This article aims to provide an overview of the taxation<\/strong> of virtual currencies<\/strong> on a global level, not just in Italy, starting with the definitions and issues that need to be managed and have already been outlined by various supranational authorities (primarily the OECD, but also the FATF, FSB, World Bank, etc.).<\/p>\n\n\n\n The topic may be of increasing interest given the recent increase in the value of cryptocurrencies such as Bitcoin, Ethereum, etc. (in the last 3 months, 1 Bitcoin has gone from around $10,000 USD to around $18,500 USD, an increase of 85%, according to BitScreener as of November 30, 2020).<\/p>\n\n\n\n Our advice to cryptocurrency holders, especially those held on exchange sites (such as Kraken, Binance, Coinbase, etc.), is to be as transparent as possible and save logs of inbound and outbound transactions.<\/p>\n\n\n\n Numerous exchanges have closed overnight, so in the event of financial audits, it becomes difficult to explain to the authorities how cryptocurrency was acquired and then transferred as a wire transfer to one’s bank account in legal tender.<\/p>\n\n\n\n In Italy, regulations regarding the taxation<\/strong> of virtual currencies<\/strong> have not yet been fully defined, but some guidelines have already been set in terms of monitoring and taxing capital gains generated at the time of exchange into official currency.<\/p>\n\n\n\n The taxable moment is created (by Revenue Agency resolution of 2016) when money is exchanged for legal tender for the purpose of speculation: by convention, this occurs when the amount exceeds \u20ac51,645.69 for more than one week, both for private investors and companies.<\/p>\n\n\n\n To avoid problems, Italy could opt for different solutions:<\/p>\n\n\n\n For comparison, until last year in Russia, a 13% tax was paid without exemption in relation to the capital gain realized with virtual currencies<\/strong>.<\/p>\n\n\n\n <\/p>\n\n\n\n Regarding monitoring in income tax declarations, it seems to be a recognized practice in the RW form that virtual currencies<\/strong> for which:<\/p>\n\n\n\n When compiling the RW form for monitoring, the foreign country in which the virtual currencies<\/strong> are held should not be included, as virtual currencies<\/strong> are not present on individual computers in the same country but on all computers that are part of the network.<\/p>\n\n\n\n On the other hand, it does not seem necessary to declare Ivafe concerning cryptocurrencies, although these virtual currencies<\/strong> are considered foreign financial activities in Italy.<\/p>\n\n\n\n The Italian legislature could refer to the US model, as the IRS (Internal Revenue Service, equivalent to the Italian Revenue Agency) requires full disclosure through form 8949 “Sales and Other Disposition of Capital Assets,” which allows explaining all movements through appropriate white boxes, and thus, those who control it can better understand the peculiarities of each individual investor.<\/p>\n\n\n\n The phenomena that were immediately identified and for which it was necessary to put a brake were and are:<\/p>\n\n\n\n This text is based on the recent OECD Paris “Taxing virtual currencies<\/strong>: an overview of tax treatment and emerging tax policy issues” (October 2020).<\/p>\n\n\n\n The taxable event can be determined from the creation to the disposal of currency regarding revenue, consumption, and property taxation<\/strong>.<\/p>\n\n\n\n It is also important to consider the recent issues arising from the significant increase in value in relation to “hot” situations and topics such as:<\/p>\n\n\n\n The questions and issues that global lawmakers need to find answers to as soon as possible are numerous:<\/p>\n\n\n\n The different Distributed Ledger Technologies (DLTs) in combination with the underlying cryptography do not have a unique standard and the same definition because they have unique purposes and characteristics and are therefore a challenge for lawmakers in various countries.<\/p>\n\n\n\n Challenges are also determined by the characteristics of lack of central control, pseudonymity, difficulty of evaluation, hybrid characteristics including financial instruments, and the rapid evolution of the underlying Blockchain (explained at the link here) and the form of these financial activities.<\/p>\n\n\n\n <\/p>\n\n\n\n DLT-based virtual currencies<\/strong> currently represent a market of around 470 million USD (source: BitScreener 30\/11\/2020).<\/p>\n\n\n\n Previous attempts at global legislation:<\/p>\n\n\n\n Despite the attempts made, to date, the responses from states are still compartmentalized, partial, or incomplete. We need to be able to answer the following additional questions:<\/p>\n\n\n\n <\/p>\n\n\n\n An essential prerequisite for taxing virtual currencies<\/strong> is finding the correct definition of them.