Tax on cryptocurrencies in Croatia
Good afternoon and welcome to our new blog post about cryptocurrency taxes in the Republic of Croatia. In addition to Croatia, we will also briefly look at the situation with the taxation of cryptocurrencies in other countries of the world. We’ll agree with you – taxes aren’t the most exciting part of dealing with cryptocurrency, but “what’s there” – it’s up to us to master them together.
Although they seem complex – today we will learn everything about payment – how, when and where?
Well, and then there is no more room for fear and worry!
Although the Republic of Croatia still does not have a clear law on cryptocurrencies, for now it is based on the EU law from 2013, according to which it settles accounts with crypto taxpayers. We will note – Croatia is definitely not ” Friendliest“A state for crypto traders and miners, but that doesn’t mean it won’t become one. Be that as it may, what is desirable for the further development of the tax law is cooperation between state tax authorities and the crypto community.
Basic tax terms
Let’s get acquainted with the basic terms in order to understand what exactly you have to pay taxes on 🙂
Capital gain: It refers to the difference between the buying and selling price of cryptocurrencies, and this amount is reduced by any transaction costs. In other words, it’s the gain you gained as the difference in the value of the cryptocurrency at the point when you He invested in it, in relation to the value of the cryptocurrency when he decided to sell it.
Possible transaction costs that you are entitled to deduct: According to the Income Act of 2021 – from capital gains, you have the right to deduct any capital losses, and you must pay tax on the obtained winnings in the amount of 10%. This amount is then further increased by the surtax that is tied to a certain municipality or city. For example, Zagreb has the highest surtax rate of 18%, followed by Split with 15%. In Šibenik, we are talking about 10%, while in Samobor – there is no surtax. On the official website of the Tax Administration Find out the surtax for your location according to the address of residence or temporaryresidence.
Changing from one cryptocurrency to another
You are not obliged to pay taxes if you change e.g. Bitcoin for Ethereum, despite the capital gain being made.
Let’s go, one example!
Let’s say, you bought 10 bitcoins at a price of $600.00, which means that your total invested amount is $6,000.00. After a while, you decided to buy ethereum, and you exchanged those 10 units of bitcoin for 118 units of ethereum. In the next period, you decided to sell all 118 units of ethereum. The value you could achieve for 118 units at that time was 300,00.00 USD per unit, and you thus achieved a total of 35,400.00 USD.
Now, this means that you have made a capital gain by trading in the amount of $29,400.00.
But, if, for example, you decided to sell instead of 118, for example, 50 units, in that case you would count as the purchase value the proportional part of the value of bitcoin at which you made the exchange of cryptocurrencies from bitcoin to ethereum (in this case, it would be the value for 4 bitcoins).
However – any change to cryptocurrency – whether in HRK or EUR from 2023 – is subject to tax. Why? This moment of conversion to fiat is taken as the moment of realization of capital gain. What we would suggest to any investor – the more experienced or less experienced, is to keep all cash flow receipts, whether digital or physical. So, you can always prove your source of income.
How and when to pay tax on cryptocurrencies?
According to the current law, in our country, investing in cryptocurrencies is considered similar to investing in stocks from abroad – which means that you are obliged to report your earnings to the tax administration, submit a form, and pay the appropriate amount of taxes.
The good news is that in these digital times, you can also file your tax online via e-tax. It is also necessary to fill out the predation JOPPD form, which you can download online on the website of the Tax Administration, and there you will find examples of successfully completed forms.
When do you report and when do you pay taxes?
For receipts earned in the previous calendar year, you report the tax in the form of a summary report of all transactions for that previous year, and no later than February of the current year. So, by February 2023, he should submit reports for 2022. We advise you to keep the documentation on the purchase and sale for a minimum of 6 years after the realization of capital gains or losses, because after that period there is a statute of limitations.
Mining and staking tax
In the case of occasional home mining or mining, the realized profit must be converted into kuna according to the middle exchange rate on the day of income acquisition (i.e. into euros from 1.1.2023.); then report the earnings as other income and pay taxes.
Mining or mining as a basic occupation
In the event that mining becomes your main source of income, and you do this job continuously with the intention of making a profit over a longer period, you are obliged to register your self-employment.
Cases in which it is not necessary to pay tax on cryptocurrencies
Generally speaking, if you own cryptocurrencies, you don’t pay taxes. What this means is that you are only required to pay taxes when you change your taxes. cryptocurrencies in their possession for fiat currencies (HRK, EUR, etc.). Of course, only if capital gains were made during the change to fiat.
- If after 2 years of ownership, your cryptocurrency is stolen (e.g. in a divorce case, etc.)
- If you are exchanging crypto for crypto – e.g. Bitcoin for Ethereum;
- If you own a cryptocurrency for more than two years – you are exempt from paying taxes; however, if you have traded that cryptocurrency during those two years, then it is not considered this case, that is, you are obliged to pay taxes;
- You do not have to pay taxes if the total capital losses are greater than the total capital gains that have been made. It is important to note here that capital losses are valid only within the current year in which they are realized.
FAQ
What if someone donated cryptocurrencies to me?
In the event that you have received a donation in the form of cryptocurrency as a natural person, it is considered a non-taxable income, but the following conditions must be met: If there is no consideration, this documentation can prove that the funds were donated by other natural persons who do not have a registered self-employed activity. It is also necessary to prove that the funds donated were acquired from taxable income or derived from receipts that are not considered income.
