In addition, Highgate Law & Tax is also celebrating its win in the “Capital Markets” category, proving itself to be a comprehensive law firm with an extensive portfolio of expertise and the ability to successfully navigate diverse legal challenges.

The awards gala evening, which was organized by the media and educational group EPRAVO Group and the weekly TREND, was held at the Double Tree by Hilton hotel in Bratislava. For Highgate Law & Tax it was not only an opportunity to celebrate its success, but also to thank its clients and partners for their trust and support, without which this milestone would not have been possible.

This double triumph confirms Highgate Law & Tax’s excellent reputation for legal and tax services and reinforces its position as a leading player in the legal services market in Slovakia.

Článok Highgate Law & Tax and its double triumph in the prestigious Law Firm of the Year competition je zobrazený ako prvý na Highgate.

The MiCA regulation, commonly known as. The Markets in Crypto-Assets Regulation (or MiCA for short ) is a robust regulatory framework for cryptoassets within the European Union(EU).

The EU’s main objectives that led it to adopt MiCA were:

1. Creating a harmonised regulatory environment in which cryptoasset service providers and issuers of different cryptoassets can operate across the EU without the need for 27 different permits and licences;
2. Providing protection to consumers who purchase cryptoassets or use other services of cryptoasset providers;
3. Creating legal certainty for cryptoasset service providers with a clear set of rules for different services (token issuance, exchange, custody, etc.);
4. Taking EU leadership in the global regulation of cryptoassets to boost technological and economic innovation in the EU.

The MiCAs are subject to modification by:

1. Rules for the issuance of cryptoassets (known primarily as “ICOs”), the obligations of their issuers, and the rules for the admission of cryptoassets to trading on a cryptoasset trading platform;
2. Rules for the authorisation of issuers of asset reference tokens ( ARTs) and issuers of electronic money tokens ( EMTs);
3. The procedure, requirements and process for the authorisation (licensing) of cryptoasset service providers;
4. Protection of clients of cryptoasset service providers and holders of cryptoassets issued and cryptoassets admitted to trading.

Although MiCA is a comprehensive regulation, it does not regulate the following areas directly related to cryptoassets:

1. NFTs (which are therefore not yet regulated); and
2. Tokenised financial instruments (which are subject to the DLT Regulation and the regulation of “standard” financial instruments)).

MiCA applies in the European Union from 30.6.2024 in relation to ARTs and EMTs and from 30.12.2024 in the rest, in particular in relation to cryptoasset service providers.

In connection with the new MiCA regulation, we provide legal services to clients currently doing business with cryptoassets (in particular through trade licenses to provide virtual currency exchange services and virtual currency wallet services), as well as to clients interested in operating in this area as a regulated institution, on how to comprehensively prepare for the new MiCA regulation, including preliminary consultations with the National Bank of Slovakia on their (planned) business model.

The MiCA Regulation and what it entails was also covered more comprehensively in our video podcast, which you can watch here:

At the same time, we will also discuss the regulation and taxation of cryptos and implementation in investment structures in more detail at conference on cryptosto be held in October 2024.

What activities with crypto-assets will require a MiCA permit?

According to MiCA, a permit will be required for:

1. Public offering of tokens other than ART and EMT;
2. Acceptance of tokens other than ART and EMT for trading on a cryptoasset trading platform;
3. Public offering of ARTs and their admission to trading;
4. Provision of cryptoasset services.

What are the benefits of a MiCA permit?

MiCA is a harmonised regulation of crypto-assets, i.e. an authorisation granted in one EU country is valid in other EU countries. Therefore, for example, public offerings of crypto-assets will be feasible throughout the EU and it will not be necessary to analyse legislation in individual Member States for this purpose. Also, the provision of cryptoasset services will be able to be carried out across borders on the basis of the so-called passporting, as MiCA will make cryptoasset services subject to uniform rules across the EU.

At the same time, by imposing different conditions on cryptoasset service providers or token issuers to carry out their activities, MiCA provides a greater guarantee for the security of cryptoasset investments and investors/clients compared to the completely unregulated environment in many EU countries.

