Cryptocurrency Tax Reform, Europe’s Slovakia to Reduce Maximum Tax Rate on Sales Gains from 25% to 7%


Reduction of tax burden of virtual currency

On the 28th, Slovakia’s parliament passed a bill to reduce the tax burden on profits from the sale of crypto assets (virtual currencies).

Slovakia is located in Central Europe, next to Poland and Ukraine. According to Denník N, a local media outlet, the bill will stipulate that a flat 7% tax rate will be applied to profits from the sale of cryptocurrencies held for more than one year. This is significantly lower than the normal income tax rate (19%-25%).

In addition, there will be a provision that the use of virtual currency for payments up to the equivalent of 2,400 euros (about 380,000 yen) will be exempt from tax. Additionally, income earned in cryptocurrencies is exempt from the 14% health insurance tax.

The aim of the bill is to “reduce the tax burden associated with the sale of cryptocurrencies and facilitate their use in everyday life.” It has the potential to facilitate the use of cryptocurrencies for both individual investors and businesses, driving innovation in the country.

connection:Portuguese government to increase tax rate for cryptocurrencies

Short-term and long-term capital gains tax

Slovakia’s bill could attract investors, cryptocurrency mining companies and others. As a result, it is believed that investment from both inside and outside Japan will increase, and that it will become a hub for cryptocurrencies in the EU (European Union).

On the other hand, in Portugal, cryptocurrencies have been exempt from value-added tax (VAT) and income tax since 2019. However, the 2023 budget stipulates that “capital gains from trading crypto assets held for a period of one year or less” are subject to a 28% tax. Virtual currencies held for more than one year are still tax exempt.

The application of tax rates according to the holding period has also been adopted in the United States and Germany. In the United States, tax rates of 10% to 37% are applied if the holding period before selling the virtual currency is 1 year or less, and the tax rate on the gain on sale of the virtual currency owned for more than 1 year is 0% to 20%. (Data: IRS).

Under current Japanese law, all income related to individual crypto asset trading is subject to comprehensive taxation, with a tax rate of 5% to 45% (up to 55% including inhabitant tax). However, last year, the Liberal Democratic Party’s Digital Society Promotion Headquarters web3PT made proposals for tax reform, including a “review to 20% separate taxation,” but did not reach a decision.

connection:The Liberal Democratic Party Web3PT aims for an urgent proposal on the virtual currency tax system, such as “subject to separate taxation at a tax rate of 20%”

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