<\/p>\n\n\n\n The most commonly used definitions in the various years since the creation of the first bitcoin in 2009 (source: terminology in internet search engines) are:<\/p>\n\n\n\n To date, there is no international standard even in the above definitions.<\/p>\n\n\n\n Definition given by FATF: virtual assets, digital representation of value that can be sold or digitally transferred and can be used to pay for goods and services or held for investment purposes (2019).<\/p>\n\n\n\n Technically, crypto activity can be defined as DLT technology with encryption underlying the exchange of information.<\/p>\n\n\n\n <\/p>\n\n\n\n The idea that virtual currencies<\/strong> were inherently seen as a speculative source and, due to pseudo-anonymity, as a source of illicit or criminal activity has gradually been abandoned, contributing to their progressive increase in value.<\/p>\n\n\n\n The World Bank has a rapidly evolving approach and the usefulness it derives from them today concerns the saving and sharing of data maintained in a distributed network of computer servers called nodes (2019).<\/p>\n\n\n\n Data is saved and shared synchronously and decentralised among network participants. The advantage is that intermediaries are not needed for transactions that are processed (2018).<\/p>\n\n\n\n Consensus creation mechanisms:<\/p>\n\n\n\n Payment tokens characteristics:<\/p>\n\n\n\n Profit tokens characteristics:<\/p>\n\n\n\n Guarantee tokens characteristics:<\/p>\n\n\n\n Creation (airdrops: bounties, ITO – initial purchase offer, mining, forging or staking with proof of stake).<\/p>\n\n\n\n Storage and transfer wallet:<\/p>\n\n\n\n Security guaranteed by asymmetric keys:<\/p>\n\n\n\n <\/p>\n\n\n\n Some states classify virtual currencies<\/strong> as property and therefore include them in the taxable base, while others classify them as financial instruments or products. Some, such as Italy, consider them foreign currencies (resolution of the Italian tax agency in 2016), while others, such as Poland, consider them digital representations of value.<\/p>\n\n\n\n The International Financial Reporting Interpretation Committee (IFRIC) classifies them as assets capable of being separated from the holder and sold separately, providing the holder with the right to receive a fixed and determinable number of units of currency.<\/p>\n\n\n\n At the same time, they cannot be classified as currency because no digital currency can yet be considered as a basis for measuring transactions and serving as a unit of measure in place of legal tender currencies, as they are still inherently linked to the value of legal tender currencies (perhaps in the future, when there are less value fluctuations, they could be detached from the underlying valuation of legal tender currencies).<\/p>\n\n\n\n A currency is a representation of value as a unit of account accepted in exchange for goods and\/or services and issued by a public authority such as a central bank, recognized as legal tender in at least one jurisdiction.<\/p>\n\n\n\n IMF: the concept of currency value is based on the state’s ability to regulate the monetary system (confidence in the value that the currency represents).<\/p>\n\n\n\n The intrinsic value of a currency is therefore based on the ability of a state to support the currency and avoid too much fluctuation in the short term (as in the case of the extreme devaluation of Venezuela). In Venezuela, given the ongoing crisis, the new virtual currency “Petro” has been coined, which is alongside the legal tender currency (which is practically worthless) and the dollar.<\/p>\n\n\n\n <\/p>\n\n\n\n Properties applied to virtual currencies<\/strong>:<\/p>\n\n\n\n Definition of virtual currencies<\/strong> for taxation<\/strong> purposes:<\/p>\n\n\n\n <\/p>\n\n\n\n Interesting cases include Portugal, where, according to local revenue authority, virtual currency exchanges are not treated as taxable income because they do not fall within the definition of capital gains or taxable income. However, they could be considered a business activity if they constitute the private individual or company’s commercial activity.<\/p>\n\n\n\n In Switzerland, on the other hand, buying or selling virtual currency is treated as a conventional means of payment, and therefore the resulting profit or loss has no tax consequences (capital gains are not taxable, and losses are not deductible). However, if the purpose of the transaction can be considered a commercial activity, capital gains may be taxable and losses deductible.<\/p>\n\n\n\n In the Netherlands, for virtual currencies<\/strong>, a resident taxpayer holder is taxed with the presumed regime for saving and investing, which provides that taxpayers receive a percentage of the positive balance of the current value of assets that include virtual currencies<\/strong>, less the value of liabilities. There is no taxation<\/strong> if the difference is less than 30,360 euros. The market value is analyzed on January 1 of each year, and the tax rate in relation to taxation<\/strong> is 30%; this regime does not apply to companies subject to CIT for all their activities, including mining and professional traders.