January 2019 International Crypto Tax Update
Written 16th January, 2019
An increase in inspections?
For the first time in its history, the Danish Tax Agency will have access to information on the trade of cryptocurrency, as it was authorized by the Tax Council in the country. There are three specific Danish crypto exchanges that occurred between 1 January 2016 and 31 December 2018 that are of interest to the Tax Agency. The objective in retrieving the requested information is to ensure that the accurate tax was paid on the three crypto exchanges.
The United States has placed some attention on holders of cryptocurrencies as well. Between the approximately 13,000 Coinbase users who were affected by the IRS call to provide detailed information in early 2018, and the report in April 2018 that only 0.04% of tax filers report gains on crypto in 2018, we may see the IRS take more action on underreporting of gains on crypto this year.
Not only are personal holders of cryptocurrency gaining the spotlight in the tax agencies of their home countries, but companies are as well. The Bulgarian National Revenue Agency (NRA) has announced that they will begin inspections of companies whose business is in the online platform of selling, purchasing, and/or trading of cryptocurrencies. The purpose of the inspection is to assure that the companies and their clients/customers are complying with tax and social security legislation. There are nine companies who have already been assigned to be checked, but the names of these companies are not yet known.
Brexit – taking precautions
As Brexit still looms with uncertainty, some crypto companies aren’t taking their chances and are taking preemptive measures to not get caught in case the results from Brexit are not in their favor. Binance shared today that they are launching a new platform for fiat-to-crypto trading in Jersey, with intentions to expand their presence in Europe while also providing “freedom from looming Brexit uncertainty”.
Coinbase also opened an office in Dublin, Ireland in late 2018 to also have a presence in Europe as it was “also a plan B for Brexit”.
Although the state of cryptocurrency in the UK after Brexit has been discussed for some time now, the coming week will be crucial as Theresa May’s Brexit plan was recently rejected and is now facing a vote of no confidence. All that can be said regarding this for now is, TBD and watch this space…
Canada – crypto donations to politicians
Recently Canada has posted guidance on the treatment of cryptocurrencies that are donated to political parties. Although the document on these regulations is currently only a draft, Canadian political parties have until the 21st January 2019 to submit opinions and revisions. Some of the current regulations in the document include the treatment of cryptocurrency donations as like bonds/stocks in which the digital asset must be sold for traditional currencies before being able to place it into a bank account. Political parties and candidates who receive cryptocurrency donations are also not allowed to purchase property directly using the donation. Another important addition to the draft document is the restriction from political parties receiving anonymous cryptocurrency donations. They will put into place a two-step process of contributions in cryptocurrency amounting to 20 Canadian dollars (15 USD) to first identify the contributor and to record the transaction information for the purpose of future audits. The anonymous nature of cryptocurrencies raises the ethical dilemma of how to track cryptocurrency donations to political parties, which causes one to wonder how other countries treat such donations.
