Cryptocurrency Taxation Laws in Europe and America
Ever since their inception in 2009, cryptocurrencies have been a major issue of concern for governments. Given that the digital currencies are decentralized, many sovereign governments don’t know what stand to take. Also, regulating the currencies and imposing taxes on them has proved to be a challenge.
It is no surprise that America and Europe are in the limelight over how they deal with the cryptos. These two superpowers could positively impact the mass adoption of cryptocurrencies, depending on what moves they make.
So, what is the state of cryptocurrency regulation in these two regions? Let’s have a look below.
Cryptocurrency Taxation in America
Cryptocurrency taxation in the US has been a subject of discussion for quite some time now. Although the US government has been quite vocal in expressing its doubts over the digital currencies, there were no legal laws on the matter until recently.
On 25th March 2014, the IRS released a notice concerning their stand on cryptocurrencies. According to the notice 2014-21, the IRS views cryptos as property, instead of a currency. As a result, the body would impose general property tax laws on cryptocurrencies.
In early October, after 5 years of being silent on the issue, the IRS announced new changes to the previously issued draft. The new notice declared that US taxpayers would have to report their crypto earnings or face penalties from the body.
The updated notice was just a draft that the body sent to key players in the industry to get their views within a month.
The notice was received with much relief at first. However, upon further inspection of the document, crypto users identified some loopholes.
One major concern is the issue of taxing cryptocurrencies traded before 2018. Initially, the December 2017 tax overhaul allowed crypto traders to defer the tax on the gain of a transaction, given that the trader invests the return in the same property. The new regulations, however, state that taxes on like-kind cryptos cannot be deferred, even if they occurred before 2018.
Although there are a few things to be straightened out, it is clear that the government is looking to regulate cryptos in US, which could be some good news for crypto traders in the region. This may also increase adoption of cryptocurrency in the region. Companies such as BlockCard have been at the vanguard of promoting crypto adoption by enabling users to buy products using their crypto currency in stores that accept VISA.
Cryptocurrency Taxation in Europe
The state of crypto regulation is almost similar in Europe. The EU, as a bloc, has no known laws on cryptocurrencies. Generally, cryptocurrencies are legal in the region. However, individual regulatory bodies in the countries pull the ropes when it comes to the taxation of cryptocurrencies.
In Germany, exchange platforms are exempt from taxes. Individuals on the other hand, are not and need to pay tax on profits that are greater than €600. Cryptos that are used to buy goods or services are also subject to tax.
France already has some tax regulations in place. In 2018, the French Council of State announced that retail traders would have their taxes reduced by a great deal. Regular traders have their profits classified as either industrial or commercial profits. Occasional transactions generate non-commercial profits which are exempt from tax.
Switzerland seems to have embraced cryptocurrencies well. The country is home to the Libra association and Ethereum Foundation headquarters. The Canton tax structure is in use in the country, where crypto holdings attract different tax levies in different regions.
Europe and America are global leaders and it is not unusual that crypto investors are looking at these two regions. It remains to be seen what role these two regions will play in the crypto world. However, it is clear that tax regulations are in place and it is just a matter of time before the two regions come up with tax laws that are acceptable by all key players in the industry.