The text below is our own interpretation of the official announcement and article on cryptocurrencies and taxes from RRIF by dr. sc. Nevia Čičin-Šain, plus some non-Croatian information on global tax status of cryptocurrencies sprinkled in for good measure.

RRIF is a magazine and Croatia's authority on tax and accounting matters and is legally accepted as a means of dispute resolution in court. Ergo, the source material can be considered Croatia's newest official stance on cryptocurrencies.

According to FATF (Financial Action Task Force), virtual money is characterized by standard attributes of money – it is a means of exchange and value storage. However, there's a big difference between fiat and virtual money. Fiat money is the means of transacting in a country or region created by the central bank of that country or region as opposed to virtual money which comes into existence via mining or staking.

Virtual money is "made up" money in digital i.e. electronic form. Of course, there are also digital forms of "real" fiat money. The most popular virtual currency (in this context cryptocurrency) is Bitcoin, and since we've already explained the concept behind it here, we'll focus on the legal/financial aspect of it in this text.

Bitcoin, as most other cryptocurrencies, can be attained through mining, purchasing through exchanges, online brokerages or via inheritance / gifting. We'll talk about direct and indirect taxing of cryptocurrency in the text below but first let's take a look at the fundamentals of taxing individual cryptocurrency transactions.

Foundations of Taxing Cryptocurrency Transactions

What are cryptocurrencies? By now, more or less all of us are familiar with them. But what is cryptocurrency from the perspective of the government? Goods, money, bonds, something else? To define direct and indirect cryptocurrency taxes, we first have to classify them. Some countries see them as an asset, while others see them as money (more on this below).

For a cryptocurrency like Bitcoin to be money, it has to satisfy some prerequisites as presented at the beginning of this post. Given that it's (hypothetically) used for transactions, it does satisfy the "means of exchange" rule. However, the store of value attribute is disputable, as not everyone agrees on it. What is the intrinsic value of a bitcoin? Right now, we express it as value in another standard currency. The third attribute is it being relatively stable and reliable. Although bitcoin isn't affected too much by the political landscape (though this can also be disputed) or inflation and similar problems affecting traditional currency, it can be affected by rumor, other cryptocurrencies, bans, or even tweets.

According to RRIF, the following additional reasons are why cryptocurrencies cannot be considered money:

  • From a legal perspective, money represents the debt of the government
  • Money is the only legal tender in a given country or region
  • Emission and control are both centralized
  • Money has to be material, tangible, not exclusively virtual

It's obvious that most cryptocurrencies – especially the most popular ones like BTC or Eth – do not satisfy any of these conditions.

Are cryptocurrencies assets, then?

The IRS declared them a capital asset. They see bitcoin as a convertible currency which satisfies all three prerequisites for being money, but it's being taxed as a foreign currency because although it isn't legal tender anywhere, it's being used as a typical foreign currency in some places.

Australia sees it as a medium of exchange instead of classifying it as a foreign currency because the term currency is already defined in their law as the official currency of a non-local government, something cryptocurrencies are not (yet).

Singapore considers cryptocurrencies as immaterial stores of value which can be exchanged for goods and services wherever they're accepted. They claim that bitcoin is neither a legal means of payment nor bond for them to regulate, but they do intend to regulate exchanges just like with any other transaction susceptible to sales and transaction tax.

Germany sees them as neither electronic money, nor foreign currency. Austria claims they aren't a financial instrument, while Slovenia says they aren't a means of payment. UK and Netherlands don't consider money anything that isn't centralized or legal tender, while Estonia, Finalnd and Norway agree with this and consider cryptocurrencies to be assets.

As we can see, there's no consensus on legally defining cryptocurrencies, but they're obviously considered assets more often than being considered a financial instrument.

Indirect Taxing of Cryptocurrency Transactions

Tax regulation differs inside and outside EU. Outside EU, most countries have some kind of general transaction tax which does not apply to payments made with the country's official legal tender. Most countries outside EU tend to avoid indirectly taxing cryptocurrencies because they're not ready to accept them as "real money", instead seeing them as assets. What this means is that if you bought cryptocurrency with "real" money, you don't pay tax for that transaction.

Inside EU, the situation is a little different. Direct taxes are the jurisdiction of the member state, but indirect taxes are up to the EU which wanted a unified European market. The main EU tax is the VAT (Value Added Tax). In a special Hedqvist request made by a Swedish exchange to the EU's tax offices regarding taxation of cryptocurrencies, the EU's offices clarified:

"a transaction which includes non-traditional currencies, i.e. those that are not money used as legal tender in one or more countries, but in which both parties agree that the currency is an alternative means of payment, is a financial transaction."

This means the EU sees cryptocurrency transactions as VAT-free money. This also means payments done with cryptocurrencies are VAT free.

