Cryptocurrencies are virtual currencies in Slovenia – nothing new there – and the Act on Payment Services and Systems deems that crypto exchanges and associated agencies dealing in cryptocurrency trading are considered as financial institutions to bring them within the remit of its Anti-Money Laundering Act, which, like many countries, is concerned to tie-up crypto within established anti fraud and criminal laws. Quite early on in the rise of crypto – and unlike even more sophisticated economies, the Financial Administration of Slovenia provided guidance on a specific taxation regime for cryptocurrencies. Many countries are only now putting such guidance in place over tax. The Administration viewed the taxation of cryptocurrency as depending on various factors such as whether the trader was casual or regular/professional, the types of transaction,s and timings of purchasing and redemption of the currency in question.
The country is coming on strong as a mini crypto powerhouse and its latest low tax proposals are partly to steer the country into a position as an attractive crypto Hub. Although a small country it has gained a reputation for being one of the fastest-growing financial and crypto economies in Europe.
Tax is the subject that often hits the headlines around the world, especially when related to crypto ‘havens’. Low-tax or no-tax crypto economies such as Hungary, Portugal, and Malta regularly come up as ‘crypto investor paradises’. Hungary announced a flat-rate tax as a means to gain more take for the Treasury, and the current move by Slovenia would seem to be along similar lines.
The government’s flat-rate tax proposal on crypto redemptions for individuals would be payable when virtual currencies are sold or exchanged and this flat rate would be set at a mouth-wateringly low rate of just 10%. This is payable on the value of the crypto redemption (there is also a tax threshold of some 15k euros against these gains) Hungary’s flat-rate tax is 15% for comparison.
Capital gains from trading cryptocurrency market are not subject to taxation. All resident businesses pay taxes in Slovenia, even if registered abroad, and comply with the taxation requirements of that country. Another brilliant wheeze – why doesn’t the rest of the world do that? Companies are deemed to have tax residence in Slovenia if they have management or a statutory seat within the country’s borders.
Individuals’ gains from cryptocurrency whether as employment income or profits from an ongoing business are subject to personal income tax. This leads us to cryptocurrency mining. Gains from mining come within the miner’s personal income tax.
By some assessments, Slovenia has one of the highest market capitalizations per capita of blockchain projects anywhere, with an average of 14.5 blockchain companies per million inhabitants.
Initial Coin Offerings
As with blockchain technology generally, Initial Coin Offerings (ICOs) appear to play an increasing role in the Slovenia economy. Up until recently, laws around crypto can appear complex or at least unclear and this has been a factor in restricting Slovenia’s crypto progress. When it comes to Initial Coin Offerings, those tokens used to initiate the start-up funds need to be processed for tax purposes in accordance with standard accounting rules and the Law on Corporation Tax, although they are taxed independently of physical currencies.
Slovenia is known as a bitcoin-friendly nation that is establishing itself as a leader in crypto adoption with a wide range of cafés, restaurants, hotels, and services available across the country accepting cryptocurrencies. The capital, Ljubljana, has several Bitcoin ATMs (see our feature on ATMs here) and a growing number of merchants and services that are willing to accept Bitcoin or other cryptocurrencies as payment.