Tax Regulations: The Impact on Traders and Miners
Government agencies of various states are developing tax rules aimed at regulating the cryptocurrency market. Some lawmakers have failed at amending the legislation, but many still have a chance to make crypto traders pay their bills.
Cryptocurrency taxation is a delicate and tricky topic for most jurisdictions around the world. The global adoption of digital assets pushes regulators to make various legislative amendments to tax crypto transactions.
While the Thai government has decided to exempt crypto traders from taxes, Brazil is voting on an initiative to impose taxes on crypto trading. And Portugal is rejecting a bill to tax those willing to participate in digital asset exchanges. On the other hand, Kazakhstan approves new fiscal rates for crypto miners.
So, first things first.
Thailand Exempts Crypto Traders from Taxes
The Thai authorities have officially introduced a value-added tax (VAT) exemption for cryptocurrency transfers through government-approved exchanges. The corresponding decree was published in the Royal Thai Government Gazette.
The tax exemption was implemented retroactively by the government starting April 1, 2022. According to local media reports, the tax breaks will be valid until late 2023.
The tax break’s main purpose is to facilitate the trading of cryptocurrencies on authorized exchanges. This permits crypto transactions to be regulated and supervised by relevant departments like the Securities and Exchange Commission (SEC).
Thai Finance Minister Arkhom Termpittayapaisith is convinced that the relaxed tax rules will make crypto exchanges in the country more secure and stable. The minister is also sure that waiving taxation on cryptocurrencies “would encourage Thailand to have an infrastructure and payment system ready for the future digital economy.”
Ekniti Nitithanprapas, Director-General of the Revenue Department, added that crypto trading would become more convenient for investors who benefit from a fair tax regime and secure transactions. At the same time, Thailand has improved its image in the global digital space.
The tax benefits will apply to digital currency issued by the Bank of Thailand. Another royal decree extends the VAT exemption to transfers with retail central bank digital currency (CBDC) released by the Monetary Authority of Thailand. The Bank of Thailand announced late last year that it plans to begin testing the CBDC at the end of 2022 in transactions between financial institutions and users as an alternative means of payment.
Recall that the Thai authorities rejected the idea of legalizing cryptocurrency as tender, seeing it as a threat to the country’s financial system.
Brazil to Impose Tax on Cryptocurrency
The Federal Revenue of Brazil (RFB) stated that local digital investors should pay tax on crypto transactions. The corresponding declaration was published in the official journal of the Brazilian federal government.
Trades between cryptocurrency pairs should be taxed even if there is no conversion to the real, the RFB said. However, what can be considered profit in this kind of transaction is unclear, as there is no capital gain in fiat currency when exchanging one crypto-asset for another.
Note that not all crypto traders will have to declare transactions. The regulator has stipulated that investors whose trading turnover exceeds 35,000 BRL (about $7263,67) in cryptocurrency will pay income tax.
The bill is opposed by representatives of the National Labor Party (Podemos). Their spokesperson, Federal Deputy Kim Kataguiri, points out that tax law has no authority to change the definition of private law institutions. “In the exchange between crypto-assets, there is no exchange involving currency; one crypto-asset is exchanged for another, therefore, there is no equity increase,” Kataguiri said.
As a reminder, Brazil is actively working on creating the CBDC. A pilot project is planned to be launched in the second half of this year. For its implementation, the government is cooperating with the Stellar blockchain network.
Portugal Rejects Crypto Taxation Initiative
According to local media reports, the Assembly of the Portuguese Republic has dismissed the proposal of several political parties to introduce mandatory taxation of cryptocurrency transactions. The proposal was made by representatives of the left-wing parties Bloco de Esquerda and Livre but was rejected by the cabinet during the 2022 budget vote. The initiative provided for the taxation on profits above €5,000. During the vote, Bloco de Esquerda MP Mariana Mortágua criticized the government for being unwilling to take the necessary measures to tax cryptocurrencies.
However, Portugal’s Finance Minister Fernando Medina said he intends to continue working on the regulatory framework to introduce taxation of financial transactions related to cryptocurrency assets.
Kazakhstan Introduces Taxes on Crypto Mining
In the first reading, the Kazakh government adopted amendments to the National Tax Code regulating the tax burden on crypto mining. These amendments imply differential tax rates linked to the electricity consumption prices for mining.
Under the adopted regulations, tax rates for mining businesses will change depending on the cost of electricity they consume:
- An additional tax of 10 KZT will accompany electricity consumption worth 5-10 KZT per kWh.
- The electricity costing 10-15 KZT per kWh will be taxed at 7 KZT.
- The electricity of 20-25 KZT per kWh will be subject to an additional tax of 3 KZT.
The previous initiative to raise the price of electricity for crypto miners, voiced by Kazakhstan’s first Vice-Minister of Finance Marat Sultangaziev back in February, was rejected. However, the new amendments outweigh Sultangaziev’s proposal, making significant adjustments to crypto miners’ income.
Kazakhstan’s Economic Minister Alibek Kuantyrov said that the adopted amendments aim to create an incentive for using renewable energy sources. Thus, under the new regulations, miners using green energy will pay a tax of only 1 KZT, excluding the cost of electricity.
Recall that a recent study showed that BTC mining has become even more eco-friendly.