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Cryptocurrencies – Frequently Asked Questions and Answers

Nevena Milosevic

Nevena Milošević

Senior Associate

05/02/2024

How do you tax the digital assets, and what are all the available tax incentives?

Income generated by an individual from the transfer of digital assets is considered a capital gain, and it is subject to a 15% tax rate. In other words, to have an obligation to pay capital gains tax, a certain profit must be realized. Profit is defined as a positive difference between the purchase price and the selling price of the digital asset. For example, if you purchase one coin for 30 EUR and sell it for 100 EUR, the tax base would be the difference between the selling and purchase prices, which is 70 EUR.

The law provides for cases in which an individual may be exempt from the obligation to pay capital gains tax. Namely, if the taxpayer sells digital assets and subsequently invests the proceeds within 90 days in the share capital of a company in Serbia, or the capital of an investment fund established in Serbia and has a center for business and investment activities in Serbia, they may be exempt from 50% of the capital gains tax. In other words, for an individual utilizing this tax exemption, the effective tax rate on capital gains is 7.5%.

For example, if a taxpayer earns a profit of 100,000.00 dinars by selling digital assets and then invests 100,000.00 dinars within 90 days in the share capital of a company or an investment fund established in Serbia, they will be entitled to a 50% reduction in capital gains tax.

Additionally, even if the taxpayer makes the described investment within a period longer than 90 days, but no later than 12 months from the date of the sale of digital assets, there is still a benefit, which consists of the right to a 50% refund of the tax paid.

Furthermore, digital assets can also be subject to taxation in accordance with the Property Law Tax. Specifically, this law prescribes that an inheritance and gift tax is payable on inherited or gifted digital assets. This tax is levied at a rate of 2.5%.

The law also provides for a tax exemption from the obligation to pay taxes on gifts and inheritances, specifically for gift recipients and first-degree heirs (e.g., when a parent gifts digital assets to their child). Second-degree heirs and gift recipients pay a lower tax rate of 1.5% (e.g., if a child gifts digital assets to their parents or a sibling gifts them to a sibling). Additionally, it should be noted that digital assets received by an heir or gift recipient from the same person in a single calendar year, up to the value of 100,000.00 dinars, are exempt from taxation.

When it comes to legal entities, capital gains or income derived from the sale of digital assets are included in the tax base. However, similar to individuals, the law also provides for the possibility of using tax exemptions. Namely, if the funds earned from the sale of digital assets are invested in the share capital of a legal entity or in an investment fund with its business activities center located in the territory of Serbia, the capital gain realized is not included in the tax base. It is important to note that the investment must be made in the same tax period in which the capital gain was realized, meaning in the tax period in which the sale of digital assets occurred.

How could the taxes be reported, and what documentation is required for it?

The tax return for capital gains tax is submitted electronically through the “e-Government” portal or in written form, via mail or in person at the relevant Tax Administration office. In the case of realizing a capital gain from digital assets, individuals are obligated to file their tax return no later than 120 days from the end of the quarter in which the income from digital assets was obtained. Therefore, if you sell cryptocurrency on February 1, 2024, and realize a capital gain, you should file your tax return no later than August 1, 2024 (120 days from the end of the quarter – March 31, 2024).

It’s also important to note that a tax return should be submitted even in cases of capital losses if you intend to use tax credits or when tax exemptions are applicable.

Along with the tax return, you need to provide all documentation that can prove the purchase price and the selling price of the digital assets. For example, this could be a confirmation from the platform through which the digital asset was traded, a confirmation from a cryptocurrency exchange, a contract, or similar documents. If an individual cannot provide evidence of the purchase price, it is considered to be 0 RSD, meaning that the tax base for capital gains tax would be the entire selling price.

Example: So, if you bought through the crypto exchange platform for 500 EUR and sold for 1000 EUR, and you provide appropriate proof, you will pay tax on a profit of 500 EUR / – 500 EUR x 15% = 75 EUR. If you bought P2P and don’t have adequate written proof of purchase for 500 EUR, but sold for 1000 EUR, the tax payable is 150 EUR (15% of 1000 EUR = 150 EUR).

In practice, there are still open questions regarding the taxation of digital assets, and we expect further opinions and instructions from the Ministry of Finance on this matter. 

Is it necessary for the employer to pay any taxes when transferring digital assets to an employee?

Income, as defined by the Personal Income Tax Law, includes earnings derived from employment, as well as other income of employees. In this context, if an employer transfers digital assets to its employees, such employee income is considered earnings. Therefore, there is an obligation to pay regular income tax and contributions that are typically paid when salaries are disbursed.

How are virtual currencies and digital tokens recognized, how are virtual currencies and digital tokens valued, how is digital assets recorded, and are there any specific considerations when it comes to mining?

Accounting regulations, as well as the International Financial Reporting Standards (IFRS), do not currently define the accounting treatment of digital assets but provide recommendations. Virtual currencies and digital tokens are typically recorded based on existing rules. In practice, virtual currencies are often recorded as intangible assets or inventory. When digital assets are temporarily held for further sale, they are accounted for as inventory, while in all other cases, they are recorded as intangible assets.

Considering the diversity of digital tokens and the different nature of rights arising from such tokens, each token needs to be analyzed individually to ensure correct accounting treatment. The Ministry of Finance has explained that digital tokens can generally be accounted for as intangible assets, inventory, financial instruments (equity or debt, excluding cash), advance payments, or specific property rights in real estate, machinery, equipment, etc.

Is it necessary for customers to issue an EF when selling digital assets through a crypto exchange, and what tax category and code should be selected when creating an EF?

When companies sell digital assets to crypto exchange, they are required to create an electronic invoice. On this occasion, it is necessary to select the tax category E and the basis code 25-1-1a.

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