After the creation of its “Bitcoin city”, BTC City, Slovenia is considering changing its taxation rules on cryptocurrencies. This proposed law aims to simplify and harmonize current tax practices.
A simpler crypto-taxation system in Slovenia
According to the current regulations in Slovenia, the taxable income from cryptocurrency transactions is eminently related to the factual circumstances and situation of the tax resident. For example, an individual is subject to capital gains tax on his profits from the sale of cryptocurrencies, when they are made in the course of a business activity.
As it stands, the application of the tax regime is burdensome and time-consuming for the Slovenian tax authorities (FURS). Indeed, it usually has to examine multiple crypto transactions made by the taxpayer.
Therefore, FURS has proposed to change the rules regarding the taxation of cryptocurrencies. The proposed tax law aims to apply a single 10% rate to crypto transactions. This rate will apply to all fiat currency conversions and purchases of goods or services made in cryptocurrencies.
“We would like to emphasize that it is not the profits that would be taxed, but rather the amount that a Slovenian tax resident receives in his or her bank account when converting virtual currency into fiat currency or when buying something.”FURS statement
Specifically, FURS wants to simplify and harmonize its tax regime for cryptos. However, according to this proposed law, the taxpayer will have to provide proof of losses incurred, which will involve the analysis of all transactions.
The population is already raising its voice
Upon the announcement of this proposed law, the reactions of parties interested in cryptocurrencies were not long in coming. Indeed, according to a report in the Slovenian newspaper Finance, the day after the declaration of FURS, the whole proposal would not be satisfactory. The problem is the 10% rate, which is unreasonable and even punitive in some cases.
“They want to tax 10% of the sale value of cryptocurrencies. That means if you buy €1,000 worth of bitcoins and later sell them for €1,100, your profit is €100 and the tax is €110.”Article from Slovenian newspaper Finance
In many cases, the application of such a rate would result in “confiscations” of part or all of the profits by the Tax Administration (FURS). According to the same newspaper, cryptocurrency trading should instead be considered similar to securities trading, as the majority buy them to resell them at a higher value, not to make purchases.
The adjustment of the proposed tax law
The day after this report, FURS announced that it would amend its proposed tax law in favor of an option regime for individuals. Thus, the Slovenian taxpayer will have to opt for taxation of
- Of the total amount of the transaction at the rate of 10% ;
- Or the profits made at the rate of 25%.
For example, if a trader buys a bitcoin for $3,000 in 2018 and cashes it today in fiat for $50,000, then he will have the choice: either to pay a tax of $5,000 (10% on the overall amount), or a capital gains tax of $11,750.
This regime seems fairer, as it allows the taxpayer to strategically adjust his or her taxation. Finally, the Slovenian administration has already stated that this option will not apply to legal entities.
Unquestionably, Slovenia affirms its status as a European leader in the adoption of cryptocurrencies. After the development of various and sundry businesses accepting payment in cryptocurrencies, there is no doubt that this country will focus on the issue of taxation.