Many refer to crypto as “Wild West”, but some believe this may not last for too long.
Thomas Shea, EY Financial Services’ crypto tax leader, said to Cointelegraph that crypto taxation is in an ever-evolving area and that new regulations could be put into place soon. Shea stated that there is new legislation that requires reporting for at most some crypto transactions. There will be major changes when those rules take effect.
EY’s executive stated that crypto has become more popular than ever and lawmakers are constantly looking for ways to generate revenue from digital assets.
“We are seeing some jurisdictions create regimes, rates, and reporting that are unique to digital assets. We are seeing the U.S. government impose rules on digital assets and report them as property (and not securities).
Shea said that while crypto investors may not be aware of the tax implications associated with crypto, it is important to understand the tax changes. According to Shea, the tax expert said that market participants must be aware of the “scope” of transactions that could trigger a taxable event as well as the reporting requirements.
Shea says that whether you buy or sell crypto determines whether it is taxable. It is not tax-deductible to purchase crypto with fiat or any unrealized appreciation. The tax executive pointed out that selling crypto is a taxable event. He explained that the gain or loss of crypto is “generally capital in nature” which could be subject to tax.
Even if the crypto is exchanged for Bitcoin (BTC), Ether (ETH), an EY executive stated that this was a “taxable event” and users must report any gain or loss.
Nonfungible tokens are also subject to the same rules. Shea stated that if you bought an NFT using fiat, there is no tax. But, buying NFTs with cryptocurrency is treated the same as a crypto-forcrypto exchange. According to a crypto tax expert, the gross proceeds are less than your tax basis in the asset. This includes any fees/costs.
Shea advised people to seek advice from qualified advisers when they are fully aware of their tax obligations.
“In an industry where technology is the architectural framework, having an advisor that has a technology solution will allow you to make the best possible decisions to minimize your tax burden.”
Related: How are crypto taxes reported?
According to reports, crypto traders in Thailand are exempted from the 7% value added tax on authorized exchanges. The country’s traders will be able annually to offset their losses against their gains.
In February, the Indian government proposed a 30% tax on income generated from crypto. Many opposed the proposal as a 30% crypto tax would be almost twice that of the 16% corporate tax rate.