The EU is making rapid progress towards regulating crypto markets across member countries, and the EU tax laws for crypto will now be applicable along with existing tax laws across European countries for crypto. In this post, we discuss the Slovak crypto laws in particular. So, how does crypto taxes in Slovakia work?
EU Tax Laws for Crypto
Progress is being made by the European Commission in establishing an EU-wide agreement known as the Directive on Administrative Cooperation (DAC8). The directive aims to:
- combat tax evasion, and
- improve the monitoring of cryptocurrency transactions within the European Union
The proposed amendment will build upon existing legislation and enhance the reporting and exchange of information between tax authorities across EU member states.
Now, how is crypto taxed in Slovakia in particular?
Crypto Taxes in Slovakia for Individuals
When it comes to taxes on profits made from cryptocurrencies for individuals, those profits are filed as “other income” in personal income tax returns. The amount people owe taxes on can be reduced by deducting any related costs, but only up to the level of income they have actually earned.
Now, the tax rates that apply to this “other income” are either 19% or 25%. If an individual’s total income is below €35,022.31, then the 19% rate applies. But if the total income goes above that threshold, then we’re looking at the higher rate of 25%.
Crypto Taxes in Slovakia for Businesses
In Slovakia, cryptographic companies are typically subject to the same general taxes as other businesses. Cryptocurrencies are considered short-term financial assets, separate from regular fiat money, and their value is determined based on the market value at the time of the transaction.
Every Slovak company involved in crypto-related economic activities must register with the tax authorities responsible for collecting and managing taxes in Slovakia. Just like any other company, they have the option to choose a standard tax year that aligns with the calendar year or select a different 12-month period.
Crypto companies in Slovakia may need to pay these taxes:
- The Corporate Income Tax (CIT) rate is currently 21%.
- The Value Added Tax (VAT) is set at a rate of 20%.
- The withholding tax (WHT) ranges from 0% to 35%.
- The Social Insurance Contributions (SIC) amount to 25.2%.
- The Health Insurance Contributions (HIC) amount to 10%.
Speaking of regulation for businesses operating within the crypto space in Slovakia, let’s take a quick look at the licensing requirements for such enterprises:
Slovakia crypto license
To acquire a crypto license in Slovakia, it is necessary to have a domestic enterprise that offers cryptocurrency services. The prescribed amount of share capital for a company is 5,000 EUR (you do not have to deposit the amount instantly during registration). In addition, it is recommended to designate a director possessing either EU or Slovak citizenship and to formulate and present a comprehensive business plan.
Cryptocurrency enterprises are required to undergo verification and identification procedures. The European Union has communicated certain requirements which have been incorporated into the legal framework of Slovakia. Applying Anti-Money Laundering (AML) laws and Know Your Customer (KYC) regulations pertains to regulation and licensing. Furthermore, corporate information is accessible to all regulators.
Types of crypto license in Slovakia
There are two types of crypto license in Slovakia available: the Intermediation of a Cryptocurrency Exchange license and the Maintenance and Storage of Funds on a Cryptocurrencies license.
1. The Intermediation of Cryptocurrency Exchange license enables companies to exchange digital currency into fiat currency and vice versa, allowing for exchanging one cryptocurrency for another for a fee. This crypto license in Slovakia is ideal for businesses that want to operate a Slovak cryptocurrency exchange platform or provide exchange services to their customers.
2. Conversely, the Maintenance and Storage of Funds on Cryptocurrencies license is intended for companies that introduce cryptocurrency wallets for storage purposes. This license on crypto exchange in Slovakia allows for creating encrypted client keys and secure storage. This is a necessary license for businesses that want to provide cryptocurrency wallet services to their customers.
The National Bank of Slovakia regulates both licenses and requires companies to comply with strict regulations to provide their clients with secure and reliable services. Companies that operate without the appropriate Slovak crypto license may be subject to various fines and other penalties. Therefore, it is integral for businesses operating in the Slovak cryptocurrency space to obtain the necessary license on crypto exchange in Slovakia to operate legally and avoid any potential legal complications.
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