Slovenia Clarifies Position on Cryptocurrency Tax

Slovenian regulators have released a statement clarifying certain ambiguities related to bitcoin and other digital currencies.

The Tax Administration of the Republic of Slovenia said it received queries from taxpayers who were interested in the possible tax implications of bitcoin transactions.

In response, the Tax Administration requested a formal response from the Ministry of Finance, which stated that bitcoin remains a virtual currency – thus, it is not a 'monetary asset' under Slovenian law.

Furthermore, bitcoin is not considered a financial instrument, either. However, the ministry stressed that taxation of bitcoin income still warrants a review on an individual basis. In other words, it is necessary to determine who actually generates an income, and classify what sort of income is being generated.

Income made by individuals is subject to standard income tax provisions, irrespective of the form in which it is paid or received. Such income is taxable under Slovenian law, and bitcoin income will apparently be taxed by measuring the bitcoin/euro exchange at the time of the transaction.

However, personal income tax is not paid on capital gains. Hence, individuals who generate income by selling bitcoins will not pay income tax.

This does not apply to bitcoin miners, as their income is taxed like any other income – using the exchange rate at the time the income is received. Profits derived from trading and mining bitcoin are taxed as income under the provisions of Slovenian personal income legislation.

According to Slovenia’s Corporate Income Tax Act, any profits generated over the course of a year are included in the annual income statement, but the Ministry stressed that the current legislative framework contains no provisions applicable to businesses involved in bitcoin trading.

There is a fair amount of ambiguity here, as the ministry cites two corporate income laws, so determining the tax base could be problematic. The statement concludes that the treatment of bitcoins in the accounting process varies on a case-to-case basis.

Although this may sound unusual, it is a quite common practice in Slovenia and its neighbouring countries. With relatively small economies, it is possible to determine whether a specific law or bylaw applies to each individual business that applies for clarification.

At a glance, the latest statement does not in any way affect Slovenia’s overall position regarding digital currencies. Bitcoin exchange Bitstamp is based in Slovenia, but none of the issues raised in the statement should have an impact on its everyday operations.

Ljubljana, Slovenia image via Shutterstock