Serbia: Implementation of law on digital assets

Serbia is an emerging tech hub in Europe. Consequently, Serbia introduced Law on digital assets (Law) in 2021 to regulate and promote Web3, being one of few European countries introducing such legislation.

Local Web3 community hopes this is also a breakthrough in developing Serbian undeveloped financial markets.

The Law regulated issuing and secondary trade of digital assets (crypto currencies and digital tokens), as well as:

• Presenting new opportunities for companies in raising capital via digital tokens (via ICO)
• Initiating changes in tax regulation

With digital tokens company can solve:

• Financing problems (investment/asset tokens)
• Marketing problems: innovative way of offering goods and services to the market (utility tokens)

It is important to check if digital token has characteristics of financial instruments in accordance with the Law on capital market. If not, companies can perform ICO in accordance with the Law and reduce costs, procedures and time. Digital token has no characteristics of a financial instrument provided:

• Digital assets have no characteristics of shares and are not fungible with them.
• The total value of digital assets issued during a 12 month period does not exceed 3.000.000 EUR

Some of digital tokens’ characteristics may be:

• Interest rate
• Payment in other digital assets
• Payment in goods/services, price discounts etc.

Therefore, digital tokens can be similar to bonds, but also similar to different marketing programs (e.g.  loyalty cards). There are some similarities to crowdfunding, but it also provides secondary trading market.

ICO prospectus (White paper) is approved by Securities Exchange Commission.

In Serbia it is possible to get part of salary through digital assets. Tax treatment is the same as regular salary (10% tax rate).

Personal income tax on mining is 20% of market value of mined crypto.

Individuals trading with digital assets are subject to capital gains tax (15% of profit). All transactions (from digital asset to cash or from digital asset to other asset etc.), regardless of the way of acquiring assets (trade, employment, mining) are subject to capital gains tax. There are some reliefs:

• Holding assets for more than 10 years.
• Investing those funds in a domestic company.

Personal income from holding digital assets are taxed either at 15% or 20%.

Gifted or inherited assets of value higher than 850 EUR are taxable at 2.5% max.

Regarding companies, both income from holding digital assets, mining and capital gains are included in corporate tax base (15% rate). There are possible reliefs for capital gains, e.g. if funds are invested in a domestic company.

After 2 years of Law’s introduction, local web3 community raised a public discussion calling for amendments of the Law, proposing changes such as:

• Regulating DeFi, DAO and NFTs
• Different issuing and capital gains tax requirements for utility and investment/asset tokens, considering their use. The idea is to make utility tokens as practical as more traditional means of trading (cash for goods/services)
• Encourage retail payments in digital assets – it is now possible only via registered exchange
• Less strict definition of tokens as securities, to encourage more ICOs regulated by Law, not by securities regulation
• Tokenizing shares in limited liability companies, so they can get equity financing without IPO.

If you wish to discuss these topics, please contact:
WTS Porezi i Finansije d.o.o.