Slovenia Cryptocurrency Laws Regulation of Digital Currencies: Cryptocurrency, Bitcoins, Blockchain Technology
Cryptocurrencies are virtual currencies in Slovenia, meaning that they are neither financial instruments nor monetary assets per the Slovenian Act on Payment Services and Systems. Similarly, all cryptocurrency exchanges and dealers participating in cryptocurrency trades are considered “financial institutions” for purposes of the Anti-Money Laundering Act, which now makes explicit reference to cryptocurrencies.[1]
Beginning in 2017, the Financial Administration of Slovenia (FURS) provided some guidelines on the taxation regime for cryptocurrencies. In particular, FURS clarified that taxation of cryptocurrency depend on factors such as the status of the trader, the type of transaction, and other individual circumstances. In addition, corporations must pay taxes in Slovenia, so long as they have a tax residence in the country, even if they are registered abroad and comply with all the taxation requirements of that country. Corporations have a tax residence in Slovenia if they have management or a statutory seat within the country’s borders.[2]
For individuals, any income obtained in the form of cryptocurrency, such as employment income or profits derived from a “permanent business activity,” is subject to personal income tax. Similarly, income obtained from cryptocurrency mining is also subject to the individual’s personal income tax.[3] On the other hand, capital gains obtained from trading or fluctuations in the cryptocurrency market are not subject to any income taxation, since cryptocurrencies are not considered financial instruments or shares under Slovenia’s Personal Income Tax Act.[4]
In Slovenia, FURS has sole authority in determining whether a certain activity constitutes a “permanent business activity.” Likewise, there are no definitive criteria as to what constitutes a “permanent business activity,” so cryptocurrency traders are often left uncertain as to whether their transactions will be tax exempt. However, Valentina Knavs, a speaker at the recent “Tax and Accounting Aspects of Cryptocurrencies” event organized by Blockchain Think Tank Slovenia (BTT), lectured about six factors that may be useful for distinguishing “permanent business activities” from individual activity, with an extra emphasis on the last two factors:
[the] number of orders placed over a one-year period; the number of trading days over a one-year period; [the] value of realized orders over a one-year period; [the] average value of the cryptocurrency portfolio over a one-year period; the investment or use of dedicated equipment and other resources to carry out activities, information, knowledge and technologies; [and] the existence of an organizational structure and the division of work among several people in order to reach a common goal.
For corporations, the law is even less clear. In fact, FURS stated, “The accounting treatment in the described trade or company depends on the circumstances of the specific case,” since the status of the income recipient and the type of income must be factored into the calculation. Unlike individuals, corporations must pay corporate income tax for capital gains at a rate of nineteen percent, which is relatively high compared to that of many European countries.[6] Currently, corporations are prohibited from restricting payment options for goods and services solely to cryptocurrencies and must retain a bank account for monetary transactions.[7]
On a separate note, tokens used to collect start-up funds for initial coin offerings (ICOs) must be processed for tax purposes in accordance with standard accounting rules and the Law on Corporation Tax, although they are taxed independently of physical currencies.[8]
P.S. Insights on Cryptocurrency Legal Issues
Most jurisdictions and authorities have yet to enact laws governing cryptocurrencies, meaning that, for most countries, the legality of crypto mining remains unclear.
Under the Financial Crimes Enforcement Network (FinCEN), crypto miners are considered money transmitters, so they may be subject to the laws that govern that activity. In Israel, for instance, crypto mining is treated as a business and is subject to corporate income tax. In India and elsewhere, regulatory uncertainty persists, although Canada and the United States are relatively friendly to crypto mining.
However, apart from jurisdictions that have specifically banned cryptocurrency-related activities, very few countries prohibit crypto mining.
Our Freeman Law Cryptocurrency Law Resource page provides a summary of the legal status of cryptocurrency for each country across the globe with statutory or regulatory provisions governing cryptocurrency. The globe below provides links to country-by-country summaries:
