The increased adoption of cryptocurrencies and blockchain technology components such as non-fungible tokens (NFT) and decentralized finance (DeFi) has prompted governments around the world to look into cryptocurrency taxation policies. .
Audit firm PwC in a report said events such as the adoption of cryptocurrencies as legal tender in El Salvador will force tax authorities who had previously remained silent on cryptocurrency tax guidelines to pass legislation.
âNot surprisingly, the number of jurisdictions issuing crypto tax guidelines has continued to increase as tax authorities realize that individuals and businesses need guidelines on how to meet their tax obligations,â he said. declared the PwC Annual Global Crypto Tax Report 2021.
Obligation of tax declaration on crypto-currencies
In mid-November, US President Joe Biden signed a billion dollar infrastructure bill containing a cryptocurrency tax filing requirement.
The inclusion of a definition of âdigital assetsâ and the introduction of obligations for âbrokersâ to report sales and transfers of digital assets in the draft infrastructure law is seen as a foregone conclusion. runner of major regulatory initiatives to come.
According to the PwC report, few US states have treated cryptocurrency and cryptocurrency transactions in sales and use tax laws, while issuing guidelines that treat cryptocurrency as a medium of exchange. .
PwC Crypto Tax Index
U.S. states have yet to release guidelines on cryptocurrency activities such as mining, airdrops and hard forks, PwC added. Meanwhile, emerging technologies such as NFTs “can potentially be subject to state sales and use tax under existing state sales and use tax frameworks,” he said. declared PwC.
The United States missed out on the top 10 places, taking 14th place, in the PwC Crypto Tax Index which assessed the most comprehensive tax policies for cryptocurrencies issued by governments around the world.
The UK, ranked 11th on PwC’s list, differed on the perception of US cryptocurrency, with Her Majesty’s Revenue and Customs (HMRC) considering crypto assets “more equivalent to a commodity” and not as a commodity. currency or money, according to PwC.
Liechtenstein tops the table
The small European principality of Liechtenstein took first place in the PwC Crypto Tax Index for the second year in a row in 2021, while six of the top 10 countries came from Europe.
Germany made the biggest jump, climbing to fourth place since 20th last year, according to the report.
Earlier in June, the German Ministry of Finance released a first draft on the direct taxation of cryptocurrencies, with the most urgent topics being “non-existent declarations on how to report crypto gains / losses to tax authorities”, staking taxation and “the rebuttable presumption for mining to be a commercial activity,” according to PwC.
El Salvador has yet to introduce formal crypto tax guidelines
Australia was ranked second with Malta. The Australian Taxation Office published its guidelines on the tax treatment of cryptocurrency investments and transactions as early as December 2014, PwC said.
âUnder current Australian tax rules, cryptocurrency is not treated as money or currency, but rather as a capital gains tax asset or as an income asset, like stocks or property, the character of the asset depending on the intention of the holder. While a digital wallet can contain different types of cryptocurrency, each cryptocurrency is a separate asset, âthe report reads.
Elsewhere, El Salvador, a Central American nation, which is arguably the first to adopt cryptocurrency after making bitcoin legal tender in 2021, ranked 24th among countries in terms of completeness of the cryptocurrency tax policy.
âInterestingly, El Salvador, which legalized Bitcoin as legal tender in 2021, still does not have formal guidelines on how digital assets should be taxed, but their Bitcoin law excluded Bitcoin / US transactions. $ capital gains tax, “PwC added.
Read more: Powell: Crypto is a risk for investors, but not for the economy
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