"Cryptocurrency", a system of payment that simply exploded into the mainstream, got enshrined into popular culture and is now acknowledged by the experts as a currency of the future. The definitive feature of cryptocurrency is that it is not dependent on a governing agency like a government or bank to uphold it legally. Instead, it is a peer-to-peer system that can enable anyone to send payments and store them in a digital wallet.
Despite cryptocurrency’s growing popularity, its acceptance and taxation by different governments around the world remain shrouded in mystery. But as we move forward, many governments have come out with plans to formally tax and legitimize this new form of currency.
In Budget 2022, the Indian government has decided on a 30% taxation rate on any kind of Crypto based transaction. This led to anger among many Indians as the rate of taxation was on par with betting and speculations. There is also a widespread belief that due to this new taxation framework, India is going to legitimize it. But his belief is flawed as the government tax laws do not legitimize a transaction or commodity. Cryptocurrency holders in India received a further setback when RBI Governor called cryptocurrency a means to destabilize the economy.
UAE has zero income tax. A tax resident of UAE, whether actively trading or holding, has to pay zero percent taxes on the capital gain. Cryptocurrency is not recognized as currency in UAE by the Central bank of UAE but is rather recognized as an investment asset. Due to no provision of income tax in the country, capital gains tax (tax applied to the profit earned on the sale of an asset) is not imposed on UAE nationals.
US Internal Revenue Service (IRS) requires taxpayers to declare Cryptocurrency transactions. The tax rates on cryptocurrency capital gains can range from 0 to 37 percent based on various factors. While buying cryptocurrency and keeping it in your wallet exempts you from any kind of taxation, it becomes taxable if you use cryptocurrency to buy US dollars, buy other cryptocurrencies, or use it to pay for goods and services. Any capital gains for cryptocurrency kept for less than 1 year is taxed at the highest marginal tax rate in your income bracket while keeping cryptocurrency for more than one year can substantially cut back the taxation to anywhere between 0 to 20 percent.
The Financial Consumer Agency of Canada lists cryptocurrency as legal for buying products and services within the country. Cryptocurrency transactions can attract either capital gains tax or income tax depending on the nature of the operation.
In the UK, the consumers who have invested in cryptocurrency for capital appreciation or any other reason are subject to the capital gains tax when they sell them.
In Australia, Cryptocurrency is considered an asset but is subjected to trading stock rules instead of capital gains tax, if it is used in conducting a regular course of business. The cost of acquiring cryptocurrency held as trading stock is cost deductible and if an Australian has kept cryptocurrency for more than 12 months, he/she qualifies for a 50 percent capital tax deduction. The rest 50 percent of net gain is exempt from any taxation.
While Major economies like the Peoples Republic of China and Russia have a blanket ban on any kind of cryptocurrency transaction on their shores, many countries like Malta, Cyprus, Portugal, and Switzerland have a rather lax and soft approach towards cryptocurrency and its taxation. In a historic step, El Salvador became the first country in the world to use Bitcoin as a legal tender alongside US Dollar.
Disclaimer: Content posted is for informational & knowledge sharing purposes only, and is not intended to be a substitute for professional advice related to tax, finance or accounting. The view/interpretation of the publisher is based on the available Law, guidelines and information. Each reader should take due professional care before you act after reading the contents of that article/post. No warranty whatsoever is made that any of the articles are accurate and is not intended to provide, and should not be relied on for tax or accounting advice.
You can access Law including Guidelines, Cabinet & FTA Decisions, Public Clarifications, Forms, Business Bulletins for all taxes (Vat, Excise, Customs, Corporate Tax, Transfer Pricing) for all GCC Countries in the Law Section of GCC FinTax
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