Croatia's own tax office has its own definition:

"We believe that for the purposes of taxation, bitcoin can be considered a value transfer instrument as per article 40 para. 1 section d) of VAT Law and that the release from VAT taxation as specified in that Law's section can be applied to transactions of virtual currencies such as bitcoin."

This means Croatia does not tax cryptocurrency trafficking.

Direct Taxation of Cryptocurrency Transactions

In the USA, cryptocurrencies are a digital capital asset. Capital assets are taxable but on the difference in appreciation. The initial value needs to be determined when taxing it – expressed in national currency on the day of the purchase. If the cryptocurrency is being held for over a year, that constitutes a long term investment and is taxed at a lower rate. Losses are subtracted from gains, and if the loss surpasses the gain it can be used to reduce the regular income tax of up to $3000 annually. Anyone accepting cryptocurrency as payment must know its value on the day of the payment expressed in national currency, and use that basis as tax calculation. Mined currency is taxable as side income. Employees accepting cryptocurrency as rewards or bonuses must declare it as a regular salary bonus.

In other countries like Australia, Singapore, UK, Slovenia, Austria etc. taxation depends on the type of transaction in question: private or business, value of currency, means of acquisition, etc.

There's been some talk about taxing cryptocurrency earnings as gambling wins because sealing a block during mining is attributable to luck. This can be refuted by the fact that mining pools exist which practically guarantee an income, so the luck element goes out the window.

Can a company pay its employees in cryptocurrency?

Outside EU, generally yes. Inside EU, it depends.

For example, Croatia's tax office replied that people can accept cryptocurrency as payment only for the amounts which aren't required to go through a traditional giro account – this includes pensions, season work of up to 15000 HRK (around 2500 USD), non-resident sport bounties, but not salaries. A salary is any money accepted for completed work as agreed upon when signing the employment agreement. However, if an employer is allowed to pay for an employee's apartment and this counts as part of the salary, why would cryptocurrency payouts be disallowed, as is the case in the USA and Australia?


Mining bitcoin is considered additional income – a production of sellable goods and is taxed as such in most countries.

In Croatia in particular, the tax rate for this is 24% if the income for the person or company does not exceed 210000 HRK (around $32,000) per year, and the tax goes up to 36% above that. This means that up to 210k will require you to pay 50.2k in tax while amounts earned past 210k will cost 36% on the difference. The 210k include all taxable income, including salary, authorship and freelance work contracts, etc. and tax expenses like supported familiy members also go into this amount, decreasing it, so having a lot of those can offset a high tax bill.

This means that if you're mining and selling cryptocurrency, $2400 of it just evaporates until you reach about $32k, which is around 3 BTC. Once you're past that point, every following bitcoin will suddenly be worth not $2400 less, but a whopping $3600 less.

Selling Cryptocurrency

When selling mined cryptocurrency, that's a production and fully taxable in most countries. But if this selling happens outside a registered area of work of a given company, then it suffers from additional classifications depending on the jurisdiction this is happening in.

Most countries consider cryptocurrencies an asset, which would make it logical that profits gained by selling them fall under the umbrella of asset income, like rent. However, in Croatia this isn't the case and cryptocurrency selling is seen as capital gains – the difference between entry price and exit price on date of buying / selling is used to calculate taxation on the difference:

Trading cryptocurrencies is considered a financial transaction, and income achieved through it is eligible for taxation as capital gains.

In case of losses due to trading, an individual can declare it on the capital gains tax form and subtract it from other gains to reduce owed tax, for example, from stocks.

If a company is selling cryptocurrencies, typical profit tax is applied. This is 12% if the net profits were under 3 million HRK (around $500,000) per year, or 18% if they were higher. A person running a solo business of reselling or mining cryptocurrency, the same conditions apply.


Many unanswered questions remain, like preventing money laundering, anonimity, tax evasion, etc. We tried to provide a global overview of taxation obligations here in line with current laws, but this is all subject to change in this tumultuous landscape.

While several countries have expressed opinion that cryptocurrencies are assets, Croatia has declared them transferrable instruments of value that VAT does not apply to. As each country writes its own laws about indirect taxes, we believe that cryptocurrencies are easily "injectable" into existing categories of currently written laws, with minimal modifications. Taxing does and should depend on the type of transactions.

We also don't see it as rational to disallow salaries paid out in crypto – there's no reason not to do it. The gross amount that is owed to the country should be payable as usual, and the net amount should be payable to the employee directly if the agreement dictates the relationship as such.

We're leaving this space open to interpretation, and are inviting you to give us your opinions and your country's facts and decisions – bonus points if you can back them up by linking to official declarations we can link to in the text!

At the moment of publication, this article failed to credit the original author of the post used as inspiration, rather linking only to the source. Bitfalls apologizes for this slip-up, which has now been rectified. Both links have been amended.

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