The popularity of cryptocurrencies has risen steadily over the past few years. Cryptocurrencies are increasingly being used by people around the world as a payment tool and as an investment opportunity.
Where there is money there are taxes. Although tax regulations do not exist or are rather vague in most countries, tax agencies are starting to wake up.
Many countries have proposed tax policies on cryptocurrencies, some making cryptocurrencies completely tax-free and others taxing cryptocurrencies just like stocks and other property.
On November 13, Philippine Finance Secretary Carlos Dominguez said that the country is considering a bill to fairly tax the digital economy. Earlier this month, the Philippine Securities and Exchange Commission (SEC) warned the public about the unlicensed Bitcoin Digital company. The company fabricated the backing of Finance Minister Carlos Dominguez and local celebrities. The SEC said Bitcoin Digital is not registered, nor authorized to solicit or accept investments from the public, nor to issue investment contracts and other forms of securities.
Recently, Russia’s Ministry of Finance proposed new amendments to the country’s upcoming crypto-assets law, which may lower the requirements for crypto taxpayers. According to the draft bill, individuals must declare their holdings of assets if the annual turnover exceeds 600,000 Russian rubles (about $7,800). In a previous proposal, the ministry had called for disclosure when transactions exceeded 100,000 rubles (about $1,300) in a year. The law is scheduled to be passed in January, and the Treasury Department wants asset disclosures for the next tax year no later than April 30, 2022. The reported value of cryptocurrencies will be calculated by the state tax agency based on the price at the time of the transaction, the bill said.
The Canada Revenue Agency (CRA) asked a judge to compel Toronto-based cryptocurrency exchange Coinsquare to hand over information and certain documents of all customers who have used the platform since early 2013. The CRA will be able to use the detailed information to find out which Canadians are already transacting on Coinsquare’s platform, which can then be compared to past tax filings to combat tax fraud and the underground economy.
In its recently released guidance note for the draft 2020 Form 1040, U.S. Personal Income Tax Return, the IRS stipulates that if a taxpayer receives any cryptocurrency for free, including through channels such as airdrops or hard forks, The “Yes” option must be checked in the encryption related question. Earlier news, the US Internal Revenue Service issued a draft note of Form 1040 to increase the clarity of virtual currency issues.
Portugal issued a statement making buying/selling/trading cryptocurrencies completely tax-free. It is the only European country to take such a position so far. The statement follows Portugal’s closed tax system (only items listed explicitly can be taxed, such as stocks, bonds, etc.). This makes Portugal a more profitable country for cryptocurrency traders.
Since 2013, Bitcoin has been officially recognized as a private currency in Germany. Bitcoin owners are subject to capital gains tax, currently at 25%. However, it will only be taxed if the profit is earned within one year of purchasing the bitcoin. Cryptocurrency owners are not required to pay capital gains tax if they hold cryptocurrency for more than a year.
The famous “blockchain island” Malta does not tax cryptocurrencies, be it VAT, earnings or capital gains. However, taking into account intraday trading similar to stocks or foreign exchange, cryptocurrency transactions made within the same day are subject to 35% corporate income tax.
Malta is probably one of the most crypto-friendly countries in the world, with the introduction of legislation that has legalized various cryptocurrency operations and made the country home to some of the major cryptocurrency businesses.
Japan recognizes bitcoin primarily as a payment method. On July 1, 2017, the Payment Services Act stipulated that Bitcoin sales are exempt from excise tax. Virtual currencies such as Bitcoin in Japan are regarded as capitalized value, which can be transferred digitally and used for payment. Profits from Bitcoin are considered business income. Therefore, the owner is subject to both income tax and capital gains tax.
The Korea Blockchain Association (KBA) has urged the South Korean government to delay plans to tax crypto trading profits from October 2021, saying the infrastructure seems unlikely to be in place in time. The KBA proposes to defer the tax plan until January 2023, when a new set of capital gains tax rules related to transfers of shares and securities will come into effect.
New Zealand’s Internal Revenue Service (IRD) has once again set its sights on the cryptocurrency sector, with the agency asking businesses associated with crypto assets to provide customer details. The IRD’s guidelines set out a series of requirements, including personal details of clients, as well as information on the classes of crypto assets held by clients.
China currently bans virtual currency transactions and ICOs, so there is no further action on taxation of cryptocurrencies and encrypted assets. However, the future situation is uncertain. With the further development and improvement of cryptocurrencies and the digital economy, taxation of encrypted assets or It will also be on the itinerary.