The MiCA also establishes a level playing field for cryptoassets business across the EU, thus creating the prerequisite for a healthy business environment in this area.

What are the consequences of doing business without a permit under the MiCA?

In the event of any activity being carried out in contravention of the MiCA, i.e. even in the case of activities requiring authorisation under MiCA, the competent authorities of an EU Member State, in Slovakia the National Bank of Slovakia, have the power to impose sanctions under national law, which may be administrative or criminal sanctions. In particular, under the MiCA, Member States must ensure that the following financial sanctions are imposed:

1. in the case of a natural person, a maximum administrative fine of at least EUR 700 000;
2. in the case of a legal person, a maximum administrative fine of at least EUR 5 000 000;
3. for certain infringements by a legal person, fines of at least 3 % to 12,5 % of the total annual turnover; and
4. maximum administrative fines of at least twice the amount of the gains made or losses avoided as a result of the infringement.

Token issuance and admission to trading

Tokens other than ART and EMT

The public offering of tokens other than ART and EMT will not be possible in the EU unless a cryptoasset whitepaper is produced. This document will then have to be notified to the NBS at least 20 working days before the date of its publication, without the approval of the NBS being required.

Public offerings of these cryptoassets are subject to similar exemptions as public offerings of securities under the Prospectus Regulation.

The development, notification and publication of a whitepaper are also required for the acceptance of tokens other than ARTs and EMTs for trading on a cryptoasset trading platform.

ART and EMT

The public offering of ART for legal entities other than credit institutions will be possible only upon the granting of permission by the NBS. Again, a whitepaper is required to be produced and published.

The public offering of EMT will only be possible for credit institutions or electronic money institutions that develop, announce and publish a whitepaper on the relevant EMT.

Cryptoasset service providers

Who are the cryptoasset service providers, the so-called. CASP?

MiCA introduces a new concept of “Crypto-asset service providers” ( CASPs), which are regulated persons who will be authorised to provide cryptoasset services within the European Union.

CASPs will be authorised to provide cryptoasset services and will be required to comply with a number of requirements, in particular:

1. Prudential (capital) requirements, which for CAPS must be at least EUR 50 000 to EUR 150 000 (depending on the services provided) or one quarter of the fixed overheads for the previous year, whichever is higher. CASP may meet these requirements with its own resources, an insurance policy, or, where appropriate, a. a comparable guarantee, or a combination thereof.
2. Personnel requirements, namely, both the requirement that the members of the CASP’s governing body be of sufficiently good repute and of sufficiently good knowledge, skill and experience to manage the CASP, and that all direct or indirect shareholders and members who hold qualifying interests in the CASP be of sufficiently good repute.
3. The internal rules that will govern the CASP’s activities, e.g. Regulations relating to the procedure for segregation of crypto assets and client funds, complaint handling procedures, governance mechanism, internal control mechanisms, policies and procedures for identifying, assessing and managing risks, including money laundering and terrorist financing risks, business continuity plan, etc.
4. Other requirements, e.g. IT provisioning requirements, or the location and place of effective management in the EU.

What are cryptoasset services under MiCA?

Cryptoasset services are those services and activities related to any cryptoasset under the MiCA:

(a) providing custody and management of cryptoassets on behalf of clients;
(b) operating a cryptoasset trading platform;
(c) the exchange of cryptoassets for funds;
(d) the exchange of cryptoassets for other cryptoassets;
(e) the execution of orders relating to cryptoassets on behalf of clients;
(f) placement of crypto-assets;
(g) receiving and transmitting orders relating to cryptoassets on behalf of clients;
(h) the provision of advice on cryptoassets;
(i) the provision of cryptoasset portfolio management;
(j) the provision of cryptoasset transfer services on behalf of clients;

Who will need a CASP licence under MiCA?

