Slovakia - Crypto penetration

Slovakia has a relatively detailed system of crypto regulation that is similar to the neighboring Czech Republic in many ways. At the same time, the small size of the domestic market hinders the development of crypto business in this country.

Slovakia has a minor danger security level according to our rating. The jurisdiction has 68.7 points (from 100) for safety level in Numbeo crime rating (1). Homicide level (2) is 1 per 100,000 inhabitants a year. Story of firearm-related death (3) 1.89 per 100,000 inhabitants a year.

According to tax law amendment (4) (2018), providing service and property acquired in exchange for virtual currency is possible.

We need to learn about the legal acts regulating crypto salaries in Slovakia. Contact us if you have such information.

The leading crypto regulators are the National Bank of Slovakia (NBS), and the Ministry of Finance.

The first regulation of crypto assets in the Slovak Republic began with an amendment (5) to the Income Tax Law(6). The concept of the so-called sale of virtual currency and its inclusion in the taxpayer’s obligation to tax income received from the exchange of virtual currency for property was introduced.

Later, the Ministry of Finance of the Slovak Republic (7) issued a methodological guide (8) on the taxation of virtual currencies. The definition of the concept of virtual currency was introduced. According to this methodological guide, virtual currency is defined as a digital value carrier that is not issued or guaranteed by a central bank or public authority, nor is it necessarily tied to legal tender, does not have the legal status of currency or money, but is accepted by some natural or legal persons as means of payment and which can be transferred, stored or traded electronically.

In the meantime, the exact definition is set out in the Law on Protection against Money Laundering and Protection against the Financing of Terrorism (hereinafter: – “AML Law(9)”).

It should be added that crypto assets are not considered financial instruments or belong to the securities category, as they do not qualify as securities by the Law on Securities and Investment Services (10).

NBS distinguishes between types of digital assets (11):

-Virtual Assets – no rights are attached to them; they 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; -Utility tokens – can be used for a future purchase of services or products provided by the entity that ‘issues’ the tokens; -Investment tokens – can give an investor the right to participate in the management or assets (future profits) of the entity that ‘issues’ the tokens.

Based on the AML Law, all VASP companies planning to offer cryptocurrency exchange services (including exchanges with fiat money) or cryptocurrency wallet provider services in or from Slovakia must be registered with the Commercial Register of the Slovak Republic(12) and obtain a trade license to provide these services in Slovakia. Registration is carried out by the Office of Trade Licensing (13).

Depending on the type of cryptocurrency activity, the Trade Licensing Authority grants the following license types:

A license for crypto exchange services for companies that facilitate the trading of cryptocurrencies for other cryptocurrencies, fiat money, and other assets, including equipment such as crypto ATMs;

License for companies introducing wallets for cryptocurrency storage, creating encrypted client keys, and storing and transferring crypto assets.

There is also a possibility of obtaining an Electronic Money Institute (EMI) license, for which the different licensing procedures apply. This license is issued to an electronic money institution (hereinafter: – “IEP”) to obtain the right to issue electronic money. IEP – is a legal entity based in the Slovak Republic, authorized to issue electronic money, manage electronic cash, and carry out payment transactions related to the issuance of electronic money. In addition to issuing and managing electronic money, he can carry out other business activities but cannot accept deposits. It is subject to terms and conditions under Payment Services Law (14). As per the law, IEPs are considered to be legal entities with an official address in the territory of the republic and eligible to carry out operations related to such areas as:

issuing electronic funds;

providing payment instruments and closely related services involving e-money;

maintenance and support of payment and exchange services.

Tax name	Index
PIT tax Min	19
PIT tax Max	25
Corporate tax (CIT)	21
Min Individual CGT (for crypto)	15
Max Individual CGT (for crypto)	25
Wealth tax Min	0
Wealth tax Max	0
Mining tax	7
TDS tax	0

PIT

Headline PIT rate is(14¹) 25%.

CIT

The standard CIT rate is(15) 21%. The reduced CIT rate of 15% for 2022 applies to corporate taxpayers, entrepreneurs, and self-employed individuals who achieve taxable income (revenues) up to EUR 49,790 for the relevant tax period.

CGT

21%. Capital gains are subject to(16) the standard CIT rate.