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Last month, the Australian Tax Office (ATO) issued a notice outlining its new data collection and surveillance requirements for cryptocurrency service providers in Australia.
This initiative is part of a broader effort to enhance tax compliance within the cryptocurrency sector.
For the financial years 2023-24 to 2025-26, the ATO will acquire extensive data from cryptocurrency designated service providers. The targeted data includes:
Names, addresses, dates of birth, phone numbers, social media accounts, and email addresses.
Bank account information, wallet addresses, transaction dates and times, transaction types, deposits, withdrawals, transaction quantities, and coin types.
The ATO anticipates collecting records related to approximately 700,000 to 1,200,000 individuals and entities each financial year.
This initiative builds on the ATO’s existing data-matching program, which started in 2019.
The program involves the collection of bulk records of purchase and sale information from cryptocurrency service providers, aimed at identifying potential tax liabilities.
The ATO’s heightened focus on data collection stems from concerns about capital gains tax (CGT) evasion.
In Australia, cryptocurrency assets are treated as CGT assets.
The ATO acknowledges that the complex and innovative nature of cryptocurrency can lead to genuine misunderstandings regarding tax obligations.
The new requirements are designed to address these issues by increasing transparency and ensuring that taxpayers accurately report their cryptocurrency transactions.
By acquiring detailed transaction and identification data, the ATO aims to better track and enforce CGT liabilities.
Businesses providing Digital Currency Exchange (DCE) services in Australia are already subject to reporting requirements under the anti-money laundering and counter-terrorism financing (AML/CTF) regime, overseen by the Australian Transaction Reports and Analysis Centre (AUSTRAC). These businesses must comply with stringent data reporting and record-keeping standards to prevent illicit financial activities.
The ATO’s new data collection measures add another layer of responsibility for cryptocurrency exchanges, further integrating tax compliance with existing AML/CTF obligations. This dual compliance requirement underscores the importance of robust internal data management systems and thorough understanding of both tax and AML/CTF regulations for DCE providers.
The ATO’s enhanced data collection is likely to result in increased scrutiny of cryptocurrency transactions, making it essential for individuals and entities engaged in cryptocurrency activities to maintain accurate records and fully understand their tax obligations.
Given the potential for genuine misunderstandings about tax obligations in the crypto sector, there may be an increased need for educational initiatives to help taxpayers navigate the complexities of cryptocurrency taxation.
Cryptocurrency service providers will need to adopt robust compliance strategies to manage the additional data reporting requirements. This includes ensuring that all client and transaction data is accurately captured and reported to the ATO.
If you have any queries about this article on Australia and Crypto Exchanges, or Australian tax matters in general, then please get in touch.
Portugal, known for its favorable taxation policies on cryptocurrency and its inviting climate, has recently shifted from a period of minimal taxation to introducing more structured tax guidelines in 2023.
This transition emphasizes the importance of understanding the new tax regulations for both residents and potential investors in the digital asset space.
The following tax Categories exist for Crypto Assets:
Crypto assets held for more than 365 days benefit from a tax exemption on any gains realized upon their sale.
Any gains from crypto assets held for less than a year are subject to a 28% capital gains tax. Similarly, income from passive crypto investments, like staking or airdrops, also attracts a 28% tax rate.
For individuals engaged in professional crypto trading, taxation varies.
Factors such as the frequency of trades, use of platforms, and the income’s proportion to other earnings play a critical role in determining tax rates, which can range from 14.5% to 53%.
Confirm your tax residency status and understand the implications of your asset holding periods.
Keep meticulous records of all crypto transactions to ensure accurate tax reporting.
Considering the complexities, seeking advice from tax professionals is recommended for staying compliant and optimizing tax liabilities.
Transactions involving gifts or inheritance of crypto assets are subject to a 10% stamp duty, with commissions attracting a 4% duty.
Portugal now allows real estate purchases directly with cryptocurrencies, following regulatory adjustments in notarial practices. These transactions require adherence to specific compliance measures.
The regulatory landscape for crypto taxation in Portugal is evolving.
Investors and residents should stay informed about the latest changes to ensure compliance and make informed decisions regarding their digital asset investments.
Partnering with a reputable advisory firm can provide valuable guidance and updates on the ever-changing tax environment.
As Portugal continues to refine its approach to crypto taxation, understanding the nuances of the current regulations is crucial for investors and residents alike.
By keeping detailed records, confirming one’s tax residency, and seeking professional advice, individuals can navigate Portugal’s crypto tax maze with confidence, ensuring compliance and optimizing their tax strategy in this dynamic market.