In practice, any legal persons or businesses that wish to carry out the above cryptoasset activities, respectively. to provide the above cryptoasset services in the European Union will need a CASP authorisation. This includes, for example, the following current business models:

(a) Various cryptocurrency platforms and exchanges;
(b) Cryptocurrency wallet providers;
(c) Managers of various cryptomining strategies;
(d) Intermediaries of exchange of cryptocurrencies for FIAT currency or other cryptocurrency;
(e) Advisory services for investments in cryptocurrencies or cryptoassets in general.

How long does it take to get a CASP license?

(a) Prior to the actual hearing of an application for a permit before CASP, the recommended to consult the business plan of the prospective CASP with the NBS and then proceed with the preparation of the application itself – this process may take varying lengths of time depending on the readiness of the CASP, in our experience with licensing proceedings for financial institutions, approximately 3 months should be expected;
(b) Once the application has been prepared, the application shall be submitted to NBSwhich must confirm whether the application is complete within 25 working days of receipt of the application;
(c) If the application is not complete, NBS will set a deadline for completion of the application (this deadline will be individual depending on the extent of the required completion, we expect this deadline to be between 30 and 60 days). If the application is complete, NBS will notify the applicant; if it is not complete even within the additional time period, NBS will reject the application.
(d) Within 40 business days of the submission of a complete application, NBS will issue a decision (grant permission / deny permission). This period may be suspended for 20 working days if the NBS requests further documentation.

What is Highgate’s role in obtaining a permit under MiCA?

What are our services?

Given that no one except CASP and some financial institutions will be allowed to provide cryptoasset services under MiCA, we advise clients both in analysing their business models to determine whether they fall under the new regulation or other regulation within the financial sector (e.g. collective investment or provision of investment services and activities) and in the case of applying for a CASP authorisation before the National Bank of Slovakia.

If the client decides to apply for a CASP licence, we represent the client from the initial consultation of its business plan with the National Bank of Slovakia and subsequently in the preparation of the licence application, including the individual annexes, in cooperation directly with the client and, where appropriate, its other advisors, for example, in the field of IT security. After the application for a licence has been submitted, we represent the client before the National Bank of Slovakia in the licensing procedure itself, in which the National Bank of Slovakia will comprehensively assess the application with all its annexes.

Given our experience with ICOs and STOs, as well as with securities issues, we also advise clients on the preparation of whitepapers for various types of tokens, the preparation of their marketing communications for the purpose of token issuance in accordance with the requirements of MiCA, and the fulfillment of obligations to the NBS in connection with the issuance of tokens or their admission to trading.

What is our experience in cryptoassets legal advice?

Although MiCA is a relatively new piece of legislation, the regulation of cryptoassets has long been comprehensively addressed, whether in the context of taxation, in the field of tokenised financial instrumentsor by speaking directly at NBS conference on MiCA. In the past, we have provided legal and tax advice to clients in, for example:

(a) the creation of a platform for cryptocurrency trading, including the legal structuring of staking strategies,
(b) the primary issuance of hybrid tokens, as well as their placement on a decentralised exchange as part of a secondary sale,
(c) primary token issuance (ICO) and security token issuance (STO),
(d) the establishment and management of alternative investment funds located in offshore jurisdictions and investing in crypto-assets,
(e) structuring the business model in connection with the creation of cryptocurrency portfolio management services,
(f) assessing the compliance of the cryptocurrency business model with the regulation of payment services and electronic money,
(g) creating investment products investing in crypto assets for client customers,
(h) creating a study for the client aimed at establishing the legal and tax framework for the operation of its internal token system.

At the same time, as we have been involved in financial regulation for a long time and thus represent clients in authorisation, registration and sanction proceedings before the National Bank of Slovakia, our know-how is an elementary prerequisite for qualified representation of a client before the National Bank of Slovakia in the licensing procedure for CASP activities, in the preparation of white papers or in applications for a public offering of tokens or their admission to trading. Demonstrating our extensive experience in the area of financial regulation are the successful conferences (some of the largest of their kind in the country) that we have organised, whether regarding real estate financing or regarding the establishment and operation of investment funds.

