In a significant development, Slovakia's National Council on June 28 has voted to approve an amendment that will reduce taxes on cryptocurrencies and introduce measures to benefit cryptocurrency holders. This is a significant reduction in the tax burden for cryptocurrency investors in Slovakia, and it makes the country one of the most crypto-friendly in Europe. The move aims to stimulate the crypto industry and attract more investors to the country. Let's delve into the details.
Reduced Taxation and Incentives:
Under the approved amendment, the personal income tax on profits from the sale of cryptocurrencies held for at least one year will be slashed to 7%. This marks a substantial decrease from the existing taxation rates of 19% or 25%. Notably, payments received in cryptocurrencies up to 2,400 euros ($2,600) will be exempt from taxation. Additionally, the bill excludes crypto income from the health insurance contribution of 14%.
Financial Impact and Legislative Changes:
The Ministry of Finance in Slovakia estimates that the amendment will have a yearly financial impact of around 30 million euros. This positive economic effect demonstrates the government's recognition of the potential of the crypto industry. The amendment follows another recent change to the constitution that safeguards the right of citizens to use cash as a payment method, considering the discussions surrounding the digital euro.
Regulatory Framework and Industry Growth:
While Slovakia is yet to introduce a comprehensive crypto regulatory framework, it hosts over 550 Virtual Assets Service Providers (VASPs), including crypto exchanges and wallet providers. This density of VASPs highlights Slovakia's position as a leading crypto jurisdiction in Europe. However, the absence of strict scrutiny and registration loopholes need to be addressed to enhance security and foster a global wealth hub.
A Comparative Outlook:
Slovakia's approach to crypto taxes aligns with the diverse strategies adopted by other European nations. Belarus, for example, remains tax-free for individuals and businesses in the crypto sector until 2023. In Croatia, favorable tax rates of approximately 10% on crypto capital gains contribute to the country's appeal among crypto traders.
Slovakia's decision to reduce crypto taxes and introduce incentives for investors demonstrates the government's proactive approach to foster growth in the digital asset space. These amendments, coupled with future regulatory developments, have the potential to position Slovakia as a thriving hub for the crypto industry, attracting both local and international participants.