Crypto Regulation in Slovakia

Crypto Regulation in SlovakiaSlovakia is one of the EU countries where a robust crypto regulatory framework is yet to be introduced. Although the authorities have acknowledged the importance of the development of innovative businesses and the associated risks as well as provided some clarity on such aspects as taxation, it appears that being part of the wider international discussion is prioritised over the rush into tight regulations which allows financial innovators to grow their businesses in a liberal environment.

The Slovak jurisdiction boasts such benefits as low company formation costs, competitive and business-friendly tax regime and the absence of restrictions on foreign ownership and employees.

The National Bank of Slovakia (NBS) is responsible for maintaining a stable monetary policy framework and for supervising participants of the Slovak financial market. The NBS defines cryptocurrencies as crypto assets, or digital assets, that are based on cryptography, decentralised and which normally use blockchain technology. Other terms include electronic coins or tokens. Mining is explained as a process of creating crypto assets.

The following types of crypto assets are distinguished:

  • Virtual assets can only be used as a means of exchange for fiat currencies and other virtual assets or as a means of payment for goods and services and no rights are attached to them
  • Utility tokens – may be used for a future purchase of services or products provided by the issuer of the tokens
  • Investment tokens may give the holder the right to participate in the management process or receive assets (future profits) sourced by the issuer of the tokens

Initial coin offerings (ICOs) are defined as an alternative method of financing, which is an innovative way to attract capital from the state to fund specific individuals’ projects. To do this, electronic coins and tokens are issued and offered to the public in exchange for fiat money or virtual assets. These transactions are mostly online.

The NBS recently introduced a regulatory system whose main objective is to promote innovation across the country by testing innovative products and facilitating cooperation between market participants and other relevant organizations. The stakeholder database serves this purpose by providing access to the contact details of a number of companies under NBS control. If you want to test your innovative cryptographic product or service in a controlled environment, you can easily apply for participation on the NBS website.

Blockchain Slovakia is another organization created to support the development of companies whose business models are based on blockchain technology, including cryptocurrencies. It facilitates cooperation among researchers, developers, entrepreneurs, regulators and investors to develop technical, legal and regulatory solutions.

Cryptocurrency Licence in Slovakia

Crypto Legislation in Slovakia

As a rule, the legislation applied by the NBS does not define or regulate cryptographic assets and related economic activities, which means that Slovak companies supplying cryptographic products or services, No specific requirements are imposed. Therefore, the authority has no reason to introduce a permit scheme, even if the cryptographic activity refers to traditional means of payment (for example, exchange for fiat money).

As 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.

As a rule, the NBS and other national authorities should refer to EU and national legislation to decide whether each individual case may fall within the definition of electronic money, financial instruments or other regulated units.

The NBS mentions a report issued by the European Banking Authority (EBA), where crypto assets are discussed against the background of EU legislation. While the EU has yet to develop a comprehensive regulatory framework for crypto enterprises, there are cases where existing legislation in financial markets is being applied. For example, if cryptographic assets fall within the definition of electronic money, the Second Payment Services Directive should be taken into account.

Another document cited by the NBS is a report published in 2019 by the European Securities and Markets Authority (ESMA), which discusses features and functions of virtual assets, as well as the need to amend relevant legislation.

According to ESMA, where cryptographic assets are considered financial instruments, the following EU legislation should apply to issuers and various cryptographic service providers:

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

However, in Slovak legislation, pursuant to Act 566/2001 on securities and investment services, crypto-assets are not considered financial instruments or securities.

To make the crypto business more transparent and reliable, Slovakia follows the AML/CFT rules set by the EU. The last three EU directives adopted by the member country are the Fourth Anti-Money Laundering Directive (AMLD4), the Fifth Anti-Money Laundering Directive (AMLD5) and the Sixth Anti-Money Laundering Directive (AMLD6). They have established a clear legal definition of cryptographic assets as well as a regulatory framework for companies engaged in cryptography-related economic activities.

In addition, EU authorities have recently agreed new anti-money laundering rules for crypto operations, which are expected to provide greater transparency without impeding innovation. According to the new rules, customer identities should be checked for any size of transactions between two regulated digital wallet providers. Unencumbered personal wallets, on the other hand, will remain outside the scope.

