Since its inception in 2009, cryptocurrencies have come a long way in terms of mainstream acceptance. Many nations across the world are currently bringing forward pro-crypto regulations, with Hong Kong and the UK notable among them. However, when it comes to obtaining a crypto license in Slovakia, how are the regulations faring?
In Slovakia, cryptocurrency gains from crypto transactions were so far taxed at 19% or 25%, Slovakia announced on June 28, 2023 its plans to cut down personal income tax on profits from cryptocurrencies that have been held for at least a year to 7%.
Slovakia favors a liberal approach to crypto regulation and crypto taxation, overall.
Legislation
As per the rules, the law applied by the National Bank of Slovakia (NBS) does not define or regulate cryptographic assets and related transactions unless covered by any other framework developed for the financial market.
The NBS and other national authorities refer to EU and national legislation to decide whether each personnel’s commercial case may fall within the definition of electronic money, financial instruments, or other regulated units. However, the existing types of authorization granted by the National Bank of Slovakia exclude activities in the field of cryptography.
A report published by the European Securities and Markets Authority (ESMA) identified the features and functions of virtual assets and their possible classification.
Source(sloveniatimes/ Regulations of Crypto in Slovakia)
How to get a crypto exchange license in Slovakia?
As per the regulations, one should have a local business company that provides e-money services to procure a crypto exchange license in Slovakia. The minimum amount for the company’s authorized capital is 5,000 euros. Also, one has to have a director with Slovak or EU nationality and develop and offer a business plan.
Types Of Crypto License in Slovakia
There are two options for digital currency permission in the country. One can provide e-wallet services and a license to exchange crypto. It must have a director who is a resident of the EU or Slovakia. This entity is also required to have a realistic business plan.
At a minimum, to enroll a local business company, it is necessary to have the following legal papers.
1. Passport of beneficiaries and directors of the company.
2. Proof of registration from the local government or utility bill.
3. Options for the desired name of the company.
4. Power of attorney.
5. Verification of no criminal accounts
An EU/EEA citizen or a foreign entrepreneur based in the EU/EEA who does not meet the required criteria needed to regulate trade in crypto transactions or its derivatives activities may apply to the administration of internal affairs of the Slovak Republic to shed some light and compare their knowledge and experience which is confirmed on the various parameters of diplomas, certificates or other qualifications certificates. The non-Slovak qualification recognition process can take up to three months.
Crypto Taxation in Slovakia
All Slovak companies that engage in crypto-related economic activities and crypto transactions must register with the tax authorities that collect taxes in Slovakia. There are two options for companies to choose from in terms of crypto taxation: the first is a standard tax year that coincides with a calendar year, and the latter is to choose another 12-month period.
Let’s look at the taxes that Slovak crypto companies are obliged to pay.
1. Corporate Income Tax (CIT)
2. Value Added Tax (VAT)
3. Withholding Tax (GSP)
4. Social Security Contributions (SCP)
5. Health Insurance Contributions (CHF)
According to the authorities, income received from crypto trasactions is taxable, and any exchange associated with cryptocurrencies is taxable. For tax purposes, cryptocurrencies are often referred to as short-term financial assets rather than fiat money and are valued at market level at the time of transaction.
In the context of taxation, virtual currency or crypto is defined as decentralized assets of value not issued by a central bank or a public-authorized financial institution. It is not generally associated with legal tender, but natural or legal persons accept it as a payment method that can be transferred, retained, or sold.
Following are the activities upon which income is taxed:
- Exchange of cryptocurrencies for other types of virtual currencies
- Exchange of crypto for provision of services
- Exchange of crypto for assets
- Provision of paper storage services
As mentioned before, for crypto taxation, Slovakian lawmakers have decided to tax any income from crypto sold after one year of acquisition at a rate of 7%. The lawmakers voted 112-2 in favor of said legislation.
Conclusion
The Nation Bank of Slovakia has yet to lay down concrete guidelines for crypto assets, so they rely on EU laws for the most part on how they should be treated. Right now, crypto in Slovakia is regulated with a positive approach for the most part, and the situation is only expected to get better in the coming years.
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Frequently Asked Questions (FAQs)
Yes, Slovakia grants a license for crypto activities. Slovakia offers two types of crypto licenses depending on the activities that a crypto company intends to conduct.
Getting a license for activities related to crypto in Slovakia may take weeks or months.
Although the total duration of the processes can be split into three parts:
– The process of opening a bank account takes at least two weeks
– The company formation process may take around 3-4 weeks
– The procedure of obtaining a crypto license may take around 4-6 weeks
Non-residents of Slovakia can be a part of the board. The only prerequisite for being a part is that they should be residents of another EU member state.