Currently, a private person resident in Slovenia, is not taxed on the realized capital gain from the sale or use of virtual currencies, unless the activity is considered to be a professional business.
However, the Slovene tax administration sees the opportunity to expand the fiscal income with the introduction of new taxation rules for virtual currencies for private investors. The draft of a new tax regime for virtual currencies was introduced in October 2021, but its transposition and effectiveness as of 1 January 2022 is currently uncertain (slo. Zakon o davku od virtualnih valut).
The draft bill is not limited to crypto currency but refers to virtual currencies, a broader concept defined in the money laundering legislation. Virtual currency means a digital representation of value that is not issued or guaranteed by a central bank or a public authority, is not necessarily attached to a legally established currency and does not possess a legal status of currency or money, but is accepted by natural or legal persons as a means of exchange and which can be transferred, stored and traded electronically. The meaning of virtual currency is technologically neutral, as it does not define any specific technology features of the digital asset.
According to the legislative proposal, the flat tax rate (10%) will apply to (1) any exchange of virtual currency for Fiat currency or (2) purchase of goods or services with virtual currency. Transactions up to 15.000 EUR cumulatively per calendar year are tax-exempt. In order to secure simplicity of taxation, the tax base is the amount of virtual currency sold. Additionally, a tax-exempt transaction is also the exchange of the virtual currency for the purchase of real estate or corporate shares. The timing of taxation is the day, when the exchange for the fiat currency or purchase of the goods / services takes place. The annual report of all sales or exchanges of virtual currency for a specific calendar year must be submitted to the tax authorities electronically by the end of February of the following year. Tax must be paid in 5 days after the submission of the annual report.
Alternatively, the taxpayer may choose taxation of the profit from the exchange or usage of the virtual currency. Profit is defined as the residual between the sale price and purchase price. The tax rate for the alternative method would be 20%.
The new legislation for the taxation of virtual currencies, including crypto currencies, will probably not be effective from the beginning of 2022. The tax-free sale and exchange of crypto currencies currently entices EU citizens to change their residence to Slovenia to sell their crypto asset tax-free. We expect that - once the date of effectiveness of the new legislation is determined - the sale of crypto (virtual) currency by Slovene residents will rise, as the new legislation will tax all sales and exchanges, regardless of a holding period.
If you wish to discuss this topic, please contact: WTS Tax d.o.o., Slovenia
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