Supervision has always been the sword of Damocles hanging over the cryptocurrency. Everyone tends to focus on hard regulation such as ICO and exchanges, but it is easy to ignore the “soft supervision” of taxation for cryptocurrency holders. This article will take a look at the new trends in global policy in 2019 from the perspective of “tax”.
A clear trend is that many national tax authorities are beginning to tax cryptocurrencies. A typical representative is the J5 International Task Force, which consists of tax authorities in the United States, Australia, the United Kingdom, the Netherlands, and Canada.
The US Internal Revenue Service (IRS) set up a virtual currency team and sent two rounds of letters to the cryptocurrency holders they already know to pay taxes; the Australian Taxation Office (ATO) handled 12 tax avoidances involving the misuse of cryptographic assets. Case and allocate $1 billion to combat tax avoidance; HMRC pressures cryptocurrency exchanges to disclose customer names and transaction history; Canada Revenue Agency (CRA) invests in cryptocurrency in March After issuing a 14-page questionnaire, they also began to crack down on tax-related non-compliance.
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Correspondingly, there are also countries that exempt cryptocurrencies, such as Germany, Singapore, Portugal, Malta, Malaysia, Belarus, and Switzerland.
In July of this year, the Singapore Internal Revenue Service (IRAS) issued a draft to exempt goods-based cryptocurrency (DPT) transactions from service tax (GST) and value-added tax (VAT); in contrast, the Portuguese tax bureau It is unconditionally tax free. An official ruling issued in August stated that the exchange of cryptocurrency for fiat money is tax-free and adds that cryptocurrency users are not subject to any income tax.
The other five countries also announced tax exemptions under certain conditions in previous years. Germany exempts VAT from holding more than one year of bitcoin transactions; Ma is also exempt from tax on long-held cryptocurrencies; the Malaysian government does not impose capital gains tax; Belarus has imposed many tax exemptions on cryptocurrency activities last year; Switzerland is relatively complex. For individual investors, tax exemption is required for professional cryptocurrency traders, and employers pay personal income tax in the form of cryptocurrency.
Other interesting phenomena include the fact that some countries have reduced taxes this year after trying to tax cryptocurrencies. For example, the French Parliament passed the Pact Act in April, which reduced the capital gains tax from 36.2% to 30%, while the currency transaction will be tax-free.
In other countries, the focus of taxation is not on transactions, but on mines such as Kyrgyzstan, Iran and Slovenia. The Ministry of Economic Affairs of Kyrgyzstan is exploring two possible options for taxation of cryptocurrency mining; the Iranian State Taxation Office (INTA) said that miners are eligible for tax exemption if they agree to repatriate overseas surpluses; Slovenia’s financial management department said in July that it is trying to find And punish individuals who engage in cryptocurrency mining or trading activities without paying taxes.
On the whole, global cryptocurrency regulation presents four characteristics in terms of “taxes”:
By definition, most countries position cryptocurrencies as capital assets such as stocks, securities, gold, and real estate. If the virtual currency sells more than the adjusted purchase cost (tax base), it generates taxable income. The draft amendments to the virtual currency that Japan just passed in March changed the name of “virtual currency” to “encrypted assets”, but the proceeds from the exchange of encrypted assets were classified as miscellaneous income, and the income tax could be up to 45%.
From a means of point of view, some countries prefer to put pressure on their cryptocurrency exchanges, asking for user lists and transaction details. At the same time, they are also using some “tools”. For example, in March of this year, Ernst & Young launched the EY Encrypted Asset Accounting and Taxation (CAAT) tool for accounting and preparing for cryptocurrency.
From the perspective of the amount, countries vary widely. The Bulgarian government imposes a 10% tax on the profits of cryptocurrency transactions, which is relatively mild. Swedish taxation is as high as 300% of profits, which means that if you earn $1, you have to pay $3. Even more exaggerated is Australia, where investors say they have cryptocurrencies worth $20,000, but must pay $100,000 in taxes.
To a certain extent, some countries are very strict. For example, the United States clearly states that it is taxable to exchange one currency for another; in France, currency transactions for retail investors are tax-free.
Due to the large number of countries involved, the following is a breakdown of the taxation policies of cryptocurrencies since 2019.
