Cryptocurrencies are a new financial instrument, the popularity of which is growing every year. The authorities of some countries see digital assets as an alternative to national currencies, which must be entered into the current legislation, while others refer to crypto assets as another resource for collecting taxes.
To understand the issue, we have collected information about taxation regimes in different countries.
The United States of America
Cryptocurrency tax legislation in America is in the process of being finalized. In 2014, the authorities obliged users to pay a percentage of their income. But, due to flaws in the system, many chose not to pay attention to the decree. American regulators did not give up. In July 2019, they tried to attract users to payments with the help of a mailing list, which reminded them of the need to transfer the tax on cryptocurrency to the United States.
In the United States, regulators have been very strict in taxing the crypto community. The American authorities have taken an advantageous position in advance by attracting existing participants in the digital asset market. For example, in mid-July 2020, the IRS signed a contract with the popular cryptocurrency exchange Coinbase. As part of the agreement, the developers of the trading platform provide the software for tracking cryptocurrency transactions.
There are several ways to pay US digital asset tax. For example, a user can register in the EY CryptoPrep application, which was provided by the developers of Ernst & Young (EY). The program automatically collects information about transactions with cryptocurrencies, fills out the necessary forms, and transfers the information to the tax office.
According to the portal cryptotax.io, cryptocurrencies in the United States are recognized as property. The amount of tax payments for members of the American crypto community is calculated based on the volume of transactions with digital assets. For example, for transactions up to $ 9,700, the user will have to pay 10% tax. The cryptocurrency mining tax is charged if the income exceeds $ 400. For this, self-employed taxation is applied, it is 15.3%.
The Russian Federation
The deputies have been trying to form a legislative basis for the digital asset market in the Russian Federation since the fall of 2017. Despite this, there are no tax rules for the crypto community in Russia. However, some market participants believe that this does not exempt investors from paying taxes. However, it is not clear how and how much interest should be paid.
In 2021, laws came into force in the Russian Federation that will regulate the capabilities of participants in the country’s crypto community.
For example, cryptocurrency in Russia will receive legal status. At the same time, it will be illegal to use it as an alternative to the ruble. They also want to oblige members of the crypto community to provide tax reporting. What exactly will be the tax on cryptocurrency in Russia is not yet clear.
South Korea
The country’s authorities continue to form the legal framework for participants in the crypto community. In January 2020, it became known about the intention of regulators to introduce income tax on operations with cryptocurrencies. In mid-July 2020, local media confirmed the authorities’ desire to receive income from the profits of members of the crypto community.
According to sources, regulators want to set a tax on bitcoin and other coins at 20%. If the changes are adopted, the definition of cryptocurrencies will also be corrected in the legislative framework. The authors of the bill believe that digital assets should be viewed as a commodity, not a currency.
Cryptocurrency tax in the world
Attempts to regulate taxation in the crypto industry are underway in most countries around the world. Here’s how things stand in some of them:
- In Singapore, individual miners are not taxed. The authorities also refused payments to participants in the distribution of coins and users who received cryptocurrency as a result of hard forks.
- In Australia, cryptocurrencies are considered a form of ownership. The authorities obliged users of digital assets to pay capital gains tax. In June 2019, representatives of Crypto Tax Australia proved that the legal framework was imperfect. According to them, one of the clients of the organization paid a tax of $ 100 thousand on coins, with a total value of 20 thousand dollars.
- New Zealand regulators are also working to improve the regulatory framework for taxing the digital asset market. In February 2020, the country’s authorities proposed to abandon the application of the goods and services tax to cryptocurrencies.
- The Japanese authorities are ready to accept digital currencies in the event of a change in tax legislation.
- Switzerland turned out to be one of the most developed countries in terms of the convenience of the taxation system. At the end of January 2020, local regulators invited citizens to pay taxes on bitcoins. According to media reports, professional Swiss investors who buy, sell or hold virtual currencies for personal gain are not required to pay capital gains tax.
The list of countries that do not pay taxes on income from cryptocurrencies, according to bitcoin.com, includes Malaysia, Portugal, Slovenia, Belarus, Germany, and Malta.
Conclusion
Even though regulators in many countries have been working for a long time to form a regulatory framework for taxing the cryptocurrency industry, a universal solution has not yet been found. To other conclusions:
- The regulation of the digital asset market in various countries largely depends on local laws and the attitude of the authorities towards a new financial instrument;
- Not all countries tax income from cryptocurrencies and mining at the same time;
- It is not known when the development of laws for taxation of the digital asset market will be completed.
It is noteworthy that many regulators, when developing draft laws, are guided by the experience of foreign colleagues.