<\/p>\n\n\n\n In France, Article 150 of the Tax Code states that the exchange from virtual currency to legal currency constitutes a tax moment. Any exchange of virtual currency for another virtual currency does not constitute a tax moment and is therefore not taxed. In addition, transaction fees and miners’ fees are also exempt.<\/p>\n\n\n\n In Poland, the exchange from virtual currency to another virtual currency is neutral regardless of the method (over the counter, through external currency exchanges, or within the same currency exchange). In contrast, revenues from currency exchanges in legal tender or when virtual currencies<\/strong> are used to pay for goods or services are considered capital gains and are always taxed, whether from private or business activities.<\/p>\n\n\n\n In Australia, individuals are taxed on the capital gains generated when virtual currency is used. The exemption for personal use does not apply if the activity was held for speculative purposes. However, if the activity was held for more than a year, the taxation<\/strong> can be spread over several years. Losses, on the other hand, are only deductible against future gains if the trading rule is applied and virtual currencies<\/strong> are considered ordinary income, and the cost of acquisition is deductible.<\/p>\n\n\n\n In Austria, the treatment depends on whether the activity is business, investment, or other nature: if it is a business activity, it is treated as ordinary income, and the normal personal progressive tax or CIT is applied; if it is an investment activity, the taxpayer pays taxes on the lower value between the personal progressive tax and CIT. Finally, if it is considered another type of investment, they are taxed on the capital gains on a progressive basis if held for less than a year (with a minimum exemption of 440 euros), or are not taxed if held for more than a year.<\/p>\n\n\n\n In Belgium, if it is a personal activity, profits are taxed as professional income, and the progressive tax rate of between 25% and 50% is applied. If it is not a professional activity, it must be determined whether the gain is considered speculative activity or normal disposition of personal assets. This distinction is not clearly defined. In any case, if it is considered a normal disposition activity, there is an exemption, while if it is considered speculation, the fixed rate of 33% applies.<\/p>\n\n\n\n In Canada, the taxable moment occurs with a profit derived from the disposition or sale of assets for business or when currency is purchased with the intention of making profits. Virtual currencies<\/strong> are treated as other professional income. Therefore, the capital gain is taxed. While disposition other than business activity is taxed only on half the capital. In this case, losses can be used for offsetting or carried forward or back in the previous 3 years (requested for reimbursement or offsetting).<\/p>\n\n\n\n In Estonia, the sale or disposition of virtual currencies<\/strong> generates a taxed capital gain of 20%, except those made in trading. Profits made with trading are taxed as professional income subject to personal tax and contribution.<\/p>\n\n\n\n In Japan, a distinction is made between occasional gain and that made from business activity. Revenues derived from occasional activities are taxed as miscellaneous income, while those from business are taxed as business activities.<\/p>\n\n\n\n Regarding the recipient of virtual currencies<\/strong>, it is emphasized that, generally in the various states, it is required to include the value in taxable income and that, when salaries are paid in virtual currency, they are taxable according to the personal tax regime (as fringe benefits or salary income).<\/p>\n\n\n\n Interesting cases relate to donations of virtual currency, and there are 2 possible tax treatments: they could be taxed to the donor as disposals under the laws relating to capital gains or income, although there are exceptions for donations to charitable organizations, or they may not be taxed to either party. In any case, it is essential to establish the value for tax purposes.<\/p>\n\n\n\n In the UK, the value is the market value at the time of donation, and the donor is taxed; if the capital gain is not detectable at the time of donation, for example, because it is trading or because of the exemption due to small amounts, then the donee can replace the donor, and the donee is taxed at the time of the currency exchange. Gifts to charitable organizations are not taxed.<\/p>\n\n\n\n In the USA, donations of less than 15,000 USD are not taxed to either the donor or the donee (2019 ruling). In this case, the taxable base depends on whether the recipient receives the activity as a capital gain (taxable) or loss (deductible).