Have you ever wondered how cryptocurrencies are taxed? Perhaps you’re considering investing in cryptocurrencies but are unsure whether to invest as an individual or a company? Maybe you’ve noticed how the value of cryptocurrencies like Bitcoin (BTC), Ethereum (ETH), and Solana (SOL) fluctuates and are curious about how this impacts their tax treatment?
During a time when the value of Bitcoin is reaching historic highs, it’s especially important to understand how profits from cryptocurrencies are taxed in Slovenia.
Current Situation
Recently, there has been a true price explosion in cryptocurrencies, attracting the attention of investors worldwide. However, this has not gone unnoticed by policymakers and tax authorities. In Slovenia, investing in cryptocurrencies is treated in a specific manner. It primarily depends on whether you invest as an individual or a legal entity and whether the purpose is investing or trading.
As an individual, you currently do not pay tax on the profit from cryptocurrencies if it involves investing. This means that if you, as an individual, have invested in Bitcoin, Ethereum (ETH), or any other cryptocurrency, your profit is (currently) not taxed, regardless of its current value. This encourages individual investors to explore the digital currency world without worrying about immediate tax consequences.
Taxation of Cryptocurrencies
It should be noted that there are two potential risks associated with cryptocurrency payouts. The first is that just because the mentioned profit is not taxed today, it does not mean it will not be taxed in the future. The second risk arises when making larger withdrawals (over 5,000 EUR) to your personal bank account. It is often the case that the financial institution freezes the transfer to a personal account when the amounts exceed the mentioned sum.
In addressing both risks, it is sensible to consult and manage matters with your tax or financial advisor. If you need assistance in this area, you can also contact info@unija.com.
The tax authority’s (FURS) stance on when incomes from trading virtual currencies are treated as income from activities should be noted. If you invest and or perform transactions on a weekly or daily basis, in large quantities and or with a high frequency of purchases and sales, the situation can change. The boundary as to when it constitutes conducting a business activity is not entirely clear.
Profits from cryptocurrencies, in the case of conducting a business activity, are considered income according to accounting rules. You are obligated to pay corporate income tax (DDPO), which from 2024 will be 22% (previously it was 19%), or personal income tax from business income (sole proprietors and other individuals who register business activities). In the case of conducting a business activity, it is of course necessary to maintain accounting records.
When selling cryptocurrencies owned by a legal entity, in addition to DDPO, you will also pay capital gains tax on the profit from the company. Capital gains tax is progressively reduced over time, which encourages long-term investing. It starts at 25% and decreases to 20% after the first five years, then to 15% after the next five years. After 15 years, capital gains are not taxed.
Example
Let’s look at a simple calculation for a company that sells cryptocurrencies bought years ago as an investment.
The company generates 100 units of profit from the sale of cryptocurrency, which it bought years ago and did not trade. The recognized profit counts as revenue and you pay 22% corporate income tax. There are now 78 units left.
You, as the company owner, want to immediately pay out the recognized profit, so you also pay 25% capital gains tax on the payout.
You receive only 58.5 units in your account.
Trading in cryptocurrencies
In the exciting world of cryptocurrencies, values fluctuate at an unknown speed. Understanding and complying with tax obligations is crucial for safe and successful investing or trading in cryptocurrencies. What kind of investor you are and why you invest is entirely your decision. If you plan to invest to cash out the highest possible profit at the next all-time high, it is currently better from a tax perspective to invest as an individual.
For investors, whether individuals or legal entities, it is crucial to stay informed about tax laws and regulations affecting their cryptocurrency investments. This ensures that their investment decisions comply with legislative requirements. As mentioned, cryptocurrencies have recently experienced a true price explosion, drawing the attention of investors.
If you are interested in current changes in the cryptocurrency market, you can also read our article at this LINK.