First, North America
The United States launched a series of cheats on cryptocurrency tax issues this year. At the end of January, there was news that IRS set up a virtual currency team to begin acquiring records and resources to track non-compliant taxpayers and combat unreported crypto assets. On May 21, the IRS stated in a public reply that it would give priority to the cryptocurrency tax guidance. It should be noted that following the "Announcement No. 2014-21", the IRS has not updated its guidance for five years.
On July 12th, the IRS issued a 181-page document detailing how agents should use various investigative methods to combat encrypted tax evaders; on July 26, IRS said it had begun sending letters to US cryptocurrency holders. Three types of letters were sent to more than 10,000 taxpayers. On August 15th, the IRS campaign escalated and sent a new round of letters to the cryptocurrency holders. This time they listed the specific amount of tax owed by the citizens.
The Canada Revenue Agency (CRA) has been operating a dedicated cryptocurrency department since 2017. Earlier this year, CRA conducted about 60 audits of companies or individuals involved in cryptocurrency transactions and mining.
On March 7, the Canada Revenue Agency (CRA) issued a 14-page questionnaire to cryptocurrency investors in the country, covering the way to purchase cryptographic assets, whether cryptocurrencies were stolen, whether they participated in ICO and cryptocurrencies. Mine and other aspects. On June 15, CRA said after investigation that there are many types of cryptocurrencies and related businesses in Canada, and the risk of non-compliance is high. CRA is cracking down on non-compliance related to cryptocurrency taxes.
Second, South America
In May, the Brazilian Internal Revenue Service issued Regulation 1888, which applies to various activities related to cryptocurrencies. From August 1st, if the monthly transaction amount exceeds BRL 30,000 ($7,800), Brazilian citizens are obliged to report their cryptocurrency transactions to the IRS. If not reported truthfully, you will face a fine of 1.5% to 3% of the unreported transaction amount.
In January of this year, the Venezuelan government issued a decree requiring taxpayers engaged in encryption business in the country to pay taxes in cryptocurrency.
Since April of this year, Chilean residents have to pay taxes related to cryptocurrencies, and the government has included crypto assets in the tax list. According to the Chilean Internal Revenue Service, Chilean residents must include income reports related to cryptocurrency transactions as “other personal income/third party income”. Taxpayers are understood to be all people who have cryptocurrencies, including cryptocurrency traders and miners.
On August 6, foreign media reported that the UK Customs and Excise Department (HMRC) is putting pressure on cryptocurrency exchanges to disclose customer names and transaction history in order to recover unpaid taxes. It is reported that Coinbase, eToro and CEX have received letters.
In September, HMRC, eToro and accounting industry agency ICAEW jointly provided tax advice to crypto-traders in a webinar. HMRC expects encrypted traders to apply capital gains tax rules to their gains and losses just as they would buy or sell stock investors.
A document issued by the Portuguese tax authorities in 2016 stated that income from the sale of cryptocurrencies in Portugal is not subject to income tax. On August 26th, the Portuguese tax and customs authorities once again confirmed that no VAT is imposed on cryptocurrency transactions or payments. The Inland Revenue Department provided clarification to a local cryptocurrency mining company and issued an official ruling. Indicates that the exchange of cryptocurrency for fiat currency is tax-free, adding that cryptocurrency users are not subject to any income tax.
On July 29th, the Slovenian financial management department said it was trying to find and punish individuals who were engaged in cryptocurrency mining or trading activities without paying taxes.
On April 16, the French Finance Minister said that the French Parliament recently passed the Pact Act, creating a new legal framework for ICO and digital asset service providers. The new fiscal bill simplifies and reduces the taxation applicable to retail investors selling crypto assets: replacing monthly returns with annual filings, reducing capital gains tax from 36.2% to 30%, while currency transactions are tax-free, but purchased as a professional – Resale of encrypted assets is subject to tax.
The Swedish tax authorities (STA) are increasingly focusing on cryptocurrency cases. In 2018 alone, STA conducted an investigation into the activities of up to 400 Swedish cryptocurrency traders. Multiple Bitcoin traders received tax returns of up to several million Swedish kronor. There are also traders who consider these taxation requirements to be “unreasonable” because he is being charged 300% of the total profit.