Final thoughts
If you have any queries about this article on Portugal’s crypto tax rules, or tax matters in Portugal more generally, then please get in touch.
The French tax authorities have recently clarified the Value Added Tax (VAT) treatment of Non-Fungible Tokens (NFTs).
This is helpful guidance for businesses involved in this nascent industry.
According to the public ruling, NFTs are subject to the same VAT rules that apply to the broader spectrum of goods and services.
Specifically, when NFTs serve as certificates of ownership for tangible or intangible assets, VAT is applicable in line with the supply of the underlying asset.
This clarification is pivotal, affirming that the unique characteristics of NFTs do not exempt them from existing tax frameworks.
Furthermore, the tax authorities explicitly state that transactions involving NFTs cannot be classified as exempt banking or financial transactions.
This distinction is drawn based on the non-fungible nature of NFTs, setting them apart from payment, utility, usage, or investment tokens, which might enjoy VAT exemptions under certain conditions.
The French tax authorities have provided concrete examples to illustrate the VAT treatment of various NFT-related transactions:
The creation and sale of digital trading cards represented as NFTs are treated as a provision of service.
When these cards are issued with minimal human intervention, such transactions are deemed electronically supplied services, highlighting the digital and automated nature of the service.
The sale of digital graphic artwork associated with an NFT, especially when exchanged for digital assets or currencies on an IT platform, is categorized as a supply of service.
However, if the creation of the artwork involves significant human intervention, it is not considered an electronically supplied service, emphasizing the role of human creativity over automation.
The initial sale of in-game items represented by NFTs, intended to fund video game development, is subject to VAT upon the effective transfer of these digital items.
Post-release, any marketing or sales of game components as NFTs also attract VAT, underscoring the continuous tax obligations throughout the lifecycle of a game’s development and its commercial exploitation.
This guidance from the French tax authorities highlights the importance of understanding the specific nature and nuances of transactions involving NFTs to accurately determine their VAT treatment.
Businesses engaging in the NFT space must carefully analyze the underlying transactions to ensure compliance with VAT regulations, recognising that the digital and non-fungible characteristics of NFTs do not exempt them from traditional tax obligations.
As the NFT market continues to evolve, this French ruling provides a crucial framework in line with which businesses might operate.
If you have any queries about this article on VAT Implications for NFT Transactions in France, or French tax matters in general, then please get in touch.
In a bold move to enhance financial inclusivity and innovation, South Africa’s 2024 budget has highlighted a strategic emphasis on integrating stablecoins and blockchain technology into the nation’s digital payments landscape.
This initiative aims to leverage cryptocurrencies, particularly stablecoins, to facilitate broader adoption of digital transactions across South Africa.
The Treasury’s 2024 budget outlines an ambitious plan to revise existing financial regulations to accommodate global financial innovations, positioning South Africa as a pioneering force in digital finance within Africa.
Key policy adaptations will include stringent reporting requirements for cryptocurrency transactions exceeding 49,999 South African Rands, a measure designed to curb illicit financial activities.
The Intergovernmental Fintech Working Group is actively exploring viable applications for stablecoins and decentralized technologies, with a commitment to release a comprehensive discussion paper on tokenization and its regulatory implications by December.
This initiative underscores South Africa’s recognition of blockchain’s transformative potential for enhancing the efficiency and security of financial markets.
Reflecting the nation’s vision for digital innovation as a catalyst for financial inclusion and economic resilience, South Africa is set to launch pilot projects in collaboration with Switzerland’s State Secretariat for Economic Affairs and the FinMark Trust.
These projects will explore the use of cryptocurrencies and stablecoins to empower small businesses, facilitating easier and more accessible digital transactions.
Despite the upcoming election in May, South Africa’s dedication to advancing progressive cryptocurrency policies is expected to remain steadfast.
The country’s efforts to classify stablecoins as crypto assets and the registration of providers in the previous year have already established South Africa as a frontrunner in the regulation of this nascent sector.
South Africa’s comprehensive approach to embracing crypto and blockchain technologies within its 2024 budget illustrates the nation’s ambition to lead digital adoption across the African continent.
While facing regulatory and societal challenges, these initiatives are widely regarded as pivotal steps towards improving financial access, enhancing transactional efficiency, and bolstering economic resilience through cutting-edge technologies.
With its progressive and inclusive strategy towards cryptocurrencies and blockchain, South Africa is setting a precedent for how technological advancements can foster opportunities and growth across diverse communities.