To comply with AML/CFT rules, cryptographic companies must adhere to the following principles:

  • Development and implementation of policies and procedures to manage risks related to money-laundering and terrorist financing
  • Ensure adequate training of staff and their ability to identify risks
  • Development and implementation of a CMC policy to identify clients, including customer due diligence procedures
  • Ongoing monitoring of operations in accordance with risk assessment principles
  • Report suspicious transactions and customers to the competent authorities in accordance with the 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, AML/CFT rules are implemented by the Slovak Financial Intelligence Service, which controls cryptographic companies and is authorized to request relevant reports containing customer data that eliminate anonymity from cryptographic activities.

Crypto regulation in Slovakia overview

Period for consideration
4-6 weeks Annual fee for supervision No
State fee for application
15 EUR Local staff member No
Required share capital 5,000 EUR
Physical office Required
Corporate income tax 21% Accounting audit Required

CRYPTO COMPANY FORMATION IN SLOVAKIA

To obtain a cryptography license in Slovakia, a Slovak company must first be established. If you are not a Slovak citizen, you will be happy to know that foreigners are subject to the same rules and are entitled to the same benefits as Slovak citizens.

One of the most common types of legal structures is a private limited company, which can be established within a few weeks provided that all necessary documentation is well prepared in advance. Whatever legal structure you choose, you will have to follow the rules regarding the establishment of the company 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 living in Slovakia or another EU country
  • 1-50 shareholders
  • Local corporate bank account (requires up to two weeks to open)

The following documents are required for the establishment of a 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

The main steps to be taken to establish UAB are:

  • Check availability and reserve the name of the selected company in the Trade Register
  • Apply for a cryptographic license
  • Submission of all necessary documents to the trade register
  • Tax registration
  • Registration with the selected insurance company and the Social Insurance Agency

You can start your cryptographic activities as soon as the certificate of registration is issued by the trade register.

HOW TO GET A CRYPTO LICENSE IN SLOVAKIA

Although crypto licensing is outside the scope of the NBS, all Slovak crypto companies planning to offer cryptocurrency services (involving cryptocurrencies and fiat money) or cryptographic wallets must be registered with the Trade Licensing Authority before starting their economic activities in Slovakia. This requirement is based on Law No. 279/2020 Coll., an amendment to 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 educational and other criteria, Financial market participants are subject to requirements.

All applicant companies must meet the following key requirements:

  • Development of data protection models
  • Creating Internal AML/CFT Policies
  • Implementation of CPC procedures for customer identification

How to get 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)

Necessary documents:

  • Articles of association
  • Confirmation of premises received for registered office in Slovakia (virtual office allowed)
  • This may be either a lease agreement, which clearly indicates the commercial purpose, or a written consent of the owner of the property signed by a notary
  • Certificate issued by the authorities of the country of residence confirming the absence of a criminal record (it must be issued not earlier than 90 days ago)
  • Proof of the appropriate qualifications of your representative or representative to carry out cryptographic activities

All documents must be translated into Slovak by an interpreter certified by the Ministry of Justice of the Slovak Republic. If you need such a service, we will be happy to arrange it for you.

If all the necessary information and documentation is provided correctly, the authority issues the license within three working days. Any changes in the licensee’s structure or activities must be reported to the Trade Licensing Authority. Relevant documents reflecting this change should be submitted within 15 days of its introduction.

Advantages

Low cost of setting up the company

Cryptoassets are not considered as financial instruments or securities

Fast project implementation time

Possibility to buy an off-the-shelf solution

TAXES ON CRYPTOCURRENCIES IN SLOVAKIA

In Slovakia, in most cases, cryptographic companies have to pay the same general taxes as other businesses. For tax purposes, cryptocurrencies are treated as short-term financial assets other than fiat money and are valued at market value at the time of transaction.

All Slovak companies engaged in crypto-related economic activities must register with the tax authorities that collect and collect taxes in Slovakia. Like any other company, they can either choose a standard tax year corresponding to a calendar year or choose another 12-month period.