If it is not clear to you whether your business model will be regulated by MiCA and therefore whether you should prepare for licensing proceedings before the National Bank of Slovakia, do not hesitate to contact our experts:

1. Peter Varga, e-mail: peter.varga@hg.amcef.com
2. Roman Baranec, e-mail: roman.baranec@hg.amcef.com

Alternatively, you can discuss your specific questions with our partner Peter Varga, who has long been involved in the regulation and taxation of cryptocurrencies:

If you are interested in the taxation of cryptocurrencies, please do not hesitate to contact us.

Článok Licensing procedures under the MiCA Regulation je zobrazený ako prvý na Highgate.

Článok Hello world! je zobrazený ako prvý na Highgate.

The full recording of the conference can be found here:

If you are interested in this topic, please do not hesitate to contact us.

Článok Peter Varga at the NBS conference on the digitalisation of the capital market je zobrazený ako prvý na Highgate.

The full recording of the conference can be found here:

If you are interested in this topic, please do not hesitate to contact us.

Článok Peter Varga at the NBS conference on MICA regulation and overall regulation of crypto assets je zobrazený ako prvý na Highgate.

Peter Varga talked more about this in his podcast: https://hg.amcef.com/zdanovanie-krypta-na-slovensku-po-novele/

However, the amended law has brought about some major changes that are sure to have a significant (and positive) impact on the use of and investment in cryptocurrencies in the country. The tax regime for cryptocurrencies has been changed, which has the potential to impact cryptocurrency investment and also improve the fair administration of taxes in this area. However, these changes only affect virtual currencies. They do not apply to other forms of crypto assets.

In this article, we take a closer look at the main tax changes and their potential implications for public finances. For more on this topic, follow Peter Varga ‘s Linkedin or watch the podcast mentioned above.

Existing burden on sales revenue

To date, the tax burden on income from the sale of cryptocurrencies to FBOs has been one of the highest in the EU. It has also been less favourable compared to most other financial assets, including shares. Profits from the sale of virtual currencies by individuals (non-business persons) were taxed at a rate of 19% or 25%, depending on the amount of annual income. In addition, health insurance premiums were also payable.

Extremely high tax and levy obligations have not only led to an outflow of cryptocurrency owners to countries with lower tax burdens, but also a higher risk of non-payment of taxes. Conversely, countries such as Malta, Germany and Portugal offer zero tax on cryptocurrency income, which has attracted many investors. It can therefore be argued that there was no direct proportionality: the higher the tax rate, the higher the revenue to public budgets.

The new situation with lower tax rates, at 7 per cent, brought about by the amendment is undoubtedly much more favourable. The lower tax burden could even have a positive impact on public budget revenues. It could motivate investors to stay in Slovakia and fulfil their tax obligations more properly. Moreover, based on our experience, it may encourage young people from abroad to move to Slovakia.

Changes in basic concepts

In addition to modifying certain processes, the amendment also introduced new definitions and concepts. These are key to understanding the new cryptocurrency tax regime and its application in practice. Here are some of the key changes to the amended law:

Virtual currency

According to the amendment to the Income Tax Act, virtual currency is defined as a digital medium of value that meets the following criteria:

• is neither issued nor guaranteed by a central bank nor a public authority,
• is not necessarily tied to legal tender,
• does not have the legal status of currency or money,
• is accepted by certain natural or legal persons as a means of payment,
• can be transferred, stored or traded electronically.

This definition clearly distinguishes virtual currencies from traditional legal tender and allows their identification and classification for tax purposes. However, it also clearly distinguishes them from other types of crypto-assets, thereby subjecting them to different tax treatment.

Stablecoin

Stablecoin means any virtual currency whose price is relatively stable because of its peg to a particular commodity, currency or because its supply is regulated by a specified algorithm.

Staking

Staking refers to the increment of virtual currency obtained by verifying transactions in a virtual network. This means that virtual currency holders can earn a reward for their participation in maintaining and securing the network. Staking has become an important part of cryptocurrency ecosystems and is one of the mechanisms by which the security and trustworthiness of these networks is achieved.

