1. New tax to save the state budget
The new tax on payment transactions is expected to take approximately EUR 700 million annually from entrepreneurs in Slovakia. EUR. This tax is to be paid when a transfer is made from a business account to another business, but not when the payment is received. It will therefore affect all payments to suppliers.
Many businesses with small margins and a large number of transactions will be at risk unless their competitors have to bear the same transactional tax burden. The sectors affected will include in particular food, agriculture and all businesses that operate in a highly competitive environment. The tax is to be 0.4% of the transfer amount, up to a maximum of EUR 40. Therefore, a small number of large transactions will be taxed less than many small transactions.
It is natural that all the most affected entrepreneurs will try to find a way to legally circumvent the tax.
2. Cash payments will not provide a solution
The cash payments provide not a suitable solution. They are already legally banned if they exceed EUR 15,000 per transaction. Exceeding this amount will not invalidate the transaction, but the entrepreneur faces a fine. In particular, the new tax will also penalize cash withdrawals from the bank account and will then have a rate of 0.8% of the amount withdrawn.
Barter, i.e. the exchange of goods for goods, is likely to be a good way to circumvent the tax, but barter can only be used if both parties are supplying some mutual non-monetary consideration to each other. Such cases will be rather rare.
3. Bank account abroad is not a solution
The transaction tax will also apply to business transfers from offshore accounts or transfers using non-bank payment services, e.g. PayPal, Skrill, etc. In these cases, however, the tax will have to be calculated by the entrepreneur himself, although otherwise it will be done by the Slovak bank.
4. Use of cryptocurrencies
And that leaves cryptocurrencies. Cryptocurrencies are not considered money in Slovakia, but a separate property value, which is governed by the rules for movable property in terms of property law. They are also taxed in this way.
For each cryptocurrency transaction, the value of the cryptocurrency on the date of the transaction is treated as taxable income for income tax purposes, and the cost of acquiring the cryptocurrency may be deducted at its monetary value on the date of acquisition. But this calculation is only used for income tax purposes.
Transaction tax does not apply to cryptocurrency and its transfers, just as it does not apply to the transfer of movable property.
Another advantage of cryptocurrencies is the speed of their transfer to the other account. The transfer usually takes only a few minutes and can be done anytime, at night or even on the weekend, without restrictions. All you need is access to the internet.
However, the use of cryptocurrencies is not a one-size-fits-all solution for transaction tax. When buying cryptocurrencies with euros , transaction tax must be paid.
Therefore, the use of cryptocurrencies will only really make sense in relation to transaction tax if the cryptocurrency is bothused to pay for goods or services by the business’s customers and, in turn, the cryptocurrency is also received by the business’s suppliers.
5. Exchange of euro to cryptocurrency and vice versa
Using cryptocurrency as payment for suppliers may become the new standard. Today, there are many exchanges and exchange points where cryptocurrencies can be converted into euros. The whole exchange takes no more than a few minutes and the euros are in our account. The payment coming from abroad, i.e. from a foreign exchange or from a foreign exchange point where we exchange cryptocurrency back into euros, will not be subject to the transaction tax. Even if the recipient of the euros is a Slovak entrepreneur. On the other hand, if a business purchases a larger amount of cryptocurrency at one time, the transaction tax will be max. 40 EUR. .. . Pri každom nákupe kryptomeny za viac ako 10.000 EUR bude preto výsledná sadzba dane z transakcie menšia ako 0,4%, a kryptomenu môže následne podnikateľ používať pri menších platbách a to už bez zdanenia daňou z transakcií.
6. Exchange rate risk
The use of cryptocurrencies will carry a high exchange rate risk unless the cryptocurrency used is pegged to the euro. The two largest cryptocurrencies pegged to the euro are EURT (Eur Tether) and EURS (Stasis Euro), but their ability to be traded is limited to certain large exchanges.
7. Cryptocurrency scams
However, the increase in cryptocurrency transactions will also increase the number of frauds. Using cryptocurrencies requires a certain amount of experience and the ability to detect fraud before falling victim to it.
When exchanging cryptocurrencies for euros on a large well-known exchange, the risk is not significant. However, only a few exchanges allow you to make a withdrawal in euros to a business account. Therefore, many exchanges take place on the so-called Peer to Peer (P2P) market.
In these transactions, the owner of the cryptocurrency finds through the marketplace someone who is willing to accept the cryptocurrency and send the owner of the cryptocurrency money, i.e. euros, back to his account. First, the owner of the cryptocurrency deposits the cryptocurrency in an escrow account organized by the marketplace. The marketplace informs the owner of euros that it has received the cryptocurrency for exchange and asks him to transfer euros to the owner of the cryptocurrency’s account. When the owner of the cryptocurrency receives the payment in his account, he confirms to the marketplace that he received the money. Subsequently, the marketplace transfers the cryptocurrency to the electronic wallet of the former euro owner.
The above course is described in the way as the transaction should take place by design. But what if the money arrives in the account of the cryptocurrency owner and he denies receiving it? Or the money does not arrive in the cryptocurrency owner’s account, but the transferor sends fraudulent receipts that the cryptocurrency owner believes? Or if the cryptocurrency owner puts the money in someone else’s account, will the money end up there, not with the cryptocurrency owner? To whom should the marketplace administrator transfer the cryptocurrency in these cases, back to the original owner of the cryptocurrency or to the original owner of the money? The result is mostly just a cluster of problems that sometimes even lawyers don’t have to resolve. In these fraudulent transactions, the biggest problem is carrying the burden of proof. To prove that we have proceeded correctly and the other party did not.
8. Conclusion
There are rules that need to be followed in order to avoid becoming a victim of crypto currency trading fraud. There are multiple rules and we will review them one by one.
It is also important to keep in mind that payments with cryptocurrencies are not free either. Buying and selling them is connected to certain costs that need to be budgeted for.
The introduction of a transaction tax will undoubtedly increase the popularity and use of cryptocurrencies. Knowledge of cryptocurrencies and their use will be considered a normal part of financial literacy in the near future, and it will be appropriate to devote some time and effort to understanding them.
Posted on 23.09.2024.
JUDr. Mag. Ján Čarnogurský
(the author is a lawyer)