Slovak crypto companies usually have to pay the following taxes:

  • Corporate Income Tax (CIT) – 21%
  • Value Added Tax (VAT) – 20%
  • Withholding Tax (WHT) – 0%-35%
  • Social Insurance Contributions (SIC) – 25,2%
  • Health Insurance Contributions (HIC) – 10%

The tax regime of cryptocurrencies was clarified in a manual published by the Ministry of Finance in 2018. According to the authorities, income received from cryptocurrencies is taxable, and any type of exchange associated with cryptocurrencies (for example, exchange of virtual currency for other virtual currency or goods or services) is taxable.

To ensure consistent interpretation of the taxation of income from the sale of virtual currencies, the Ministry of Finance also issued amendments to the Law on Tax Administration and the Law on Income Tax, where the definition of virtual currencies was included in the category of other income, as well as new rules governing the taxation of income derived from the sale of virtual currencies were introduced currencies.

Virtual currency is defined as a digital value store that is not issued or guaranteed by a central bank or public authority. It is not normally associated with a legal tender, is not considered a legal tender, but is accepted by natural or legal persons as a payment instrument that can be transferred, retained or sold.

In addition, the sale of virtual currencies refers to the exchange of virtual currencies for assets or other virtual currencies or the provision of services or the virtual conversion of currencies.

Income is taxed from the following activities:

  • Exchange virtual currencies for other types of virtual currencies
  • Exchange of virtual currencies for the provision of services;
  • Exchange virtual currencies for assets

According to the amended Income Tax Act, some crypto transactions are not included in the tax base, i.e. income received from virtual currencies acquired through mining during the tax period of its use. Instead, it should 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 used to calculate the total value of the virtual currencies’ entry price in the taxable period during which they are sold, up to the amount of revenue from their sales. The entrance price of a virtual currency is the purchase price (in case of purchase) and the real value (in case of exchange of virtual currencies for other virtual currencies).

It is worth noting that Slovak crypto companies also have access to existing tax incentives and discounts. For example, they may use an R&D discount of 200 per cent if R&D project expenditures can be deducted from the tax base twice.

Slovakia has some 70 international agreements on the elimination of double taxation, which allow taxpayers to protect their income from double taxation in different countries.

ACCOUNTING AND AUDITING REQUIREMENTS

In 2018, the Accounting Act was amended to establish accounting rules for virtual currencies and companies engaged in cryptography-related economic activities. One obligation is the conversion of virtual currencies into euros on accounting day.

The Accounting Act also regulates the method of estimating the so-called real value of virtual currencies. The real value of the virtual currency is the market price on the valuation day. It is determined by the accounting company using the selected public market of virtual currencies. During the reporting period, the company should use the same method of determining the real value of processed virtual currencies.

The real value of virtual currency arises when:

  • Virtual currency is purchased by payment
  • Virtual currency is acquired by mining on the exchange date for another asset or service
  • Service and property are purchased in exchange for virtual currencies, except fiat money and valuables valued at nominal value
  • Virtual currency is purchased in exchange for another virtual currency

Another notable rule is that cryptocurrencies directly derived from mining must be kept out of balance until they are sold or sold.

With regard to financial auditing in Slovakia, the Accounting Act also stipulates which companies are required to audit their financial statements.

Auditing is mandatory for companies that satisfy at least two of the following criteria:

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

If the Slovak cryptographic rules meet your expectations, our team of dedicated and quality lawyers will be happy to help you set up a licensed cryptographic business in Slovakia. You can be sure that we will take care of the creation of your company, licensing, taxation and reporting. In addition, if you need accounting services or a virtual office, we will be happy to help. Contact us to book a personal consultation.

Establish a Crypto Company in Slovakia

Despite the lack of a reliable legal framework for cryptography, crypto companies can legally operate in Slovakia as long as they comply with the general rules. If you are not a Slovak citizen, you will be happy to know that foreign entrepreneurs are subject to the same rules and have access to the same incentives as Slovak citizens.

