Accounting and taxation of virtual currencies has a legal basis

The published Act on Insurance Tax is dealing with virtual currencies in two separate articles amending the Act on Accounting and the Income Tax Act. New provisions of the Act on Accounting will apply to valuation of assets and liabilities for preparation of financial statements for the accounting period which ends on 1 October 2018 (for the first time). New provisions of the Income Tax Act will apply to tax returns filed after 30 September 2018.

Compared to the draft version that was available in April, the act did not bring any changes. As we mentioned already in April, sale of the virtual currency includes, besides a regular sale, exchange for assets, exchange for another virtual currency or exchange for a service. Income from sale of virtual currencies shall be included in the tax base in the period when such a “sale” takes place, i.e. including an exchange of a currency for another virtual currency (despite the fact that market value of the later mentioned currency may decrease in future).

In case of exchange of a virtual currency for an asset, for another currency or for a service, the exchanged virtual currency is valued by using a fair value at the date of exchange. The fair value is the market value from a selected public market with virtual currencies. In case of acquisition by purchase, the input price is the acquisition price. If the virtual currency was acquired by exchanging for another virtual currency, the input price is its fair value. Total amount of input values of virtual currencies could be reflected only up to the total amount of revenues derived from their sale.

Income from sale of virtual currencies of an individual is regarded as other personal income under Section 8 of the Income Tax Act, which is also subject to health insurance.