Slovakia plans to start taxing Bitcoin

Slovakia’s Finance Minister Peter Kazimir has said that all firms which provide services on digital platforms will start paying tax. As seen by many Forex brokers in Slovakia 2018, the year was going to be a good year given the increasing interest in digital trading. According to the minister, cryptocurrencies such as Bitcoin will join companies such as Uber, Airbnb, and Booking.com in paying tax under the amended Income Tax Act. The tax charged will be on all income generated from services offered within the country.

If these companies offer services repeatedly in Slovakia in the form of mediation of transport and accommodation, they will need to register as a permanent operation. These measures have been taken to prevent any outflow of profits outside Slovakia; the Finance Minister was quoted by the Dennik N Daily saying. He added that it is worthwhile to note that Slovakia is the first country that has taken the bold step to deal with the taxation of this type of modern businesses.

What if a business or bitcoin trader doesn’t pay?

Well, if the provider of the quoted services fails to register its permanent operation in Slovakia, withholding tax will then be applied. A withholding tax of between 19-35% will be paid by any business in Slovakia on the fees they are supposed to pay a foreign company. The tax imposed will be based on where the beneficiary actually seats. According to the minister, the tax obligation will be on the particular driver in case of transport services. In the case of accommodation, the obligation will be on a specific accommodation facility using the services of unregistered foreign portals.

All these measures are designed to bring about a fair business environment, the ministry said. Digital platforms which will then be properly registered and pay all the due taxes will find themselves not at a disadvantage as compared to those that move their profits to tax havens.

The obstacles the plan faces

Kazimir said that revenues coming from cryptocurrencies such Bitcoin must be taxed. The minister is currently planning to draft a proposal this year which he believes this measure could be effective come 2019. As cited by Dennik N Daily, Kazimir perceives virtual currency as having 2 roles now which are as an investment asset and as a means of exchange. He added that the government is very much interested in solving the issues relating to taxation on the income stemming from the exchange of goods and trading of cryptocurrency.

It is the intention of the ministry to tax cryptocurrency revenues the moment they are made. The taxable revenues will not matter whether they come from a sale or exchange of the Bitcoin. However, the ministry will look into possibilities of how to implement this move. According to the minister, cryptocurrency is not widely known and therefore quite dangerous. He said the fact that crypto is anonymous and unregulated involves risk of terrorism and organized crime.

What the experts say

Many experts are in agreement that it will be very hard for Slovakian government implements this tax move, especially on crypto.  According to Jakub Rosa, an analyst at Across Private Investments, One of the key issues which will influence the development and growth of virtual currency in 2018 is their regulation.

Taxing alternative currency would require the introduction of some special rules; for private individuals and entrepreneurs, Slovak Chamber of Tax Advisors cautioned. SCTA added that it will now become important to establish whether cryptocurrencies are goods or financial assets. According to the European Court of Justice, crypto trading should be considered a financial transaction and should, therefore, be VAT exempt.