In a groundbreaking case that signals the Internal Revenue Service’s (IRS) increasing scrutiny of digital assets, a Texas man has been indicted for filing false tax returns related to unreported cryptocurrency transactions.
This marks a significant moment in the enforcement of tax laws on digital currency gains, underscoring the federal government’s commitment to upholding tax compliance in the cryptocurrency space.
The Department of Justice (DoJ) announced that an Austin resident was charged with filing false tax returns from 2017 to 2019, during which he allegedly failed to report the sale of approximately $3.7 million worth of Bitcoin.
These unreported sales resulted in substantial capital gains, part of which was used to purchase a residence.
The indictment also accuses the individual of structuring cash deposits to evade currency transaction reporting requirements, further complicating the case.
This prosecution is notable not just for its focus on cryptocurrency but because it represents what is believed to be the first-ever criminal case concerning the tax implications of legal source crypto transactions in the United States.
The charges underscore the IRS’s stance: the vast majority of digital asset transactions are taxable and must be reported.
With the IRS placing the crypto question prominently on tax forms, the message is clear—ignorance or avoidance of reporting digital assets is fraught with legal peril.
This case serves as a stark reminder of the consequences of failing to comply with tax obligations related to cryptocurrency gains.
As digital currencies continue to integrate into the mainstream financial ecosystem, the IRS and the DoJ are signaling their intent to rigorously enforce tax laws in this domain.
For cryptocurrency investors and users, this case underscores the importance of maintaining meticulous records and ensuring all taxable transactions are accurately reported.
It’s crucial to remember that an indictment is merely an allegation, and the defendant in this case is presumed innocent until proven guilty in a court of law.
However, if convicted, the charges carry substantial penalties, including potential prison time for each count of structuring and filing false tax returns.
This landmark case is a wake-up call to all who engage in cryptocurrency transactions to take their tax reporting obligations seriously.
With the IRS and federal prosecutors now actively pursuing legal actions against tax evasion in the crypto space, ensuring compliance has never been more critical.
Further, one suggests the rest of the world is likely to follow suit.
If you have any thoughts on this article regarding US Historic Crypto Tax charges, or any US tax matters, then please get in touch.
The Israeli Tax Authority is ushering in a new era of cryptocurrency regulation with the introduction of a novel procedure designed to streamline tax payments on digital currency profits.
This groundbreaking approach is a direct response to the challenges faced by digital currency owners, particularly the reluctance of many Israeli banks to process deposits from cryptocurrency transactions due to concerns about money laundering and terrorism financing.
Scheduled to commence at the beginning of 2024, this six-month pilot program will enable cryptocurrency holders to pay their taxes directly to the Tax Authority.
Owners will declare their profits and provide proof of a local bank’s refusal to accept their funds.
This facilitates a solution for those impacted by bank hesitancy.
Payments can be made from foreign bank accounts in low-risk countries or via digital currency trading companies.
In October 2023, the Israeli Supreme Court made a crucial decision impacting digital currency trading.
This decision, influenced by a petition from Bits of Gold and the Israeli Bitcoin Association, clarified that Israeli banking laws accommodate banks’ engagement in digital currency transactions.
The Court recognized digital currencies as assets within the financial sector, falling under the operational scope of banks.
Banks are authorized to engage in digital currency-related activities, aligning with the interpretation of the Banking Law.
The Bank of Israel and the banking system are urged to concentrate on regulating the integration of digital currencies.
This initiative by the Israeli Tax Authority, complemented by the Supreme Court’s ruling, marks a significant shift in the financial and regulatory landscape.
It not only legitimises digital currencies but also encourages responsible and regulated engagement with them.
Israel’s progressive steps towards integrating digital currencies into its financial and tax systems demonstrate a forward-thinking approach.
This development is a bellwether for other nations contemplating the incorporation of digital currencies into their economic frameworks.
For further information or assistance regarding this Israel crypto tax update or the taxation of digital currencies in Israel more generally, then feel free to get in touch.
In a rapidly evolving digital world, Italy’s stance on the taxation of crypto-assets has taken a significant step forward.
The Italian Revenue Agency’s Circular Letter No. 30/E, dated 27 October 2023, sheds light on this, offering operational guidelines aligned with the 2023 Budget Law.
This development is relevant for both individual investors and institutions accessing the world of cryptocurrencies and digital assets.
Crypto-assets are digital representations of value or rights, easily transferable and storable via distributed ledger or similar technologies.
They encompass various types, including payment tokens, security tokens, utility tokens, and non-fungible tokens (NFTs).
