Cryptocurrency Taxation in Slovakia

Tax rates applied to personal taxes on cryptocurrency in Slovakia range between 19% – 25%. They apply to specific income thresholds in a country, such as 35,022.31 euros with a lower tax rate and a higher tax rate for income levels above that amount.

As a licensed cryptocurrency business in Slovakia, all crypto profits are considered short-term financial assets rather than cash. At the time of the transaction, prices for crypto assets are noted.
There are various tax implications for businesses working with cryptocurrency, and we can advise you as the best route in relation to your individual ownership, partnership, or corporation.

General provision

The Ministry of Finance of the Slovak Republic (hereinafter referred to as “MF SR”) has been issued in accordance with 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. (hereinafter “the Income Tax Act”) as in the case of virtual transactions in currency accounting.

The legal order uses the term virtual currency. The guide defines virtual currency as “a digital medium of value which is not issued or guaranteed by a central bank or public authority, nor is it necessarily linked to a legal tender; it has no legal status as a currency or money, but accepted by certain natural or legal persons as a payment instrument that can be transferred, stored or sold electronically.”

The Income Tax Act contains in 2. a definition of the main terms (a) defines what is meant by the 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.”

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

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

The question of tax expenses related to the virtual currency is regulated in the (19(2) years. (v) Income Tax Act. As a tax expense, expenses can be used to determine the total price of the virtual currency during the period in which it is sold, up to the amount of income from its sales.

The concept of the entry price is specified in the Income Tax Act ~ 25b.

The entrance price of the virtual currency is, on the one hand, the purchase price (when buying) and 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 para. 25 of the Accounting Act governs what is considered to be real value:

• Virtual currency purchased by payment.
• Virtual currency purchased as a result of mining on the exchange date for another asset or service.
• Service and property purchased in exchange for virtual currency, excluding cash and valuables valued at nominal value.
• Virtual currency purchased in exchange for another virtual currency.

According to section 27(13) of the Accounting Act, the real value of the virtual currency is the market price on the valuation day in accordance with (24(1) years. a) is determined in the order, established by the accounting body of the selected public market using virtual currency. During the reporting period, the subject uses the same method of determining the real value of the virtual menu.

VAT Act

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.

Private person

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.

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

In 2024, the taxation of cryptocurrency income in Slovakia continues to generate interest among investors and users of digital currencies. Slovak tax legislation provides certain rules for declaring and paying taxes on income derived from cryptocurrency transactions. This article offers a detailed overview of the current cryptocurrency taxation requirements in Slovakia to help taxpayers navigate this complex process.

Basics of Cryptocurrency Taxation in Slovakia

In Slovakia, income from cryptocurrency transactions, such as trading, mining or exchange for traditional currencies, is considered taxable income and is subject to taxation. For tax purposes, cryptocurrencies are treated as “other income” under national tax law.

How to Pay Tax on Cryptocurrency Income

1. Declaration of income: Taxpayers must declare their cryptocurrency income using a standard tax return. It is important to accurately track all cryptocurrency transactions, including transaction dates, quantity and value in euros at the time of the transaction, in order to correctly calculate the tax base.
2. Tax calculation: Cryptocurrency income is taxed at the standard personal income tax rate, which is 19% or 25% in 2024, depending on the taxpayer’s total annual income.
3. Payment of tax: Tax on cryptocurrency income must be paid by the due date for filing a tax return. Deadlines may vary, so taxpayers should check the official website of the Slovak Tax Service for up-to-date information.

Specifics of Taxation

• Mining: Income from mining cryptocurrencies is also considered taxable income and must be declared. However, expenses related to mining, such as electricity and depreciation of equipment, can be deducted from the tax base.
• Cryptocurrency exchange: When exchanging one cryptocurrency for another, taxpayers must calculate the gain or loss from each transaction for tax purposes.

Conclusion

Taxation of cryptocurrency income in Slovakia requires careful recording and declaration of all related transactions. Understanding and complying with tax law requirements are key aspects of managing cryptocurrency income in Slovakia. It is important not only to accurately declare all cryptocurrency income, but also to correctly calculate tax liabilities, taking into account possible deductions and specific taxation features for different types of cryptocurrency transactions.

To maximise clarity and minimise tax risks, it is advisable to keep detailed records of all cryptocurrency transactions. This includes keeping records of 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.

In addition, seeking professional tax advice can help avoid potential mistakes and ensure compliance with all tax requirements. A tax advisor familiar with the specifics of cryptocurrency taxation in Slovakia will be able to provide valuable advice and help optimise the tax burden.

In conclusion, although the taxation of cryptocurrencies in Slovakia may seem complicated, following all necessary procedures and requirements will allow taxpayers to avoid legal problems and potential penalties. Actively participating in the tax management process and utilising available resources and advice will make the process more transparent and manageable.

Table with the main tax rates in Slovakia for 2024. This table includes information on the rates of personal income tax, corporate income tax, value added tax (VAT), and briefly mentions the taxation of cryptocurrency 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.