Introduction to Crypto Taxation: Crypto Taxes Across the World:
Introduction to Crypto Taxation: Crypto Taxes Across the World
The increased popularity of cryptocurrencies makes it virtually impossible for governments to ignore the rave. By April 2022, analysts pegged the market cap of Bitcoin at over 821 billion dollars. Ethereum bagged a market cap of over 390 billion in the same period. For many years, these figures have been slipping through the hands of numerous governments with no form of tax. In fact, there are reports of people using cryptocurrency as a tax avoidance scheme. The need to generate more government revenue from the crypto wave has contributed to the rise of crypto taxation in many countries. As such, in this article, we will be exploring the crypto taxation measures in different countries.
Crypto Taxation Measures Across the World
The United States of America
In 2014, the USA’s Internal Revenue Service (IRS) issued a notice detailing the fundamental elements of crypto taxation. The notice also clarified the country’s position, which was basically that crypto profits were taxable. Ever since this notice was issued, crypto investors have had to file their crypto profits as capital gains. In the US, the way crypto taxation works is this: if you were to sell your crypto asset at a higher price than you bought the asset, the difference between both prices is taxable, and every investor is obligated to report the profit. Other taxable events include using crypto assets to purchase items and exchanging cryptocurrencies. However, crypto transactions like crypto donations and gifts are generally not taxed under US law.
In February 2022, India joined the group of countries with a crypto tax. During this period, the Indian Finance Minister, Nirmala Sitharaman announced that the lawmakers would make some changes to the country’s Income Tax Rules. These changes aim to ensure that the government would place a tax on any income received through the transfer of crypto assets. Under this new taxation system, the Indian government places a tax rate of 30 percent on any income gotten from the transfer of digital assets like cryptocurrencies. There are also provisions stating that the government will place a tax of 1 percent on payments made for the transfer of such assets to be carried out.
Like the US, the United Kingdom also imposes a tax on cryptocurrencies. This tax called capital gains tax. However, the law provides that only the income from the sale, exchange and donation of cryptocurrencies is taxed. The tax rate is currently pegged at 10 percent to 20 percent, depending on the type of taxpayer.
The government of Italy recently announced that it would treat crypto assets as foreign currency. The implication is that there will be a tax on the exchange of cryptocurrencies for other cryptocurrencies or fiat at a flat tax rate of 26 percent.
The usefulness of crypto taxation is still a hotly debated topic. However, it is crucial to highlight that cryptocurrencies are still a developing concept. Therefore, countries seeking to tax the crypto space should ensure that such taxes will not reduce the development of cryptocurrencies in their respective territories.