CONFIDA Serbia: Digital Property Becoming Increasingly Popular, What Does This Mean for the Taxpayers?

An inevitable trend in the world of business is definitely investing in digital property. Said rising trend entails digital creation, acquisition, transactions and development. The recognition of the trend is important, as is the regulation of the legal system, which should strive toward harmonization with the existing legal framework, but also the creation of new ones.

CONFIDA Serbia – a tax advisory, consulting and accounting company with a team of experts for tax consulting, audit and accounting regulations, deliberately follows the trends in its fields, so it has prepared an overview of the Law on Digital Property.

In this article, you can learn details about:

– the definition of digital property

– the classification and the problems

– the legislative framework and

– the taxation treatment.

The Definition of Digital Property

The Law on Digital Property defines digital property as “a digital inscription of a value which can be digitally bought, sold, exchanged, or transferred and which can be used as a means of exchange or for the purpose of investment, whereby digital property does not include digital inscriptions of the currencies which are legal means of payment and other financial property which is regulated by other laws, unless otherwise regulated by this law.”

CONFIDA Serbia clarifies that the definition is wide, so there could be dilemmas about determining whether certain property right is digital property or not.

The Classification of Digital Property

According to the Law on Digital Property, digital property is classified into two categories: virtual currencies and digital tokens.

Virtual currencies are digital property which has not been issued and whose value is not guaranteed by the central bank, or another public administration organ, and which is not necessarily tied to a legal means of payment and has no legal status as money or currency. However, natural or legal persons accept it as a means of exchange and it can be bought, sold, exchanged, transferred and kept electronically. They also have a certain value and can be a means of exchange, but they do not represent money.

A digital token is defined as a type of digital property and designates any non-material property right which, in a digital form, represents one or more other property rights, which can include the rights of the user of the digital token to the provision of certain services.

The Problems

Sladjana Vucicevic, the tax consulting manager at CONFIDA Serbia, clarifies for the eKapija portal that, in practice, it is sometimes problematic to clearly define what a virtual currency is, and what a digital token is, because at first sight it can be said that the characteristics of both types of digital property can meet in one form of digital property.

In case there’s a dilemma, she also explains which rule can help. If the digital property does not provide any rights except being used for exchange, then it is a virtual currency, which the National Bank of Serbia is in charge of. For digital property which is not meant for exchange, and entails certain rights, it can be said that it is a digital token, which is supervised by the Securities Commission. Digital property which provides some other rights, in addition to being used for exchange, is hybrid digital property which has characteristics of both a virtual currency and a digital token. In this case, both regulatory organs are in charge – the Securities Commission and the National Bank of Serbia.

The Legislative Framework

With the Law on Digital Property, Serbia has legally regulated virtual currencies and digital tokens, however, that’s only one of the first steps. Said Law is based on the principle of technological neutrality – even though it is essentially directed at the blockchain technology, it potentially covers other technologies that could be developed as well.

The Taxation Treatment

The new Law also entails the beginning of the implementation of the new digital property taxation regulations. The Law on Personal Income Tax proscribes that the income realized from the sale of digital property (trade using cryptocurrencies and digital tokens) be considered a capital gain. Tax at a rate of 15% is paid for the realized income. If no profit has been made through the sale of digital property, there is no obligation to pay the tax. Exemption from the payment of digital income tax is also envisaged. If the taxpayer sells digital property and invests the acquired money into the capital assets of the company in the Republic of Serbia, they can be exempt from 50% of the capital gains tax.

The Benefit

Sladjana Vucicevic, the tax consulting manager at CONFIDA Serbia, says that the Law also proscribes the possibility of paying bonuses and/or incentives to an employee in the form of digital property, thereby creating more options for the employers.

CONFIDA Serbia, with its local and international knowledge about tax-legal, audit and accounting regulations, creates solutions for its clients in order to provide them with the support they need in order to realize their business visions. Also, they are always up to date with what is current in their field, such as the topic of digital property. With CONFIDA Serbia, you will get to ideas that pay off!

If you have any dilemmas regarding digital property or any other tax-legal, audit or accounting topic, feel free to contact them.

Author: Sladjana Vucicevic, Tax Consulting Manager at Confida Serbia, [email protected]

Confida Consulting d.o.o. Beograd

CONFIDA Serbia

Slađana Vučićević

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