<\/p>\n\n\n\n Conclusion: most states consider virtual currencies<\/strong> as a property of the taxpayer and almost always as intangible property. Therefore, they are taxed based on capital gains in most cases and in rare cases as income from activity or as miscellaneous income.<\/p>\n\n\n\n Although most states do not consider private exchanges between virtual currencies<\/strong> as a taxable tax base, most consider the exchange from virtual currency to legal currency as a taxable event.<\/p>\n\n\n\n Also, for most states, virtual currencies<\/strong> sold to pay for goods or services or salaries fall within taxable events.<\/p>\n\n\n\n VAT on virtual currency transactions: in the European Union, the 2006 directive seeks to harmonize VAT among member states by defining taxable taxes and exemptions together with the boundaries of application of the standards and regulating the reference framework for VAT and its implementation in the EU territory.<\/p>\n\n\n\n In 2014, the EU discussed Bitcoin and virtual currencies<\/strong>. According to EU directives, it depends on how these transactions are characterized and they could be considered outside the scope of VAT, subject to exemption, or taxable in all respects.<\/p>\n\n\n\n The group concluded that virtual currencies<\/strong> would hardly be considered electronic currency, money, or vouchers. There was also uncertainty about whether they should be considered digital products or tradable products.<\/p>\n\n\n\n In 2015, the EU commission raised concerns about the lack of an official exchange rate, complexity of compliance with virtual currency exchanges, anonymity, place of purchase, and the VAT taxable status of the user, as well as the risk of carousel fraud.<\/p>\n\n\n\n In conclusion, it was decided that virtual currencies<\/strong> are better treated as tradable assets.<\/p>\n\n\n\n In October 2015, the ruling of the Skatteverket vs. Hedqvist court:<\/p>\n\n\n\n Swedish company Hedqvist aimed to become an exchange between Bitcoin and the currency having legal tender via an online platform and a corporate structure. According to the Swedish court, the transactions would be exempt from VAT.<\/p>\n\n\n\n The Swedish tax authority (Skatteverket) appealed the ruling regarding whether they could be taxable activities according to Article 2(1) of the VAT Directive and, in the alternative, whether Article 135(1) of the same directive meant that the transactions made by the exchange were exempt from VAT.<\/p>\n\n\n\n According to the court, virtual currencies<\/strong> were comparable to legal tender only for the purpose of being a unit of account, and virtual currencies<\/strong> would generate difficulties in determining the taxable amount and the deductible VAT amount.<\/p>\n\n\n\n Therefore, the court ruled that transactions including the exchange between virtual and ordinary currency are exempt from VAT according to Article 135(1) of the VAT Directive.<\/p>\n\n\n\n <\/p>\n\n\n\n New Zealand is one of the few countries to have a different approach to VAT on virtual currencies<\/strong>, as it is determined on a case-by-case basis depending on whether they are exchanged or sold and these may be fully taxable or exempt depending on the circumstances.<\/p>\n\n\n\n <\/p>\n\n\n\n The VAT treatment is more straightforward compared to the taxation<\/strong> of income taxes on virtual currencies.<\/strong> In most states, the exchange of virtual currency is not subject to VAT. The activity of using virtual currency to purchase goods or services is outside the scope of VAT, and therefore VAT cannot be calculated on the value of the currencies themselves. Virtual currencies<\/strong> represent only a means of payment, and transactions are not considered as bartering goods.<\/p>\n\n\n\n The purchase of taxable goods and services paid for with virtual currencies<\/strong> remains subject to VAT with some exceptions, for example, in France and Italy, as the receipt of new tokens\/cryptos through mining is not subject to VAT. This greatly simplifies the management of taxable amount\/deductions and the inclusion of potential small retailers according to VAT rules.<\/p>\n\n\n\n In EU states, the Skatteverket vs. Hedqvist ruling, which treated virtual currencies<\/strong> as ordinary currencies under the VAT directive, has been responsible for the treatment that is applied today.<\/p>\n\n\n\n Currency exchange-related services have a more varied treatment in different states. VAT is not due in the majority of states, typically because it is considered exempt or part of the provisions that are related to financial services.<\/p>\n\n\n\n In other countries, particularly outside the EU, currency exchange-related services are subject to normal VAT rules in line with the treatment of payment instruments and financial services concerning the recording, valuation of virtual currencies<\/strong>, and regular record-keeping.