There has also been a definitional change in the concept of “sale of virtual currency“. Previously, the sale of virtual currency was considered to be the exchange of virtual currency for property, other virtual currency, the provision of a service or the transfer of a service for consideration. Today, the sale of a virtual currency is no longer the exchange of a virtual currency for another virtual currency. However, the exchange for stablecoin is already a sale.

Acquisition price

In the previous regulation, there was a lack of a clear rule for determining the acquisition of virtual currency in some cases, frequently occurring in the economy. Such vague/insufficient regulation posed a risk of double taxation. With the amendment, this technical uncertainty has become a thing of the past, at least for the purchase of goods and services. The legislation now explicitly sets out how the purchase price of a virtual currency is to be determined when trading or providing services. This measure marks an important step towards clearer and more precise taxation of cryptocurrencies, which should make life easier for crypto holders and increase legal certainty in this respect.

A time test to encourage long-term investment?

One of the main points of this amendment is the introduction of the so-called. A time test. Investors who hold cryptocurrency for more than one year prior to the sale (and it was not part of the business assets) will be able to include this income in the special tax base at a favourable rate of 7 per cent. The move is intended to incentivise long-term investment, stabilise the market and move closer to countries that are described as crypto havens. If an individual sells their cryptocurrencies after one year of their acquisition (and they were not part of business assets), they will include this income in the special tax base, which will be subject to a reduced tax rate of 7 percent.

Should a person decide to sell the cryptocurrency before the end of the year, such income will be included in the tax base (sub-base) together with other income and the same tax treatment as today, i.e. 19% or 25%, will apply, depending on the amount of the total taxable income.

The fact how long the cryptocurrency has been in the taxpayer’s possession is called. The burden of proof is on the taxpayer. i.e. it is the taxpayer’s burden to prove this fact. In a particular situation, it then depends on the manner in which he acquired and held the cryptocurrency. For example. if he uses custody services, then a statement from the service provider may serve as proof. For a self-hosted address, identification of the wallet and an entry on the blockchain should be sufficient. A receipt for payment for cryptocurrency can also be proof, although it will only be sufficient on its own in some situations.

Health levies for cryptocurrencies

Another pleasant change is that health insurance premiums will no longer be paid. This applies to all income from the sale of cryptocurrency, unless the cryptocurrency was part of a business asset, regardless of the time test. This exemption applies to all income from the sale of cryptocurrencies after 1. January 2024, but does not apply to other types of crypto assets. This change will have a major impact on short-term investors and cryptocurrency traders who will no longer be burdened by the health levies. This exemption will also not apply to legal entities and natural persons conducting business who hold virtual currencies in their business assets.

Further changes to the law

Under the new legislation, income from the sale of cryptocurrencies acquired by a person through mining or staking will be included in the tax base (partial tax base) only in the taxable period when the sale of the virtual currency was made. This will allow for the positive results to be set off against any losses from other operations.

However, when exchanging virtual currency for another, there is an apparent contradiction with what was announced as the purpose of the amendment. The amendment was intended to make the exchange tax-free, but in the context of a non-standard legislative process, a vague provision has been created that leaves somewhat of a status quo.

The amendment also added the method of valuation if the virtual currency was acquired by selling goods or services. The entry price from 1. January 2024 will be the real value of the virtual currency. Income from the sale of a virtual currency is part of the tax base in the tax period in which the sale takes place (e.g. exchange of virtual currency for property, etc.) using the valuation of the exchanged currency at its fair value on the date of the exchange.

Cryptocurrency payments up to EUR 2,400 per year

The amended law comes with a tax exemption that applies to cryptocurrency payments. Under the new legislation, cryptocurrency payments of up to €2,400 per year will not be taxed. This is a positive signal for those who use cryptocurrencies for current payments and small transactions. This removes the need to track and record these smaller payments on tax returns. Should a taxpayer receive income in excess of €2,400 in a tax year from the exchange of virtual currency for property or services, only the difference between the income and expenses above this amount will be taxed. This means that tax will only be payable on the net income above this limit, which will facilitate small-scale cryptocurrency payments and increase their use in current transactions.