The Slovak business environment has the following advantages:

  • Open to innovation (for example, the National Bank of Slovakia (NBS) recently introduced a regulatory framework that allows testing of innovative products and services and facilitates cooperation between market participants and relevant organizations)
  • Investment incentives for eligible companies, including tax incentives and incentives (e.g., a deduction of R&D of 200 per cent, where R&D projects can be deducted from the tax base twice)
  • Economic growth (according to OECD, the Slovak economy should grow by 2.3% in 2022 and 3.4% in 2023)

All Slovak companies are mainly regulated by the Commercial Code, which lays down rules for registration, internal management, external transactions and dissolution of various types of companies.

The publicly accessible business register is maintained by district courts and administered 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 introduced a cryptography license. However, cryptography-related economic activities are considered regulated trade and are therefore subject to the rules of the Trade Licensing Authority.

TYPES OF BUSINESS ENTITIES

As a crypto entrepreneur, you can choose from different business structures depending on your business model. The most frequently chosen entities are the Private Limited Liability Company (S.R.O.) and the Joint Stock Company (A.S).

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

As a rule, financial statements and audit reports of a private limited liability company (S.R.O.) or a joint stock company (A.S.) must be submitted to the Public Register of Financial Statements, Which is responsible for providing documents for the collection of documents.

Private Limited Liability Company (S.R.O.)

One of the most common types of legal structures is a Private Limited Liability Company (S.R.O.) which is usually selected to establish a small or medium-sized business since share capital requirements are low and corporate governance regulations are lighter compared to more complex business structures.

Essential features of a Private Limited Liability Company (S.R.O.):

  • A unique and compliant company name is a prerequisite
  • 1-50 shareholders
  • Minimum share capital – 5,000 EUR
  • The minimum value of a shareholder’s contribution – 750 EUR
  • It should have a director residing either in Slovakia or another EU country
  • A local corporate bank account is required
  • Corporate governance includes the General Meeting, Executive and a Supervisory Board

The following documents are required to establish a Private Limited Liability Company (S.R.O.) in Slovakia:

  • A Memorandum of Association
  • Articles of Association
  • A bank certificate stating the capital
  • Identity documents of founders and directors
  • Proof of permanent residence of founders and directors (either utility bills or a document issued by competent authorities)
  • A detailed business plan, including operational structure and principles as well as financial details
  • Certificates issued by competent authorities proving that the founders and directors have no criminal records
  • Certificates proving that the company founders aren’t included in the list of debtors
  • 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 contain the following information:

  • Company name
  • Address of the registered office of the company
  • Details about the founders (names and addresses of residence for individuals, and company names and registered office addresses for legal entities)
  • The scope of its business activities
  • The amount of the registered capital
  • Details about contributions of each member (amount, terms of payment, etc.)
  • Identification details and residential addresses of the company’s first executive directors and the ways in which they will represent the company
  • If applicable, details of the members of the first Supervisory Board (names, residential addresses, birth certificate numbers)
  • Details of the contributions custodian
  • If applicable, the reserve fund, including terms and the limit, up to which the company should be obligated to replenish the reserve fund
  • Benefits granted to persons involved in the formation of the company
  • Estimated costs of the company incurred by the company formation process
  • A stated intent to issue Articles of Association containing the company’s internal governance principles

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

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

Joint Stock Company (A.S.)

This type of legal business structure can be used to open either a private or a public company and is essentially designed for large-scale businesses. The capital requirements and regulatory requirements are significantly higher compared to a Private Limited Liability Company (S.R.O.).

By definition, a Joint Stock Company (A.S.) is a company, the registered capital of which is composed of a certain number of shares of a certain nominal value. A share represents the rights of the shareholder to participate in the company’s management processes, to share the profits and the liquidation balance.