If these conditions are not met, the recipient himself is obliged to calculate and pay tax on the donation on the basis of other income, as well as the associated contributions. Within 30 days of receiving the donation, it is necessary to submit the JOPPD form. It should be noted that if the donated cryptocurrencies are further used for trading, and a capital gain is made in the process – then income tax is also paid on the principle of A capital gain.
The two-year rule applies in this case as well.
If you own a donation in the crypto for more than two years, and then decide to sell it, you are also not obliged to pay taxes.
What if I acquire cryptocurrencies as a salary for a service rendered or goods delivered?
Let’s say if you are self-employed, and the one to whom you provide a service or sell a product pays you in the crypt – you are not obliged to pay tax if the payment went through a platform such as PayCek. When you make a payment, you automatically convert to fiat. However, if the payment is made through cryptocurrency directly to you as a service provider, then the difference in the value of the cryptocurrency at the time it was received compared to the moment it was converted to fiat – would be considered as income from self-employment, and not as income earned from capital gains.
What if I acquire cryptocurrency as a gift?
If you acquire cryptocurrency by donation (airdrop acquisition) – there is no tax liability, but The 2-year alienation rule applies here. This means that if you receive a gift in the form of cryptocurrency, and you decide to dispose of the gift before the end of the two years, the capital income will be determined.
What if I acquire cryptocurrency by selling personal assets?
The income that you earn as a natural person by selling your personal property is non-taxable. But, in case you decide to use these acquired cryptocurrencies for further trading, and at the same time make a capital gain – then you pay capital income tax on the difference in price between the sale and purchase value. It should be emphasized that the purchase price here is the market value of the cryptocurrency at the moment when you acquired it, i.e. at the time of the sale of personal property. This is determined by taking the average value of a particular cryptocurrency from the official cryptocurrency exchange on the day of acquisition.
How to document a transaction if I bought cryptocurrencies directly from a natural person, and I used cash when buying?
In the case of a purchase in cash directly from another natural person, it is necessary to document everything with a contract or a credible document in which the following information must be included: personal data of both the buyer and the seller, the subject of the purchase/sale, the date, the amount, the price, the number of units, the method of payment.
Crypto Taxes in the World
We would like to point out a few countries in the world that are leading the way in accepting cryptocurrencies:
Belarus
- According to the law, mining and investing in cryptocurrencies are considered personal investments, and thus are exempt from income and capital gains tax;
- Liberal laws aim to encourage the development of the digital economy and technological innovation
- the third in Eastern Europe, and the 19th in the world in terms of the level of peer-to-peer cryptocurrency trading.
Germany
- Unlike most other countries, Europe’s largest economy considers bitcoin to be private money, as opposed to currency, commodities or shares;
- Any cryptocurrency held for more than a year is tax-free, regardless of the amount;
- If the assets are held for less than a year, capital gains tax is not levied on sales of less than €600.
These are the rules for the Germans. If you are a startup founded in Germany – you still have to pay tax on profits from cryptocurrencies, on the same principle as if it were any other asset. 2021. A new tax law in Germany also came into force that effectively kills crypto derivatives trading in Germany, as losses can no longer be deducted. The legislation reflects moves across Europe to regulate derivatives.
Portugal
- One of the most lenient crypto tax regimes in the world;
- income from the sale of cryptocurrencies in the case of an individual as a natural person, has been exempt from tax since 2018;
- cryptocurrency trading is not considered investment income, which is normally subject to a 28% tax, which contributes to Portugal’s lenient approach;
- However, businesses that accept cryptocurrencies to pay for goods and services are subject to income tax.
Singapore
- Capital gains tax does not exist in Singapore, so neither individuals nor corporations that own cryptocurrencies have a tax liability;
- Singapore-based companies are subject to income tax, in case their primary activity is registered as cryptocurrency trading, or in case they accept cryptocurrencies for payment;
- payment cryptocurrencies are considered to be intangible assets and not legal tender;
- Payment in cryptocurrencies is considered as a “barter or exchange” in which goods and services are taxed, but not the cryptocurrency itself for payment.
Slovenia
- Our neighbors also make a difference in their approach to individuals, compared to companies when it comes to taxation;
- Individuals do not pay capital gains tax if they sell bitcoin, and the winnings are not considered income;
- companies, on the other hand, if they receive payments in crypto, or if they are engaged in mining (eng. “mining”), are obliged to pay taxes at the corporate rate;
- however, Slovenia does not allow doing business exclusively in cryptocurrencies;
- what is good about Slovenians, and where we “take our hats off” to them, is that in the further development of the law, they include crypto communities to work closely with regulatory and tax authorities.
Switzerland as Switzerland aka Crypto Valley
- One of the most advanced tax policies in the world;
- profits from cryptocurrencies made by an individual as a natural person by investing and trading are treated as capital gains, but are tax-free;
- Earnings from professional trading and mining are subject to income tax, and a “wealth tax” is levied on the total amount owned by cryptocurrencies, along with the rest of an individual’s net worth.
Bermuda: Once a tax haven – always a tax haven!
- No taxation of capital gains from cryptocurrencies;
- digital assets are not separated from other assets;
- does not impose income, capital gains, withholding, or other taxes on digital assets, as well as on transactions involving cryptocurrencies;
- Taxes can also be paid using cryptocurrencies.
If you want to know more about taxes on cryptocurrencies in the Republic of Croatia or have a specific question – we advise you to contact the tax administration directly for any additional questions, or to ask for advice from an accountant.
Until the reading,
Your Kriptomat.hr
