Changes in Cryptocurrency Taxation in Slovakia: Embracing a Crypto-Friendly Future

By Sparring | Aug 10, 2023

The changes, set to take effect from January 1, 2024, are aimed at not only encouraging higher adoption rates and everyday use of cryptocurrencies but also improving tax collection.

Slovakia is making waves in the world of cryptocurrencies with its groundbreaking tax reforms. The country is dramatically changing the income tax on crypto and abolishing health levies, which previously led to up to 39% tax on profits from virtual currency sales. Now, under the new regulation, the tax amount is reduced to just 7% if the time test is met, and health levies are completely abolished. In this article, we take a closer look at the six key changes brought about by these revolutionary reforms. 

New progressive crypto regulation positions Slovakia as one of the leading countries in Europe when it comes to crypto-friendly policies.

Key changes to be aware of as a Slovak startup

Time Test

The new crypto regulation introduces a time test: if you have owned the virtual currency for at least one year, the tax rate is reduced to 7%, a significant drop from the previous 39%. This provision rewards long-term holders and provides an incentive for investors to hold onto their digital assets. It’s important to note that this reduced tax rate also applies to crypto-assets acquired before the amendment, as long as the sale or transfer of ownership occurs after January 1, 2024.

Tax Exemptions

Payments made in cryptocurrencies for goods and services up to €2400 per year are exempt from income tax. This exemption creates a favorable environment for small transactions, encouraging the use of cryptocurrencies in everyday life and promoting financial inclusivity.

Farewell to Health Levies 

In a move that supports the growing crypto community, health insurance contributions are abolished for all crypto-asset sales. This change further strengthens the position of cryptocurrencies as the future of payment methods, reducing financial burdens and promoting their adoption.

Not Just an Exchange

The new regulation clarifies the definition of a sale of crypto-assets. It specifies that a sale refers to the exchange of crypto for traditional fiat currency or stablecoins while excluding exchanges between different crypto-assets. This clarification ensures consistent tax treatment across different types of crypto transactions, simplifying the process for taxpayers and reducing potential confusion.

Farewell to Staking Tax 

The regulation abolishes income tax on staking income, meaning that individuals will only be required to pay taxes on such income at the moment they sell the cryptocurrency. This change acknowledges the evolving nature of crypto investments and aligns the tax treatment with the dynamics of the market.

Retroactive Application

It’s worth noting that the new tax rules will also apply to crypto-assets acquired before January 1, 2024, as long as they meet the specified conditions, such as the time test. This ensures fairness and consistency in the application of tax regulations and provides clarity to crypto investors.

In addition to the above, Slovakia is also taking steps to align itself with the wider European Union’s vision for cryptocurrency regulation – Markets in Crypto-Assets Regulation (MiCA), effective in 2024. The alignment of EU crypto regulations with Slovakia’s favorable taxation creates a powerful combination that has the potential to make Slovakia a new web3 hub of Europe. By embracing innovative blockchain technologies and creating an environment that fosters growth and development, Slovakia can attract top talent, entrepreneurs, and crypto businesses looking for a supportive ecosystem.

At Sparring, we have actively supported the development of cryptocurrency-friendly policies in Slovakia and witnessed the positive impact they can have on the industry. We believe that the combination of forward-thinking regulation and favorable taxation will not only benefit individuals and businesses in Slovakia but also contribute to the overall growth of the European crypto ecosystem.

Slovakia’s bold move towards crypto-friendly taxation is a game-changer for the industry. The reduced tax burden, exemptions, and alignment with EU regulations create an environment that encourages crypto adoption, innovation, and investment. As we look towards 2024 and beyond, Slovakia has the potential to emerge as a leading web3 hub, attracting talent and projects from across Europe and beyond. The future of crypto in Slovakia is indeed bright, and we are excited to be part of this transformative journey.

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