The Circular outlines that capital gains from sales, redemptions, exchanges, or holdings of crypto-assets fall under Article 67, paragraph 1, letter c-sexies, of the Income Tax Consolidation Act (Tuir).
These gains are subject to a substitute tax rate of 26%. Notably, the exchange between cryptocurrencies with identical economic functions is not tax-relevant.
However, transactions involving NFTs and cryptocurrencies are considered taxable events.
The taxable base for capital gains is calculated per Article 68, paragraph 9-bis, of the Tuir.
It’s based on the difference between the sale’s consideration or fair value and the acquisition cost.
Moreover, the deduction of capital losses is permissible, albeit under specific conditions.
Crypto-asset holders can now benefit from the Administrated Savings and Managed Savings regimes, broadening the scope of financial planning and investment strategies.
Resident individuals, non-commercial entities, and Simple Partnerships in Italy must report their foreign-held crypto-assets in the RW Box of their Income Tax Return, emphasizing transparency and compliance.
For those holding crypto-assets as of 1 January 2023, there’s an option to re-determine their cost or purchase value as of that date.
This re-determined value is subject to a 14% substitute tax, applicable even if the assets are no longer held at the time of payment.
The Circular aligns with international VAT best practices for cryptocurrencies used exclusively as payment means in VAT-subject transactions.
Some crypto operations, like virtual currency exchanges or mining, are exempt from VAT.
Additionally, stamp duty applies to periodic communications concerning crypto-assets.
To ascertain the taxable base for inheritance and gift tax, the fair market value at the time of succession or donation is critical.
For those who haven’t declared crypto-assets in their tax returns, a regularization window is available until 30 November 2023, with reduced penalties.
This opportunity extends to undeclared income derived from crypto-assets.
The Circular provides guidelines on the territoriality of crypto-assets, focusing on the location where access keys are held to determine if the income is produced in Italy.
Italy’s latest guidelines on crypto-assets taxation reflect a growing trend of regulatory bodies adapting to the digital age.
These guidelines offer clarity and a framework for individuals and businesses engaging in cryptocurrency transactions, ensuring compliance while navigating this emerging financial landscape.
If you have any queries about this article on Italy NFT and Cryptoasset Tax, or Italian tax or crypto tax in general, then please get in touch.
In the rapidly evolving landscape of cryptocurrencies, clarity on taxation remains a crucial concern for both users and intermediaries.
In a recent roundtable discussion between the Canada Revenue Agency (CRA) and the Association de planification fiscale et financière (APFF), the CRA offered insights and guidelines on several critical issues related to the taxation of cryptocurrencies.
A scenario presented to the CRA involved a taxpayer holding bitcoins in a cryptocurrency wallet, transferring these bitcoins to a centralized platform for exchanging and lending crypto assets.
The platform offered a variable return of approximately 4% per year in bitcoin in exchange for the deposit.
The platform’s terms included rights to pledge, sell, or lend the bitcoins, with profits from these actions belonging to the platform.
The depositor had withdrawal rights, and withdrawals were paid from a pooled wallet containing bitcoins from various clients.
The crucial query posed was whether this transfer constituted a “disposition” for tax purposes, potentially leading to the realization of a gain, loss, capital gain, or capital loss upon the transfer.
The CRA’s opinion leaned towards considering the taxpayer’s deposit as a disposition, as the platform effectively acquired rights to use, profit from, and dispose of the assets, transferring ownership away from the taxpayer.
This stance by the CRA highlights the necessity for tax advisors to scrutinize the terms and conditions of platforms for both the platform operators and their customers.
The determination of whether a disposition has occurred relies on assessing possession and economic risk linked to the property, rather than accepting a platform’s terms stating otherwise.
The discussion also shed light on the changing landscape of crypto asset lending platforms. Over the past 24 months, these platforms offering returns on cryptocurrency deposits have seen a decline.
Regulatory bodies such as the U.S. SEC and the Autorité des marchés financiers du Quebec clarified that crypto asset deposit accounts fall under securities, requiring compliance with securities laws. Notably, prominent U.S.-based lending platforms faced insolvency protection in 2022.
In Canada, custodial crypto asset trading platforms (CTPs) are regulated as dealers under applicable securities law.
They must explicitly state in their terms that crypto assets are held separately for clients. Unlike the terms of crypto asset lending platforms, transfers to CTPs might not generally constitute a disposition, subject to specific circumstances.
Moreover, the CRA addressed two other cryptocurrency taxation scenarios during the roundtable:
The insights from the CRA’s discussion offer valuable guidance, emphasizing the need for a nuanced understanding of terms and conditions within crypto platforms.
