Tax on Crypto Earnings in Serbia

Cryptocurrencies have rapidly gained traction as an innovative investment and payment method. With their rise, questions about their legal and tax treatment have become increasingly relevant, particularly in Serbia, where the Law on Digital Property and the Law on Personal Income Tax provide guidance. However, complexities arise when addressing tax on crypto earnings in Serbia, especially when salaries are paid in digital assets.

This article explores the tax implications of cryptocurrency earnings in Serbia, providing a detailed and practical understanding of income tax, payroll tax, and capital gains tax while considering the nuances of applicable laws and real-world scenarios.

Payroll Tax for Cryptocurrency Salaries

In Serbia, the payroll tax is generally paid by the employer, who acts as the taxpayer. According to Article 101 of the Law on Personal Income Tax, withholding tax is calculated, suspended, and paid into a prescribed account at the time of income payment, following the regulations effective on that date.

However, if the employer is a non-resident, the responsibility shifts to the employee (taxpayer). In such cases, the taxpayer must:

1. Submit a PP OPO tax form.
2. Calculate and report the tax within 30 days of receiving the income.

When Does Cryptocurrency Income Become Taxable?

Cryptocurrency income becomes taxable when the right of disposal is transferred to the taxpayer. This occurs when the employer transfers the digital assets to the taxpayer’s cryptocurrency wallet.

At this point:

• Payroll tax must be paid based on the value of the cryptocurrency at the time of transfer.
• The taxpayer is obligated to file the relevant tax form promptly.

Legal Interpretation of Taxable Events

The Law on Personal Income Tax does not explicitly address earnings in digital assets, nor any specific tax on crypto earnings in Serbia. However, Article 14, paragraph 2, which defines taxable events for securities, provides a useful analogy. It states that securities received from an employer become taxable when the recipient acquires the right to dispose of them. Applying this principle to cryptocurrencies, the taxable event occurs when the digital assets are transferred to the employee’s wallet.

Capital Gains Tax on Cryptocurrency Earnings

If the taxpayer holds the cryptocurrency instead of immediately converting it to fiat currency, any subsequent sale may result in a capital gain.

In Serbia:

1. Capital gains tax is 15%, calculated as the difference between the purchase price and the sale price.
2. If the cryptocurrency is sold immediately after receipt, there is no capital gain.
3. If the cryptocurrency appreciates before being sold, the taxpayer must report and pay tax on the gain.

Determining the Purchase Price

Accurate documentation of the purchase price is crucial for calculating capital gains. In cases where documentation is unavailable, the tax administration may use the lowest recorded market price of the cryptocurrency from the previous year as a reference.

The Ministry of Finance has clarified this principle, which is applied analogously to shares. For cryptocurrencies, i.e. for Tax on Crypto Earnings in Serbia the same method is used to estimate the purchase price when specific transaction data is missing.

Practical Example: Calculating Taxes for Cryptocurrency Salaries

Let’s consider a scenario:

• An employee receives a salary of 1 Bitcoin (BTC) from a non-resident employer.
• At the time of receipt, 1 BTC is valued at €20,000.

Payroll Tax Calculation

The employee must calculate payroll tax based on the value of the cryptocurrency at the time of transfer:

1. Base value: €20,000 (converted to RSD at the official exchange rate).
2. Payroll tax rate: Tax is applied to the base value according to Serbian tax laws.
3. PP OPO form: Submitted within 30 days.

Capital Gains Tax Scenario

• If the employee sells the Bitcoin immediately, there is no capital gain.
• If the employee holds the Bitcoin and sells it later for €25,000, the capital gain is €5,000.
• The taxpayer must report and pay 15% capital gains tax on the €5,000 profit.

Filing Tax Forms and Compliance

Payroll Tax

The employer, if resident, calculates and remits the payroll tax at the time of payment. For non-resident employers, the taxpayer is responsible for filing the PP OPO form and paying the tax.

Capital Gains Tax

Taxpayers must file a tax form within 120 days from the end of the quarter in which the capital gain was realized. The tax authority then determines the final tax liability.

Challenges in Practice

Cryptocurrency taxation in Serbia faces several practical challenges:

1. Documenting Purchase Price: Due to the decentralized nature of cryptocurrencies, many taxpayers struggle to provide accurate documentation.
2. Market Value Fluctuations: Cryptocurrencies are highly volatile, complicating the determination of taxable amounts.
3. Ambiguity in Laws: Current laws provide a framework but lack explicit provisions for some scenarios, such as paying salaries in cryptocurrencies.

Practical Resolution

In cases where the purchase price cannot be documented, the taxpayer must rely on the lowest recorded market price, as interpreted by the Ministry of Finance. Additionally, the purchase price of cryptocurrency salaries is determined by summing:

• The base value on which payroll tax was paid.
• The value of the cryptocurrency salary, converted into dinars, euros, or another currency.

Conclusion

Taxation of cryptocurrency earnings in Serbia is governed by existing tax laws, which provide a foundational framework but leave room for interpretation. Salaries paid in cryptocurrencies are subject to payroll tax, and any capital gains from trading these assets are taxable.

As interest in digital assets continues to grow, clarity from the Tax Administration will be critical for establishing best practices. For now, individuals and businesses must carefully document transactions and adhere to filing requirements to ensure compliance.

For more insights, refer to our Legal Guide for Cryptocurrencies in Serbia.