Taxation of cryptocurrencies in Slovakia: what you need to know

The taxation of cryptocurrencies in Slovakia raises a lot of questions every year. Until recently it was a relatively unexplored area, but today clearer rules apply that anyone who trades in cryptocurrencies should know. In this article we sum up when taxable income arises and how to proceed correctly. With the popularity of cryptocurrencies, many people are dealing with tax for the first time and do not know what the Financial Administration (Finančná správa) expects of them. A basic grasp of the rules will help you avoid the most common mistakes as well as needless worries.

When taxable income arises

Simply holding a cryptocurrency is generally not subject to tax, even if its value in your wallet is rising. Taxable income arises only on its so-called sale, that is, when the cryptocurrency is exchanged for money, for other assets, for goods or for services. It is precisely this moment that is decisive for tax purposes. What is taxed, then, is not the increase in value while you hold the cryptocurrency, but only its actual conversion into money or its use. This distinction is absolutely key to correct taxation, and many people underestimate it.

• Sale of a cryptocurrency for euros or another currency
• Exchange of a cryptocurrency for goods or a service
• Use of a cryptocurrency to settle a liability

How the tax base is determined

What is taxed is the difference between the income from the sale and the expenses demonstrably incurred, above all the acquisition price of the cryptocurrency in question. That is why, when trading, it is essential to keep careful records of how much you paid for a cryptocurrency and how much you later sold it for, so that you can calculate your profit correctly.

Records of transactions

If you make a larger number of trades, it pays to keep clear, up-to-date records right from the very start. Without them, working out a profit or loss retrospectively later on tends to be very difficult, sometimes almost impossible, especially if you trade on several platforms.

• Dates and amounts of the individual purchases and sales
• Exchange rates and values at the time of the transactions
• Statements from exchanges and cryptocurrency wallets

Rates and contributions

Income from the sale of cryptocurrencies is subject to income tax, and in some cases a health insurance contribution may also apply to it. Always check the specific rates, any preferential regimes for longer holding periods and other conditions for the tax period in question, because this area is developing quite rapidly. How long you hold a cryptocurrency before selling it can have a noticeable effect on the resulting tax. That is why it pays to think about the tax consequences at the very moment you are deciding whether to sell.

Common misconceptions

People sometimes mistakenly believe that tax applies only once the funds are withdrawn to a bank account, or that exchanging a cryptocurrency for goods is tax-free. You also need to watch out for completely missing records of acquisition prices, which can later complicate the calculation of your tax liability.

A final recommendation

As the taxation of cryptocurrencies in Slovakia keeps changing and evolving, it is sensible to consult an expert if you trade in larger volumes. That way you avoid mistakes, tax arrears and needless stress in the event of a later audit by the Financial Administration. Most exchanges now let you download your transaction history, which makes the job much easier for both you and your accountant. The more conscientiously you keep your records as you go, the simpler it will be to settle your tax.

Related articles: Transfer pricing and documentation for related parties, Taxation of income from renting out property, Tax return when you have income from abroad.

Frequently asked questions

Do I have to pay tax if I only hold a cryptocurrency?

Simply holding a cryptocurrency is generally not subject to tax. Taxable income arises only when it is sold, exchanged for other assets or used to pay for goods or a service.

How do I calculate the profit from selling a cryptocurrency?

What is taxed is the difference between the income from the sale and the demonstrable expenses, above all the acquisition price. That is why you should keep records of your purchases and sales, including dates and amounts.