Further, it highlights the need to maintain meticulous records for taxation purposes in the evolving cryptocurrency landscape.
If you have any queries on Canada Crypto Tax, or other Canadian tax matters, then please get in touch.
In the ever-evolving world of cryptocurrency taxation, staying informed is paramount.
On 19 October 2023, the Swiss Federal Tax Administration made significant updates to its tax information regarding cryptocurrencies.
Let’s take a peak under the digital bonnet and see what they said…
At one point, NFTs looked to be taking over the world – one ape at a time.
However, the wind has been taken out of their sails during the so-called ‘crypto winter’. Even apes suffer from frostbite!
If it were needed, the Swiss Federal Tax Administration has put forward a comprehensive definition, characterising NFTs as cryptographically unique, indivisible, irreplaceable, and verifiable assets.
They represent specific objects, whether digital or physical, on a blockchain, and each NFT exists only once, rendering it unshareable or replaceable.
There is nothing of surprise here.
However, it’s worth noting that the definition mainly aligns with the traditional notion of NFTs. It perhaps does not address ERC-1155 NFTs, which can represent both fungible and non-fungible tokens in a single smart contract.
This is symptomatic of the fact that, despite the best will in the world, authorities are always behind the curve.
The purchase and sale of NFTs, according to Swiss tax authorities, are generally treated like traditional asset transactions.
Income tax implications do not arise from NFT purchases, as these transactions don’t alter the buyer’s assets.
Transaction costs related to the purchase are not tax-deductible for non-professionals, as they pertain to asset swapping rather than management. Profits or losses incurred during NFT sales are not considered.
However, royalties paid to NFT creators during various transfers are subject to income tax as intangible asset income..
For companies, corporate income tax considerations come into play.
The difference between the purchase and sale prices, along with license fees, is considered taxable income or expenses.
As for withholding tax, the Swiss Federal Tax Administration emphasizes that NFT transactions are generally not subject to it, as they do not typically constitute income from movable assets.
Ultimately, it stresses, the tax position must be determined on a case by case basis.
Airdrops have become a popular way for blockchain projects to distribute crypto-assets to specific individuals.
The tax implications of airdrops are addressed in the new update.
In principle, tokens received via airdrops by individuals taxable in Switzerland are considered taxable.
The nature of the airdrop, whether it falls under general income, employment relationships, returns on movable assets, or certain exemptions, depends on its structure.
There are specific considerations for airdrops that resemble promotional games, which could be tax-exempt up to CHF 1,000, provided certain conditions are met.
This update from the Swiss Federal Tax Administration represents a positive step in clarifying the tax consequences of the crypto ecosystem.
However, the complexity of the crypto-tax landscape remains.
Precise tax planning is essential for crypto-related and FinTech projects, as case-by-case analysis often holds the key to understanding and complying with the evolving tax regulations.
If you have any queries about Swiss crypto taxes, Swiss taxes in general, or any other tax matters then please get in touch.
Blockchain technology and the intersection with traditional financial systems has given revenue authorities a digital puzzle to solve.
Tax compliance in this context involves correctly determining taxable amounts, adhering to disclosure requirements, and ensuring timely tax payments.
So, how do we approach this crypto Rubik’s cube?
The South African Revenue Service (SARS) has been treating gains and losses from crypto-investments as ordinary transactions under existing tax rules.
In 2018, cryptocurrencies were included in the definition of ‘financial instrument’ in the Income Tax Act.
In 2020, this definition was expanded to ‘crypto asset,’ broadening the range of applicable provisions.
Despite this, applying these tax rules in the crypto-investment space can be complex and requires professional expertise.
SARS has the authority to impose understatement penalties ranging from 0% to 200% for incorrect tax determinations.
To enforce tax compliance, SARS relies on taxpayers to disclose crypto-related gains and losses.
If a taxpayer refuses to disclose voluntarily, SARS can use its information-gathering powers to compel disclosure from taxpayers, advisors, and third-party service providers.
Clearly, for revenue authorities around the world to apply relevant tax laws, they must first be aware of the transactions.
This can be challenging as blockchain addresses and wallet IDs are necessary to assess on-chain digital trails.
Off-chain audits involve leveraging information from digital currency exchanges and peer-to-peer facilitators.
Revenue authorities are also using information from other authorities through data exchange agreements.
Tax compliance in the crypto space carries significant risks, and external tax professionals play a crucial role in safeguarding returns from unnecessary tax costs.
If you have any queries about South Africa Crypto Tax, South Africa taxes, or tax matters in general then please get in touch.