Tax expert says it is tax-free to buy cryptocurrency
While many people call the cryptocurrency “the wild west”, some feel that it can only last a little longer.
Thomas Shea, head of crypto-taxation at EY Financial Services, told Cointelegraph that crypto-taxation is an area in development and new rules may soon be introduced. “There is new legislation that will require at least some crypto transactions to be reported, and there will be significant changes when these rules come into force,” Shi said.
The EY chief noted that with the growing popularity of cryptocurrencies, lawmakers are constantly exploring how they can generate revenue through taxation and regulation of digital assets.
“We see that some jurisdictions are developing unique systems, pricing and reporting for digital assets. In the United States, we see digital assets managed and reporting usually limited to securities (rather than real estate).”
Shi said that while they may not understand that their cryptocurrencies are subject to tax, it is crucial to understand the changing tax implications associated with cryptocurrencies. The tax expert noted that market participants should be aware of “the volume of their transactions that could lead to a taxable event and the corresponding reporting requirements.”
According to Shi, buying or selling cryptocurrencies affects whether they are taxable or not. The purchase of cryptocurrency using a legal order and any unrealized valuation is not a taxable event. However, the tax inspector noted that the sale of cryptocurrency is a taxable event. He explained that “profits or losses are usually capital in nature” and may be taxable.
An EY leader noted that even if the owner exchanges his cryptocurrency for other assets such as bitcoin (BTC) or ether (ETH), users have a “taxable event and gains or losses on the depreciated cryptocurrency must be reported.”
The same applies to non-exchangeable tokens. “If you buy NFTs with a fiat version, they are deductible,” Shi said. However, buying NFTs with cryptocurrency is very similar to exchanging cryptocurrency for cryptocurrency. “The total revenue is below your original tax base, usually including any associated fees / charges,” said one cryptocurrency expert.
Xi also urged people to seek advice from relevant advisers as soon as they become aware of their tax obligations.
“In an industry where technology is engineering, having a consultant who has the accompanying technology solution and understands your goals will allow you to make the best possible decisions to reduce the tax burden.”
Related topics: How are cryptocurrency taxes reported?
Meanwhile, in Thailand, cryptocurrency traders are said to be exempt from a 7% VAT on licensed exchanges. Domestic merchants will also be able to recover losses annually from profits.
In February last year, the Indian government proposed a 30% income tax on cryptocurrency income. However, the proposal was opposed by many, as 30% tax on cryptocurrencies is about double the corporate tax rate, which is around 16%.