determining the actual value of processed virtual currencies.

The real value of virtual currency arises when:

• The purchase of virtual currency by payment
• Acquisition of virtual currency by mining on the exchange date for another asset or service
• The purchase of service and property in exchange for virtual currencies, except in cases where fiat money and valuables are valued at nominal value
• Virtual currency is purchased against another virtual currency

Another important rule is that cryptocurrencies acquired as a result of direct mining should not be put into the balance until they are sold or sold.

As for auditing financial statements in Slovakia, the Accounting Act also determines which companies are obliged to audit the financial statements.

Auditing is obligatory for those companies which meet at least two of the following features:

• Total assets over EUR 1,000,000
• Net turnover over 2,000,000 EUR
• Average number of staff over 30 persons

If the Slovak crypto rules meet your expectations, then our team of dedicated and high-quality lawyers will be happy to assist you in setting up a licensed crypto business in Slovakia. Be sure – we’ll take good care of your company’s creation, licensing, taxation, and reporting. Moreover, if you need additional accounting services or a virtual office, we are here for you. Contact us and book a personal consultation.

Establish a Crypto Company in Slovakia

Even though there is a lack of a reliable legal framework for cryptography, crypto companies can operate legally in Slovakia by just fulfilling the general rules. If you are not from Slovakia, you will be happy to know that foreign entrepreneurs come under the same rules as well as entitled to the same incentives as Slovak citizens.

The Slovak business environment has the following advantages:

• Open to innovation, such as the case of the National Bank of Slovakia, which has recently adopted a regulatory framework that provides the possibility to test innovative products and services. It also enables cooperation between market participants and relevant organizations.
• Investment incentives for eligible companies: tax incentives and investment incentives include a deduction for R&D of 200 per cent, whereby R&D projects might be deducted from the tax base twice.
• Economic growth: according to the OECD, the Slovak economy should grow by 2.3% in 2022 and 3.4% in 2023.

All Slovak companies are primarily subject to the Commercial Code, which sets the rules regarding the registration, internal management, external transactions, and dissolution of various types of companies.

The business register accessible to the public is kept by district courts and managed by the Ministry of Justice. The register shall contain such legally prescribed information as the name of the enterprise, identification number, and registered place.

Slovakia has not yet adopted a cryptography license. However, economic activities relating to cryptography are considered a regulated trade and are, therefore, governed by the provisions of the Trade Licensing Authority.

Types of business entities

The possibilities from which a crypto entrepreneur can choose vary depending on the model, but most frequent entities are S.R.O. (Private Limited Liability Company) and A.S. (Joint Stock Company).

This is because both these forms are suitable to participate in a business that carries a higher level of risk since shareholder liability is limited to capital contributions. Whatever the legal structure will be, you have to follow the rules regarding the establishment of the company provided for in the Commercial Code.

In general, the financial statements and audit reports of the S.R.O. company or of A.S. have to be filed to the Public Register of Financial Statements in charge of providing documents for the collection of documents.

Private Limited Liability Company – S.R.O.

A Private Limited Liability Company – S.R.O. is one of the most frequent legal forms, usually chosen when establishing a small or medium-sized business due to low share capital requirements and lighter corporate governance regulations compared to more complex business structures.

Main characteristics of the Private Limited Liability Company – S.R.O.:

• The company name shall be unique and in compliance with the requirements
• 1-50 shareholders
• The minimum share capital is 5,000 EUR
• The minimum value of a shareholder’s contribution: 750 EUR
• It needs to have a director residing either in Slovakia or another EU country
• It has to open a local corporate bank account
• Its corporate governance includes the General Meeting, Executive, and a Supervisory Board

For opening of S.R.O. company in Slovakia, the following documents need to be prepared:

• Memorandum of Association
• Articles of Association
• A bank certificate of the capital
• Identity documents of founders and directors
• Proof of permanent residence of founders and directors, supported by either utility bills or a document issued by the competent authorities
• A detailed business plan showing the operational structure and principles of the entity together with financial details
• Certificates issued by the competent authorities proving that founders and directors do not have criminal records
• Certificates of non-bankruptcy of the company founders
• Secondary education diplomas of the founders
• Certified copy of the trade authorisation
• A declaration of the contributions manager confirming that contributions have been transferred by all shareholders
• An apostilled power of attorney if a company is incorporated by a third party