Standardisation and technical challenges

There is some standardisation through the adoption of various legislative measures, especially at EU level, but each country sets its own policy on direct taxes. With this amendment to the Income Tax Act, we can see that Slovakia has decided to take its first step and move taxation to a higher level. Overall, the adoption of new legislative measures in the area of cryptocurrency taxation in Slovakia is an important step towards standardisation and improvement of the legal framework. While the amendment to the Income Tax Act has brought positive changes and shows a willingness to adapt, it should be borne in mind that there are also risks associated with the weak legislative process and long-standing shortcomings in the taxation of cryptocurrencies.

Going forward, it is essential to continue with the technical adjustments that have now been overlooked, in particular, to take into account the needs of cryptocurrencies and to ensure fair and efficient taxation. Making crypto-enthusiasts more attractive and attracting new crypto-enthusiasts is a first step, but the long-term goal should be to create clear and uniform rules that ensure effective taxation and minimise legal uncertainty.

A video podcast on the topic “Taxation of cryptos in Slovakia after the amendment” can be viewed below the article.

If you are interested in this topic, please do not hesitate to contact us.

Článok A new era in the taxation of cryptocurrencies in Slovakia: amendment to the Income Tax Act je zobrazený ako prvý na Highgate.

As of 23.3.2023, the EU applies the so-called. The Regulation on a pilot regime for market infrastructures based on distributed transaction database technology (“DLT Regulation“)[1], which establishes a pilot regime for market infrastructures based on distributed transaction database technology (“DLT“) and aims to test the trading and settlement of transactions in crypto-assets that qualify as financial instruments (“tokenised financial instruments”). While until now the issuance of tokenised financial instruments in the EU has only been possible as long as Member States’ laws regulated and allowed for it, the DLT Regulation creates a legal framework for their implementation across the EU. This will not only help issuers, but also advisers, who can rely on harmonised legislation and do not need to research the relevant legislation in each Member State where the distribution or issuance is to take place.

What are tokenised financial instruments (for example, tokenised shares or bonds)?

First of all, the EU’s efforts (also outside MiCA[2]) to define basic concepts should be seen as a clear signal of the EU’s intention to have a comprehensive and uniform legislative grasp of economic transactions within the “crypto world”. The DLT Regulation therefore defines DLT as a type of technology, albeit in a rather technically complicated manner. It states that it is a ‘distributed transaction database’, which is an information repository that holds records of transactions and is shared across a set of DLT network nodes and synchronised between DLT network nodes, using a consensus mechanism (rules and procedures by which agreement is reached between DLT network nodes that a transaction is verified). In simplified terms, the NCB describes DLT as a technology that enables the sharing of records across a computer network.3 One of the most well-known types of DLT is Blockchain.

From a financial regulatory point of view, the DLT Regulation significantly interferes with some fundamental concepts of financial law. In fact, the DLT Regulation modifies MiFID II[4] by introducing a new type of financial instrument. A financial instrument is defined as a financial instrument that is issued through distributed transaction database technology. As this is a major conceptual change, The DLT Regulation introduces only the so-called. pilot scheme . Jeho výsledky sa budú postupne analyzovať, čo bude mať za následok prípadné ďalšie legislatívne úpravy.

At the same time, however, the DLT Regulation will not apply to all financial instruments, but only to those that the DLT Regulation defines as follows:

(a) Shares (subject to a limitation on the maximum or provisional market capitalisation of their issuer);

(b) Bonds, other forms of securitised debt or money market instruments (the limitations are primarily on the maximum amount of the issue and such a financial instrument cannot contain a derivative); and

(c) Some shares or interests in so-called. UCITS funds

(“Tokenised Financial Instruments“).

In practice, this means that in the Slovak legal environment it should be possible to issue only the above mentioned Tokenised Financial Instruments under DLT.