The Bulgarian State Taxation Office (NRA) classifies cryptocurrencies as financial assets, while individuals who earn profits on financial assets are subject to a 10% tax. On January 16th, the Bulgarian government has begun investigating cryptocurrency exchanges to tax profits earned by investors through cryptocurrency transactions.
The draft of the virtual currency-related amendment drafted by the Japanese cabinet on March 15 was passed, changing the name of “virtual currency” to “encrypted assets”, but it still belongs to “miscellaneous income”.
On May 30, the personal tax return of 2018 issued by the State Administration of Taxation of Japan showed that 271 people reported miscellaneous income including virtual currency exceeding 100 million yen (about 913,900 US dollars). However, the Japanese Internal Revenue Service believes that the total amount of cryptocurrency reported in the past few years is about 10 billion yen. To this end, the IRS launched a 200-person special task force in July to avoid tax evasion and other activities, and plans to collect information from companies such as encrypted exchanges.
On July 19th, the Japan Virtual Currency Exchange Association (JVCEA) submitted a virtual currency "Palace System Amendment Petition" to the Financial Services Department. Then on July 24th, the Japan Virtual Money Business Association (JCBA) also submitted a 2020 tax reform request. However, the latest “Tax Modification Requirements” published in August did not mention the content of virtual currency, which may mean that the current revision of the virtual currency tax system has not progressed.
On July 5th, the Singapore Internal Revenue Service (IRAS) issued a draft exempting the service tax (GST) and value-added tax (VAT) of goods for payment-type cryptocurrency (DPT) transactions. If the draft passes legislation, it will take effect on January 1, 2020.
In August, Indian Bitcoin community group IndiaBits said that the Indian income tax department issued a notice to some cryptocurrency dealers and investors asking for information about the taxpayer's source of income, the cryptocurrency name of the transaction, and the details of the hardware wallet. The notice also warned that a fine would be imposed on those who deliberately evaded taxes.
On September 12, the Iranian State Taxation Office (INTA) stated that Iran’s cryptocurrency miners would be eligible for tax exemption if they agreed to repatriate their overseas surpluses. According to INTA, encrypted mining is a taxable business and, like other industrial activities, should follow the requirements of the Iranian Central Bank.
On August 28th, the Ministry of Economic Affairs of Kyrgyzstan submitted the “Draft Law on the Amendment of the Tax Law” with the aim of introducing a cryptocurrency mining tax. The Ministry of Economic Affairs of Kyrgyzstan is exploring two possible options for taxation of cryptocurrency mining. The first is to levy taxes on income, and the second is to levy taxes on the costs incurred during cryptocurrency mining.
In May, the Israeli Central District Court accepted the position of the Israeli tax authorities in a judgment that bitcoin is an asset, not a currency, and the profits from the sale of bitcoin are subject to capital gains tax.
The Australian Taxation Office (ATO) will collect a large number of records from its designated cryptocurrency service provider (DSP) and will initiate a data matching program. ATO estimates that between 500,000 and 1 million Australians invest in encrypted assets.
In April, ATO began to regulate the cryptocurrency held by Australian citizens. In June, the Australian Taxation Office (ATO) handled 12 tax avoidance cases involving the misuse of cryptographic assets. It is reported that ATO allocates 1 billion US dollars to combat tax avoidance, with special emphasis on cryptocurrency transactions. ATO plans to first obtain data from a designated service provider in Australia and move to a smaller supplier later this year, then expands to a foreign digital service provider area.
The New Zealand tax authorities have ruled that cryptocurrency income is legal and provides guidance on how to accurately tax. In the tax information announcement issued on August 7, the New Zealand Revenue Agency concluded that the cryptocurrency must be “like money” in order to be taxed according to the public ruling made under section 91D of the 1994 Tax Administration Act. .
Specifically, the “Guidance on the Treatment of Income Tax on Encrypted Assets” applies to payments made in encrypted form, that is, part of the employee’s fixed salary, fixed at a predetermined amount or rate, rather than as part of the employee share plan. etc.
In the end, everyone may wonder: China? In fact, the question of whether or not the cryptocurrency is taxed is completely blank in China's tax law, and the criminal law is not guilty. Some legal experts have analyzed that in China, the use of virtual currency to pay remuneration can be regarded as legal tax avoidance. If the relevant laws in China continue to improve in the future, which country policy do you prefer to learn from?