<\/p>\n\n\n\n <\/p>\n\n\n\n In conclusion, from the analyses carried out, it is clear that the taxation<\/strong> of virtual currencies<\/strong> requires legislators to balance objectives and perspectives. Given that technology changes over time, recommendations cannot yet be made, which would in any case need to be reviewed with the updating of technology. However, it has been understood that:<\/p>\n\n\n\n This type of virtual currency has characteristics that make it more similar to capital income rather than being treated as capital gains. Considering and addressing these activities with a treatment more in line with their nature could lead to greater transparency and prevent taxpayers from seeking to evade taxes as they would have a better understanding of the reason and purpose for paying that type of tax.<\/p>\n","protected":false},"excerpt":{"rendered":" Introduction: Current Issues This article aims to provide an overview of the taxation of virtual currencies on a global level, not just in Italy, starting with the definitions and issues that need to be managed and have already been outlined by various supranational authorities (primarily the OECD, but also the FATF, FSB, World Bank, etc.). […]<\/p>\n","protected":false},"author":37,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jnews-multi-image_gallery":[],"jnews_single_post":{"subtitle":"","format":"standard","video":"","gallery":"","source_name":"","source_url":"","via_name":"","via_url":"","override_template":"0","override":[{"template":"2","single_blog_custom":"","parallax":"1","fullscreen":"0","layout":"right-sidebar","sidebar":"default-sidebar","second_sidebar":"default-sidebar","sticky_sidebar":"1","share_position":"float","share_float_style":"share-normal","show_share_counter":"1","show_view_counter":"1","show_featured":"1","show_post_meta":"1","show_post_author":"1","show_post_author_image":"1","show_post_date":"1","post_date_format":"default","post_date_format_custom":"Y\/m\/d","show_post_category":"1","show_post_reading_time":"1","post_reading_time_wpm":"300","show_zoom_button":"1","zoom_button_out_step":"2","zoom_button_in_step":"3","show_post_tag":"1","show_prev_next_post":"0","show_popup_post":"1","number_popup_post":"1","show_author_box":"1","show_post_related":"1","show_inline_post_related":"0"}],"override_image_size":"0","image_override":[{"single_post_thumbnail_size":"crop-500","single_post_gallery_size":"crop-500"}],"trending_post":"0","trending_post_position":"meta","trending_post_label":"Trending","sponsored_post":"0","sponsored_post_label":"Sponsored by","sponsored_post_name":"","sponsored_post_url":"","sponsored_post_logo_enable":"0","sponsored_post_logo":"","sponsored_post_desc":"","disable_ad":"0"},"jnews_primary_category":{"id":"","hide":""},"jnews_social_meta":{"fb_title":"","fb_description":"","fb_image":"","twitter_title":"","twitter_description":"","twitter_image":""},"footnotes":""},"categories":[601,525],"tags":[800,170,798,62,842,826],"coauthors":[422],"class_list":["post-6160","post","type-post","status-publish","format-standard","hentry","category-economy","category-real-applications-en","tag-bitcoin-en","tag-blockchain-en","tag-businesses","tag-ledger","tag-legal-value-eng","tag-mining-en"],"_links":{"self":[{"href":"https:\/\/affidaty.io\/blog\/wp-json\/wp\/v2\/posts\/6160","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/affidaty.io\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/affidaty.io\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/affidaty.io\/blog\/wp-json\/wp\/v2\/users\/37"}],"replies":[{"embeddable":true,"href":"https:\/\/affidaty.io\/blog\/wp-json\/wp\/v2\/comments?post=6160"}],"version-history":[{"count":0,"href":"https:\/\/affidaty.io\/blog\/wp-json\/wp\/v2\/posts\/6160\/revisions"}],"wp:attachment":[{"href":"https:\/\/affidaty.io\/blog\/wp-json\/wp\/v2\/media?parent=6160"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/affidaty.io\/blog\/wp-json\/wp\/v2\/categories?post=6160"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/affidaty.io\/blog\/wp-json\/wp\/v2\/tags?post=6160"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/affidaty.io\/blog\/wp-json\/wp\/v2\/coauthors?post=6160"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}Taxation Moment<\/h2>\n\n\n\n
\n
Income Tax Declaration<\/h2>\n\n\n\n
\n
\n
\n
\n
Global Legislation: Attempts and Necessity<\/h2>\n\n\n\n
\n
\n
The Need for Standard Definitions<\/h2>\n\n\n\n
\n
Growth of value: from speculative source to global banking tool<\/h2>\n\n\n\n
\n
\n
\n
\n
\n
\n
Legislative classification: differences between countries<\/h2>\n\n\n\n
\n
Ownership of currency: unit of account, medium of exchange, and store of value.<\/h2>\n\n\n\n
\n
\n
Taxation Moment: State by State<\/h2>\n\n\n\n
\n
The EU Commission has ruled as follows:<\/h2>\n\n\n\n
\n
VAT<\/h2>\n\n\n\n
Taxation of Virtual Currencies: Objectives and Perspectives<\/h2>\n\n\n\n
\n