Legal framework for the issuance of Tokenised Financial Instruments

DLT The tool creates the so-called. It creates a DLT market infrastructure to exist alongside the infrastructure for trading and settling trades in existing financial instruments. This new infrastructure consists of the following systems:

(a) DLT Multilateral Trading Facility (“DLT MTF“), which is a multilateral trading facility that only accepts Tokenised Financial Instruments for trading;

(b) DLT Settlement System (“DLT SS“), which is a settlement system that settles transactions in Tokenised Financial Instruments against payment or against delivery; and

(c) the DLT Trading and Settlement System (“DLT TSS“), which combines the services provided by the DLT MTF and the DLT SS.

Tokenised financial instruments will be admitted to trading on the DLT MTF, respectively. DLT TSS, while the settlement of these financial instruments will take place on DLT SS, resp. The issuance and subsequent trading of Tokenised Financial Instruments will be subject to the current regulation that also applies to “non-tokenised” financial instruments (in particular the Central Securities Depositories Regulation[5] and the Markets in Financial Instruments Regulation[6]), however, the DLT Regulation allows for certain exemptions to apply in certain circumstances. Among the most important exemptions of this pilot regime are:

(a) Elimination of the obligation to report full and accurate details of transactions in financial instruments.

(b) Exclusion of provisions on book-entry form, transfer order and securities account. Thus, the DLT Regulation does not create a separate category of “tokenized” form of a security, but if the book-entry form is incompatible with DLT under the law of a Member State, it may not apply for the purposes of the Tokenized Financial Instruments.

(c) Exclusion of financial settlement provisions. Settlement of Tokenised Financial Instruments will also be possible through non-cash money, also in tokenised form or also through electronic money tokens.

Who will operate and provide the infrastructure for the issuance of tokenised financial instruments?

To operate DLT systems, it will be necessary to obtain a permit from the National Bank of Slovakia. The operation of DLT MTF, resp. For example, a securities trader or an exchange will be able to apply for a DLT TSS. A central depository will be able to apply to operate a DLT SS. At the same time, other legal entities will also be able to apply for authorisation to operate DLT systems if they also apply for the relevant “parallel” authorisations (in a non-DLT environment), e.g. However, they will also be able to apply for a permit to the extent that it is sufficient for them to operate exclusively in the DLT environment).

Special permits to operate DLT systems will be valid throughout the EU, but only for a period of six years, given that the DLT Regulation constitutes a test regime for the issuance of Tokenised Securities.

Who will the issuance of Tokenised Financial Instruments be for in practice?

As it follows from the above, the DLT Regulation creates a pilot scheme consisting in the creation of infrastructures that are parallel to the existing infrastructures in the current financial market (depositary, MTF). At the same time, the applicability of this pilot scheme in individual Member States may vary depending on what regulation of tokenised financial instruments already exists in the national legislation of individual Member States. The European Securities and Markets Authority (“ESMA“) in its opinion on the DLT pilot regime[7] dated 27 September 2022 states[8] inter alia that:

(a) DLT Regulation should allow not only the tokenization of existing (issued) financial instruments, but also the issuance of new “from inception” tokenized financial instruments; and

(b) DLT Regulation will also allow OTC trading of Tokenised Financial Instruments.

Motivation for financial market participants to use DLT infrastructure for the purpose of issuing Tokenised Financial Instruments, resp. In particular: (i) transparency, (ii) eliminating the need for intermediation (facilitating direct access to secondary markets); and (iii) efficiency (e.g. real-time execution of transactions).

Change to the Securities Act

In order to implement the changes of MiFID II into the Slovak legal order, an amendment to the Securities Act[9] was submitted to the National Assembly of the Slovak Republic on 23 February 2023, which provides, among other things, that financial instruments are also considered to be financial instruments that are issued through distributed transaction database technology. The proposed effective date of the amendment is 1.7.2023. Thus, to this extent, the Slovak Republic has taken advantage of the possibility of an extension of the deadline to align its legislation with the DLT Regulation effective as of 23.3.2023.

