One of the founders of the United States, Benjamin Franklin, once said, “But in this world nothing is certain except death and treasure.” Although this sentence came true in 1789, it is the same today. The only difference is that taxes are slowly but surely being levied on cryptoassets.

It should therefore come as no surprise that Big Four accounting firm PricewaterhouseCoopers has just released its first annual cryptocurrency tax index as part of its Global Cryptocurrency Tax Report. The detailed report contains the latest global changes in cryptocurrency taxation, as well as information on cryptocurrency fees for more than 30 jurisdictions. Interestingly, 61% of the surveyed jurisdictions have provided guidance on calculating profits and losses from cryptocurrency capital for individuals and companies.

The survey’s Cryptocurrency Tax Index ranks jurisdictions based on the general structure of their tax directions. The report shows that a small and innovative European country, Liechtenstein, leads this year’s ranking, followed by Malta and Australia.

Finally, crypto assets are taken very seriously.
Peter Bruin, PwC’s tax partner in Hong Kong and author of the report, told the Cointelegraph that the industry is finally seeing an increase in the activity of some transnational politicians, such as the Organization for Economic Co-operation and Development. As a result, the tax authorities have shown an increased interest in cryptoassets, but these guidelines are outdated:

“Our research shows that the regulations issued by many tax authorities are outdated. Yes, it is important for people to know how to calculate the tax on trading in bitcoin and other cryptocurrencies, but in fact it is a tax on cryptocurrency 101. ”
Despite the outlined basic principles for taxation of popular crypto assets, Bruin notes that loopholes remain. “What we really need, what is lacking in almost all jurisdictions, is principled guidance appropriate to the new decentralized economy,” he said.

One of the most important findings in the report, however, is that no jurisdiction has yet issued guidelines on the topics that shape the future of the digital asset economy. For example, there are no tax rules regarding loans and lending in cryptocurrencies, decentralized financing, non-perishable tokens, token assets and revenue generation.

This is worrying given the recent rise in DeFi and billions of dollars locked in DeFi contracts, as criminals could monetize the hype. Although the PwC report is impressive, it highlights that innovative managers and start-ups without management will face significant tax uncertainty, especially with regard to cross-border activities.

Some recommendations are given in the document; For example, when it comes to taxing DeFi, he mentioned that this should include how income from the DeFi platform is taxed at the recipient level and whether jurisdictions can try to tax source payments. This is similar to how withholding tax is often applied to interest payments in traditional finance.

The report also takes into account the ever-changing ecosystem in the crypto industry, and thus emphasizes that future recommendations must be principled and not overly receptive.

Cryptocurrency is still considered real estate
Another important finding in the report is that most jurisdictions treat cryptocurrencies as a form of ownership from a tax point of view. In fact, very few digital assets are considered currency for tax purposes. The report indicates that this is due to the fact that the disposal of property is similar to a barter; This can lead to profits or losses that can be taxed.

However, this is not the case in all jurisdictions. For example, countries such as Israel have begun to propose taxing bitcoin as a currency. If this proposal becomes law, digital currencies such as bitcoin (BTC) can be taxed in Israel at a lower rate than at present.

Although taxation of cryptocurrency as a currency can also lead to problems. The report notes that a tax change can be made every time a person uses a digital asset. This poses a problem because many consumers cannot calculate profits or losses for each of their daily transactions. This is generally not the case for the fiat team, but it could have been if cryptocurrencies were used, which led to another obstacle to mass adoption.

Tax uncertainty will create problems
Overall, the PwC Cryptocurrency Tax Report shows that despite the enormous efforts made to provide advice on the taxation of digital assets, the industry has lagged behind the latest developments.

Source: CoinTelegraph

LEAVE A REPLY