Trust Bloomberg Tax's Premier International Tax offering for the news and guidance to navigate the complex tax treaty networks and business regulations.
By Jan Stojaspal
Cryptocurrency income must be taxed, the Slovak Ministry of Finance announced, just days ahead of the April 3 filing deadline.
“Revenue (proceeds) derived from the sale of a virtual currency is subject to tax,” the Ministry of Finance said in general guidance released March 23, adding that “any type of exchange, for example, an exchange of a virtual currency for an asset” or its “exchange for a service rendered or its paid transfer, including its exchange for another virtual currency” is considered to be a taxable sale under the general guidance.
The guidance is the first “unequivocal confirmation that the ministry intends to tax cryptocurrencies and to do so on a relatively broad scale that includes exchanging one cryptocurrency for another,” Miroslav Marcincin, senior manager, personal income tax, EY Slovakia, told Bloomberg Tax March 27.
Slovakia is the latest example of a country grappling with the taxation of bitcoin, ethereum and other types of cryptocurrency, a booming industry. Australia, Israel, and Germany are among those focusing on the issue.
The guidance follows confusion in early January when Peter Kazimir, Slovakia’s finance minister, said the country wants to start paying attention to taxation of cryptocurrencies, which some took to mean that income from cryptocurrencies wasn’t being taxed for the time being, Marcincin said.
In addition, the guidance is significant because “it clarifies the accounting regime,” he said. “This was really unclear, and people did not know whether to book” cryptocurrencies “as financial assets or inventory, or whether to put them in the balance sheet or off-balance sheet.”
Anyone struggling to meet the April 3 filing deadline may apply for a three-month extension, Marcincin said.
Income from the sale of a virtual currency is to be listed under “other income” in personal income tax returns, and it can be lowered by corresponding costs but only to the level of the income obtained, the Ministry of Finance said.
For businesses, income from the sale or exchange of a virtual currency is to be treated as income from financial assets, such as equity securities, which means recognizable losses from trading can’t exceed income from trading in a given tax year, nor can the losses be carried forward, according to tax practitioners.
Virtual currencies are to be booked as “short-term financial assets other than money,” the guidance said, and they are to be priced at market value the moment of transaction.
Cryptocurrencies directly obtained from mining are to be kept on the off-balance sheet until they are sold or traded, at which point they will booked at market value, the guidance said.
“In my view, this is a preliminary solution meant to cover the year 2017,” Christiana Serugova, partner and tax leader at PwC Slovakia, told Bloomberg Tax March 27. “For sure, additional legislative measures are to be expected.”
For instance, the guidance doesn’t address value-added tax, she said. And while it is understood that transactions involving goods or services are subject to VAT, even if they are conducted using cryptocurrencies, it needs to be determined whether the sale of a cryptocurrency itself, which some may regard as a commodity or a product, should also be subject to VAT, Serugova said.
While the guidance isn’t binding, it is hard to image that “someone would proceed in ways other than described,” Peter Pasek, partner and managing director at Accace Slovakia, told Bloomberg Tax March 27.
To contact the reporter on this story: Jan Stojaspal in Prague at email@example.com
To contact the editor on this story: Penny Sukhraj at firstname.lastname@example.org
Copyright © 2018 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)