Virtual currencies taxation rules are getting basic contours

In the Methodological Guideline, the Ministry is expressing its position on taxation and accounting of virtual currencies at the time when the tax payers are missing any specific provisions dealing with virtual currencies in the legislation. At the same time, the government is working on an amendment to the Act on Accounting and to the Income Tax Act, being included under the draft of the Act on the Insurance Tax. Both of these indirect amendments are dealing with the accounting, valuation and taxation of virtual currencies, more or less in accordance with the already issued Methodological Guideline.

In accordance with the above-mentioned Methodological Guideline and drafted amendments, any exchange of virtual currency, including an exchange for another virtual currency and exchange for a service or an asset is understood as a sale of the virtual currency. Income from such sales shall be included in the tax base (i.e. including an exchange of one virtual currency for another virtual currency).

Income included in the tax base is determined by using a fair value at the date of exchange, while the fair value is the market value from the selected public market at the day of sale. Total amount of input values of virtual currencies could be reflected only up to the total amount of revenues derived from sale of virtual currencies, i.e. possible losses will not be included in the tax base.  The amendments are also dealing with determination of input prices of virtual currencies and of assets and services acquired for a virtual currency.

As regards taxation of individuals, income from sale of virtual currencies is included under Section 8 of the Income Tax Act (Other personal income) and thus, will be subject to health insurance.

However, the drafted amendments still need to pass the approval process in the Slovak Parliament. We will keep you informed about future developments.

In case of trading with virtual currency, it is recommended to consider any potential tax implications in advance. Should you be interested in more details, please contact us.