A company is public if it issues all the shares or a part of them to the general public for the subscription of shares or the shares which 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 the abbreviation Akc. spol. or A.S.
  • Minimum share capital – 25,000 EUR
  • The directors can only be natural persons who may need a residence permit if they aren’t EU citizens
  • A managing director must be a citizen of the EU or OECD
  • Shareholders don’t have to be permanent residents of Slovakia
  • The shares are freely transferable if it’s a public company
  • The company is liable with its entire 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
  • A bank certificate stating the capital
  • Identity documents of founders and directors
  • Proof of permanent residence of founders and directors (either utility bills or a document issued by competent authorities)
  • A detailed business plan, including operational structure and principles as well as financial details
  • Certificates issued by competent authorities proving that the founders and directors have no criminal records
  • Certificates proving that the company founders aren’t included in the list of debtors
  • Secondary education diplomas of the founders
  • Certified copy of the trade authorisation
  • An apostilled power of attorney if a company is incorporated by a third party

The Foundation Deed must include the following information:

  • The company name
  • The address of the company’s registered office
  • Scope of business activities
  • The amount of the registered capital
  • The number of shares, their nominal value and form, issue price, also restrictions if applicable
    • If shares of different types are to be issued, their designation and a specification of the attached rights should also be included
  • The number of shares subscribed by each founder
  • A description of in-kind contributions (specifics, value, etc.)
  • Information about the custodian of the contributions
  • An estimate of the costs associated with the formation of the company
  • In case of a public company formation, the place and time of share subscription and the procedure of subscription of shares in excess of the proposed registered capital must also be included
  • The place and the term for the payment of fractions of the subscribed shares and the percentage
  • The ways of convening the constituent General Meeting of subscribers

The shares are considered to have been issued to the general public for a subscription if they are all subscribed by a securities broker pursuant to a shares issue facilitation agreement unless the agreement contains an obligation of the securities broker to sell the shares to pre-agreed parties.

If a public company has less than 50 shareholders and its shares haven’t been accepted for trading by a stock exchange, it can be transformed into a private company, provided that all the shareholders approve the change. The number of shareholders can be determined by referencing the names of shareholders listed in the register of shareholders.

All the registration documents of any company type must be translated into the Slovak language by a translator certified by the Ministry of Justice of the Slovak Republic. If you’re considering requesting such a service, we’ll be happy to arrange it for you.

What You Need to Do

If you have a qualified electronic signature and are fluent in the Slovak language, you can create a company online by filling out one of the relevant forms of the Trade Register. Otherwise, you can go to Slovakia or sign a power of attorney, and the representative will take care of all the procedures for establishing your company on your behalf.

The following steps should be taken to open a cryptographic company in Slovakia:

  • Prepare three versions of your company’s names and send them to the trade register, which will register the one that meets all regulatory requirements and is available
  • Notify the Trade Licensing Authority of your intention to start a crypto business in Slovakia
  • Submit an application for registration of the company together with the necessary documents to the Trade Register
  • Apply for a regulated trading license from the Trade Licensing Bureau
  • Tax registration
  • Registration with the selected insurance company and the Social Insurance Agency

It should be noted that the creation of a Slovak crypto company is inextricably linked to the relevant trade license. All companies planning to offer cryptocurrencies services (involving cryptocurrencies and fiat money) or crypto purse services in or from Slovakia must register with the Trade Licensing Office before starting their business for AML/CFT purposes.

TAXATION OF SLOVAK CRYPTO COMPANIES

Every Slovak crypto company is required to register with the Tax Office, the Tax Office of Slovakia, and is responsible for paying general taxes. The standard tax year coincides with the calendar year.

Slovak cryptocurrency companies are responsible for paying the following taxes:

  • Corporate Income Tax (CIT) – 21%
  • Value Added Tax (VAT) – 20%
  • Withholding Tax (WHT) – 0%-35%
  • Social Insurance Contributions (SIC) – 25,2%
  • Health Insurance Contributions (HIC) – 10%

Resident companies are taxed on their income worldwide and can benefit from investment incentives and more than 70 international double taxation agreements. Non-residents are taxed only on income derived from their economic activities in Slovakia. A company is considered to be a tax resident if it is registered in Slovakia or if it is well managed in Slovakia.

If you are planning to establish a cryptographic company in Slovakia, our reliable and dynamic team of Regulated United Europe (RUE) is here to provide guidance on company creation, licensing and taxation. In addition, we will be more than happy to intervene if you are looking for financial accounting services. We guarantee efficiency, privacy and careful attention to every detail that affects your business success. Contact us to book a personal consultation.

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Registration number: 14153440
Anno: 16.11.2016
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