[1] Regulation (EU) 2022/858 of the European Parliament and of the Council of 30. 2022 on a pilot regime for market infrastructures based on distributed transaction database technology and amending Regulation (EU) No. 600/2014 and (EU) No. 909/2014 and Directive 2014/65/EU

[2] Regulation of the European Parliament and of the Council on cryptoassets markets and amending Directive (EU) 2019/1937

[3] https://nbs.sk/dohlad-nad-financnym-trhom/fintech/technologia-distribuovanych-zaznamov-dlt/

[4] Directive 2014/65/EU of the European Parliament and of the Council of 15. Directive of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments amending Directive 2002/92/EC and Directive 2011/61/EU

[5] Regulation (EU) No. 909/2014 z 23. júla 2014 o zlepšení vyrovnania transakcií s cennými papiermi v Európskej únii, centrálnych depozitároch cenných papierov a o zmene smerníc 98/26/ES a 2014/65/EÚ a nariadenia (EÚ) č. 236/2012

[6] Regulation (EU) No. 600/2014 z 15. Regulation (EU) No 600/2014 of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Regulation (EU) No 600/2014 on markets in financial instruments. 648/2012

[7] https://www.esma.europa.eu/sites/default/files/library/esma70-460-111_report_on_the_dlt_pilot_regime.pdf

[8] The opinion is not legally binding, but it allows us to better understand the purpose and possibilities that the DLT Regulation brings.

[9] https://www.nrsr.sk/web/Default.aspx?sid=zakony/zakon&MasterID=9153

If you are interested in this topic, please do not hesitate to contact us.

Článok Issues of tokenised shares and bonds already in Slovakia?
DLT Regulation je zobrazený ako prvý na Highgate.

If you are interested in this topic, please do not hesitate to contact us.

Článok Expert article by Vladimíra Mačuhová and Petr Varga in the Bulletin of the Slovak Chamber of Tax Advisors on the topic of crypto assets je zobrazený ako prvý na Highgate.

The problem of double taxation on payments for goods and services to cryptos is a real issue. The solution cannot simply be sought in the Income Tax Act, nor can it be automatically expected from the application of some ad hoc fairness in taxation (i.e. there is no double taxation because it is unfair). Simply, if a taxpayer receives a crypto asset as consideration for the supply of goods or services, there is a risk that the tax authorities will not be able to attribute an input price tothat crypto asset.

In practice, we encounter a number of options available to some advisers to avoid this phenomenon. However, even more advisers do not even know that such a problem exists. It is therefore with this lecture that we have sought to publicise this problem at a highly professional level to a relevant audience. We are very pleased that the lecture was also attended by relevant representatives of the Ministry of Finance, with whom we were able to discuss the extent of the problem and potential remedies.

If you are interested in this topic, please do not hesitate to contact us.

Článok Double taxation on crypto payments.
Peter Varga and Vladimíra Mačuhová lectured at the methodological days of the Slovak Chamber of Tax Advisors je zobrazený ako prvý na Highgate.

Staking means holding cryptocurrency in a cryptocurrency wallet or on some exchanges, with the holder receiving a reward for doing so. Those who do so should, in theory, currently pay tax on that profit, even if in reality there is not necessarily an increase in the taxpayer’s wealth. If they do not do so, they may pay for it in tax audits in a few years’ time on the basis of loopholes in the law.

The aim of the Highgate Group’s proposal is that staking income should only be taxed when the staking profit is real. If Slovakia were to legislate staking, it would be one of the first countries in the world and perhaps a model for other countries. At the same time, this will prevent unnecessary lawsuits and litigation, which could arise in the future because of the ambiguous regulation today.

Full article here : https://touchit.sk/nova-legislativa-ohladne-kryptomien-pravnici-z-pracovneho-timu-ministerstva-financii-vypracovali-navrh-ako-zdanovat-staking/426541

If you are interested in this topic, please do not hesitate to contact us.

Článok The taxation of cryptoassets raises a number of question marks.
Interview for TouchIT je zobrazený ako prvý na Highgate.