Thinking about diving into the world of crypto in Slovakia? While the digital asset market offers exciting opportunities, it’s crucial to understand crypto regulation in Slovakia. Back in 2018, the Slovakian Ministry of Finance issued guidelines clarifying that cryptocurrency transactions are taxable. And in June 2023, Slovakian lawmakers passed a bill that cut down the crypto tax rate. This blog post dives into the details of these regulations, exploring how crypto holdings are valued, what types of transactions are taxed, and how these regulations might impact crypto in Slovakia.
Cryptocurrency taxation in Slovakia
Slovakia treats crypto holdings as “short-term financial assets other than money” and mandates that any type of crypto exchange (for goods, services, or other virtual currencies) be considered a taxable transfer. The value of these assets for tax purposes would be based on their market value at the time of the transaction. Also, cryptocurrencies obtained directly through mining are not considered income until they are sold or traded.
According to the rules, the amount of tax you pay on your crypto earnings depends on your yearly income. There are two tax brackets:
- If your total income is below €35,022.31, you’ll pay a tax rate of 19% on your crypto profits.
- If your total income is above €35,022.31, you’ll pay a tax rate of 25% on your crypto profits.
How does income tax apply to crypto holdings?
The Slovak Ministry of Finance issued guidelines to clarify how income tax applies to buying and selling virtual currency (cryptocurrency). Just like any other income, profits earned from buying and selling cryptocurrency are considered taxable in Slovakia. These crypto gains are reported as “other income” on personal income tax returns. One can reduce their taxable income by claiming expenses associated with their crypto transactions.
- The law defines virtual currency as a digital asset not issued by a central bank, but accepted as a payment method by some.
- Buying, selling, or exchanging crypto for other assets or services is considered a “sale” for tax purposes.
- Companies must convert the value of their cryptocurrency holdings to Euros on the transaction date for accounting purposes.
- Tax deductions are allowed for expenses related to buying and holding crypto (up to the amount of income earned from selling it).
- The “entry price” of cryptocurrency is considered the purchase price or the revalued price when exchanging one crypto for another.
- The “real value” of cryptocurrency for accounting purposes is based on its market price on the valuation date.
Crypto regulation in Slovakia: What about VAT?
In the European Union, buying and selling cryptocurrency itself is generally considered a financial transaction and therefore exempt from VAT or Value added tax. This is based on a ruling by the European Court of Justice. However, if you use cryptocurrency to purchase goods or services, VAT might still apply. In these cases, the transaction is treated just like using Euros, and VAT would be charged accordingly.
How to pay crypto taxes in Slovakia?
Here’s a clear and concise overview of how to pay taxes on your cryptocurrency income in Slovakia:
Track your transactions
- Keep meticulous records of all your crypto transactions throughout the year.
- This includes: date of transaction, quantity of cryptocurrency involved, value in Euros at the time of transaction (important for calculating tax base).
File a tax return
- Declare your cryptocurrency income as “other income” on the standard Slovakian tax return.
- Use the information you meticulously tracked in step 1 to accurately report your crypto earnings.
Calculate your tax
- As stated before, the tax rate depends on your total annual income in Slovakia: 19% if your total income is below €35,022.31 and 25% if your total income exceeds €35,022.31.
Pay your taxes
- The tax on your cryptocurrency income needs to be paid by the official due date for filing your tax return.
- This deadline can change, so it’s crucial to check the latest information on the Slovak tax service website.
How is it different from the previous crypto tax regime?
Here’s how the new Slovakia crypto tax regime differs from the previous regime:
- Lower tax rate: If you hold your crypto for at least one year before selling, you’ll only pay a 7% tax on your profits. This is a massive drop from the previous rate of 33% (or even 39% for some!). Bonus: This applies to crypto you already own too!
- Crypto-to-crypto swaps are tax-free: Buying and selling different cryptocurrencies (think swapping Bitcoin for Ethereum) is now exempt from taxes altogether.
However, this tax break doesn’t apply to everything in the crypto world. Non-fungible tokens (NFTs) are still taxed at the standard rate.
Overall, this new tax framework is a big step towards making Slovakia a more attractive place for cryptocurrency investment. It removes a major barrier for people who were hesitant to get involved due to high taxes.
Benefits of the new Slovakia crypto tax regime
Let’s explore the six key changes that make Slovakia a frontrunner in crypto-friendly policies:
- Tax-free everyday crypto use: Small purchases made with cryptocurrency (up to €2400 per year) are now exempt from income tax. This encourages using crypto in daily life and promotes financial inclusion for all.
- Health levy relief: Health insurance contributions are abolished for all crypto sales. This reduces financial burdens and positions crypto as a viable future payment method.
- Clarification on “Sale”: The new regulations clearly define a “sale” of crypto assets. It only applies when exchanging crypto for traditional currency or stablecoins, not when swapping between different cryptocurrencies. This simplifies tax treatment and reduces confusion.
- No tax on Staking: Income from staking is now exempt from income tax until you actually sell the cryptocurrency.
- Retroactive application: The new tax rules apply to crypto acquired before 2024 too, as long as they meet the conditions (like the time test). This ensures fair and consistent tax treatment for all crypto investors.
Slovakia gearing up to be the crypto hub
Slovakia’s move towards crypto-friendly taxation is a game-changer. The reduced tax burden, exemptions create a welcoming environment for crypto adoption, innovation, and investment. As we look towards the future, Slovakia has the potential to become a leading web3 hub, attracting the best and brightest from across Europe and beyond.
Millionero: a user-friendly crypto exchange
Looking to buy Bitcoin (BTC) or other cryptocurrencies? Millionero, a rapidly growing exchange with a user-friendly platform, might be a perfect fit for you! Here’s why:
- Simple interface: Millionero avoids overwhelming users with complex interfaces. Their website focuses on key information like price, highs/lows, and volume, making it easy to navigate.
- Copy trading: Learn from the pros! Millionero’s copy trading feature lets you mimic the trades of experienced investors, saving you time on analysis and potentially reducing risk.
- Multiple cryptos: Invest in a diverse portfolio with over 35 cryptocurrencies offered under one roof.
- Easy wallet: Millionero’s crypto wallet is designed for ease of use. Deposit and withdraw funds seamlessly with various options like Coinify, Simplex, and more.
Whether you’re a seasoned investor or just starting out, Millionero’s user-friendly platform, diverse offerings, and convenient features make it a strong contender for your crypto needs.
Disclaimer: Cryptocurrencies are an inherently volatile asset class, and investments can carry substantial risks. This information is for educational purposes only and should not be construed as financial advice. Always do your own research and conduct due diligence before investing in crypto projects.