Current global conflicts have caused significant changes in financial markets – from inflationary pressures to increased volatility on stock exchanges. In such conditions, Bitcoin initially experienced a sharp decline, followed by a period of stabilization, though with continued pronounced fluctuations in value. Experienced investors see such cycles as an opportunity for “entry”, as these kinds of market corrections have proven to be good entry points – provided there is adequate knowledge and a well-defined strategy. In such situations, the tax aspect is often overlooked, which is why proper tax planning in the field of digital assets – especially during the realization of potential profits in a bull cycle, when the value of digital assets reaches its peak – is a key component of a sustainable investment strategy. Starting from the current situation, and taking into account both those who are planning to enter the digital asset market and those already present, the following text provides an overview of the tax treatment of digital assets for both individuals and legal entities.
How and in what ways can digital assets be acquired in the Republic of Serbia?
The acquisition of digital assets is permitted for both individuals and legal entities in accordance with the Law on Digital Assets. In practice, it is most commonly carried out through foreign online platforms such as Crypto.com and Binance, as well as through domestic service providers related to digital assets (so-called crypto exchanges), such as ECD and Crypto12. Both exchanges hold operating licenses issued by the National Bank of Serbia, which makes them legally authorized platforms for the purchase and sale of digital assets, for both individuals and legal entities.
In the world of digital assets, miners play an important role, as they provide the hardware infrastructure necessary for the functioning of the blockchain. They can be understood as a type of validator of all transactions carried out on the blockchain, and for their efforts, these validators receive a form of reward – namely, units of a cryptocurrency associated with that blockchain. Mining is one way of acquiring digital assets under Serbian law, in accordance with Article 6, paragraph 2 of the Law on Digital Assets. From a tax perspective, the relevant provisions are those of the Law on Personal Income Tax and the Law on Corporate Income Tax, since both individuals and legal entities may engage in mining.
When individuals engage in “mining,” they generate income outside of a registered activity, and such income is therefore subject to tax on other income at a rate of 20%, with the recognition of standardized expenses. On the other hand, income earned within a registered activity is taxed as income from self-employment at a rate of 10% (Law on Personal Income Tax, Article 38). As for legal entities, income generated from mining is included in taxable profit, which is subject to a 15% tax rate after the deduction of expenses, in accordance with the Law on Corporate Income Tax. Any legal entity or entrepreneur that acquires virtual currencies must notify the National Bank of Serbia. However, if a legal entity purchases them through a domestic licensed crypto exchange, the exchange itself reports to the National Bank of Serbia. Individuals who hold or trade virtual currencies are not subject to a reporting obligation to the National Bank of Serbia.
Minting is a process somewhat similar to mining, but it refers to the creation of tokens. It is a process in which an individual independently creates or converts a digital file (such as an image or video) into a unique, fungible, or non-fungible token (NFT), which is permanently recorded on the blockchain. This process serves as proof of ownership and authenticity, making the content secure. From a tax perspective, capital gains tax at a rate of 15% is paid on the difference between the documented minting costs and the income generated from the sale of the created token. Holders of digital tokens are not subject to a reporting obligation to regulatory authorities. The National Bank of Serbia records only virtual currencies.
Tax treatment of the disposal of digital assets
Holding digital assets in ownership on a hardware or software wallet is not subject to taxation. However, the disposal of digital assets may result in a capital gain or capital loss and therefore constitutes a “tax event”, in accordance with the Law on Personal Income Tax and the Law on Corporate Income Tax. In the case of generating a capital gain, which represents the difference between the acquisition price (i.e., the price at which the digital asset was obtained) and the selling price, the taxpayer is obliged to pay capital gains tax at a rate of 15%. In the case of generating a capital loss, i.e. when digital assets are sold below the price at which they were purchased, if the taxpayer can document the moment of “entering into crypto” (for example, with an exchange statement or a transaction screenshot), such a capital loss may later be used to offset capital gains tax when another digital asset is sold. If an individual does not have proof of the acquisition value, the tax is calculated on the entire selling price. Individuals are required to submit a capital gains tax return within 120 days after the end of the quarter in which the gain was realized through the sale (Form PPDG-3R), while legal entities and entrepreneurs report capital gains after the end of the calendar year, when preparing their annual financial statements.
Tax Reliefs
• If the taxpayer is an individual or entrepreneur, the obligation to pay capital gains tax does not arise if the digital assets were owned for at least 10 years before their sale.
• The Law on Personal Income Tax (ZPDG) provides for a 50% exemption from capital gains tax for a taxpayer who, within 90 days from the sale of digital assets, reinvests the proceeds into: (1) the share capital of a company that is a tax resident of Serbia, or (2) the capital of an investment fund established in accordance with domestic regulations, provided that the fund’s place of business is located within the territory of the Republic of Serbia. The legislator also sets the condition that the company into which such funds are invested must not reduce its capital in the year in which the investment was made, nor during the following two years. Otherwise, the taxpayer loses the right to the tax exemption and is obliged to notify the tax authorities.
• If the investment is made after the expiration of 90 days from the sale of digital assets, but within 12 months from the sale, instead of a tax exemption, the taxpayer is entitled to a refund of 50% of the paid capital gains tax. In any case, the tax return must be submitted.
• Amendments to the Corporate Income Tax Law provide that a legal entity’s capital gain will not be taxed if the taxpayer, within the same calendar year, invests in the share capital of a company or an investment fund established in accordance with domestic regulations, provided that the center of business activities of such company is also located in the Republic of Serbia.
Is the acquisition of digital assets by gift a taxable event?
With the amendments to the Property Tax Law in 2020, the scope of inheritance and gift taxation was expanded to include digital assets. If the taxpayer is in the first line of inheritance in relation to the deceased or donor, they are exempt from inheritance and gift tax. If the taxpayer is in the second line of inheritance in relation to the deceased or donor, they will pay tax at a rate of 1.5%. In all other cases, the tax rate for transfer by gift or inheritance is 2.5%.
