"Cryptocoins" - or cryptocurrencies - are virtual trading tools that use blockchain and encryption technology to validate the operations performed. They are decentralized, independent, and stored in electronic addresses created for that purpose.
Since its creation, in 2009, the "cryptocoins" throve, with the creation of numerous other than the most famous one, the "BitCoin", gaining evermore to held in its place as a global tendency.
There are no doubts, therefore, that cryptocurrencies are a global phenomenon that already attracts the attention of most countries, especially for its potential usage for illegal activities.
In contrast, considering the potential for legal uses of cryptocurrencies, governments around the globe are striving to figure out how to regulate and, particularly, tax transactions involving those "coins".
The big question is, thus, how to achieve said taxing.
First, it must be settled the nature of the cryptocurrencies, as there is no consensus in that matter. Cryptocurrencies could be treated as "coins", per se (taxable as financial transactions and income), material possessions, or, finally, financial assets.
The implications of the definition are enormous. If cryptocurrencies were to be taxed as regular currencies, countries would be facing problems related to the typical instability that virtual coins entail. There would be, also, problems with bookkeeping, when related to a legal person.
The definition of virtual money as material assets, on the other hand, would allow taxing any other payment using said assets, and even taxing over capital gain on its transactions.
There is always, anyway, the possibility of taxing the "production" of cryptocurrencies: the so-called "mining".
The European Court of Justice has already stated that cryptocoins should receive the same fiscal treatment of the foreign currencies. United Kingdom and Germany's Federal Revenue have already recognized that virtual coins are "private cash", for taxing purposes.
It should be noted that transfer of coins used in the European Union, are exempt of Value-added Tax (VAT), with exception of collectible coins - golden and silver coins, primarily - which culminates in a possible conclusion that virtual coins should not be taxed as well.
In contrast to the EU, the Internal Revenue Service (IRS) of the United States of America, stated that cryptocoins should be treated as material assets, and not as foreign currencies.
Brazilian Federal Revenue, in yet another interpretation of virtual coins, compare those to financial assets that should be declared, for tax purposes, by its conversion to the Brazilian currency ("Reals"), and taxed over capital gain, at the moment of its transaction.
It gets even more complex, because the cryptocoins are used according to the situation. Although you can use it as a regular coin, to intermediate transactions, they are also heavily used just by its value - it is common ground nowadays to try and make money just by acquiring and selling cryptocoins, such as the BitCoin.
In this context, numerous international organizations have already turned their attention to cryptocurrencies. The Organization for Economic Cooperation and Development (OECD) and G-20 have already suggested the relevance of cryptocoins in the next years.
Also, the analysis of virtual coins was allocated to the BEPS (Base Erosion and Profit Shifting) Project, in what concerns the challenges brought to the virtual economy and to the Financial Action Task Force (FATF), which look for global patterns to fight money laundering and terrorist financing.
The International Monetary Fund (IMF), World Trade Organization (WTO) and the Bank for International Settlements (BIS), also released reports on the subject.
It remains to be seen what the developments of this scenario will be, as well as the actions that will be taken by national governments and international institutions about the matter.
The information provided in this article is for general information purposes only. The information is not intended to be comprehensive or to include advice on which you may rely. You should always consult a suitably qualified professional on any specific matter.
Hugo Reis Dias
Professor, Attorney and Legal Adviser based in Belo Horizonte, Minas Gerais. Attending Masters Degree in Public Law, Specialization degree in Tax Law and Law graduate from Pontifical Catholic University of Minas Gerais (PUC/MG). Experience as attorney and legal adviser in the area of Corporate Law, with a focus in Tax Law. Experience with international legal practice at Trowers and Hamlins’ tax team, based in London. Post-graduation professor at IEC – PUC/MG (Tax Law). Post-graduation professor at “Centro de Atualização em Direito Tributário – CAD” (Upgrade Center in Tax Law). Post-graduation professor at “Escola Superior de Advocacia – ESA da Ordem dos Advogados do Brasil” (Lawyer’s Superior School of the Brazilian Bar Association). Chief-Counselor of Três Corações’ Municipal Taxpayers Board. Member of the Brazilian Association of Tax Law (ABRADT) and Tax Law Committee of the Brazilian Bar Association’s Minas Gerais Section.
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