The Memorandum of Association must be provided with the following information:

• Company name
• Address of the registered office of the company
• Information about founders: names, and addresses of residence in case of physical persons, and company names and addresses of the registered office in the case of legal entities
• The scope of its activity
• The amount of the registered capital
• Information about contributions of each member, such as an amount, terms of payment, etc.
• Identification details and residential addresses of the first executive directors and a description of the manner in which they will represent the company
• If the Supervisory Board is established: members of the first Supervisory Board – name, residential addresses, birth certificate number
• Details of contributions custodian
• Reserve fund – if any, including terms and the limit, up to which the company shall be obliged to restore the reserve fund
• Privileges granted to persons contributing to the setting up of the company
• Estimated costs of the company arising in connection with the procedure for the formation of the company
• A statement of the intention to file Articles of Association that contain the company’s statutory and other provisions relating to its internal management

An audit is only obligatory for those companies that exceed at least two of the following amounts:

• Total assets – 1 mill. EUR
• Net turnover – 2 mill. EUR
• Average number of employees – 30

Joint Stock Company (A.S.)

This legal form of the business entity serves for opening either a private or a public company and is actually designated for large-scale business. The capital and regulatory requirements are much higher than in the case of a Private Limited Liability Company – S.R.O.

A joint-stock company – by definition – is a firm whose registered capital consists of a certain number of shares of a certain nominal value. A share is the expression of the right of the shareholder to participate in the management processes of the company, to share both the profits and the liquidation balance.

A company is public if it issues all of the shares or a part of them to the general public for subscription of shares or the shares that were accepted for trading by a stock exchange.

Key features of a Joint Stock Company (A.S.):

• The name of the company must include the words Akciovaspolocnosi or abbreviation Akc. spol. or A.S.
• Minimum share capital – 25,000 EUR
• Directors must be natural persons who may require a residence permit if they are not EU citizens.
• A managing director needs to be an EU or OECD citizen.
• Shareholders aren’t required to be permanent residents of Slovakia.
• The shares are freely transferable, provided it is a public company.
• The company is liable with its whole property for any breach of its obligations.
• The shareholders aren’t liable for the obligations of the company.
• The total nominal value of shares must be equal to the registered capital.
• A company can, if the General Meeting approves, issue bonds to which the right to their exchange against the shares of the company or the right to a preferential subscription of shares of the company is attached.

Required documents:

• A Memorandum of Association
• A Foundation Deed
• Bank certificate of the capital
• Identity documents of the founders and directors
• Proof of permanent residence of founders and directors, either utility bills or a document issued by the competent authorities
• A business plan in detail with operational structure and principles and the financials
• Certificates from the competent authorities that prove that founders and directors have no criminal records.
• Certificates confirming that the founders of the company are not listed as debtors
• General education diplomas of the founders
• Certified copy of the trade authorization
• An apostilled power of attorney if a third party was setting up the company

The Constitutive Act has to include the following information:

• The company name
• The headquarters of the company
• Area of business practice
• The amount of the capital registered
• The number of the shares, their par value and form, issue price and restrictions, if any.
• If various types of shares are to be issued, their denomination and a description of the rights attached should also be indicated
• Number of shares subscribed by each promoter
• Description of contributions in kind, specialties, value, etc.
• Details relating to custodian of the contributions
• An estimate of the costs associated with the formation of the company
• If the formation of a public company, the place and time of share subscription and the procedure of subscription of shares in excess of the proposed registered capital must be included as well
• The place and the term for the payment of fractions of the subscribed shares and the percentage
• Forms of convening the constituent General Meeting of subscribers

Where shares are subscribed by a securities broker alone in accordance with the shares issue facilitation agreement, the shares shall be deemed to be issued to the general public on a subscription basis, provided an obligation to sell the share to pre-agreed parties is not embodied in this type of agreement.

A public company can be converted into a private company if it has less than 50 shareholders and its shares have not been accepted for trading on a stock exchange. This will only be possible provided the change was approved by all its shareholders. The number of the shareholders may be ascertained with reference to the names entered in the register of shareholders.

All incorporation documents of whatever kind concerning the company must be translated into the Slovak language by the translator accredited by the Ministry of Justice of the Slovak Republic. If you are interested in requesting such a service, we can most gladly arrange it for you.