ADVERTISEMENT
Advertise with BNC

UK joins Japan and US with plans to update crypto tax guidance

Tax authorities from influential jurisdictions are planning to make life easier for crypto tax-payers

As a completely new asset class, the laws governing cryptocurrency taxation have not always been clear. But over the last few weeks, several world governments have revealed their intentions to simplify and streamline the process of paying tax on cryptocurrency transactions.

U.S. calls for clearer guidance

In the United States, a House Ways and Means committee serving the Internal Revenue Service (IRS) has called for clearer definitions on how transactions in cryptocurrency should be taxed.

Although cryptocurrency is treated as property for the purposes of tax, the calculations required can be complicated, and a report earlier this year found that a large percentage of Americans had decided not to report profits from crypto trading in the previous tax year. This was supposedly due to "perceived complexities" preventing investors from reporting their gains and losses.

In an open letter to the IRS, the committee has urged the agency to make haste in providing clearer, more up-to-date guidance – particularly given the fact that the IRS was ramping up enforcement action against taxpayers, while simultaneously doing nothing to clarify the regulatory position.

"the IRS has had ‘more than adequate’ time to develop clear rules on how cryptocurrency-related profits would be taxed. We therefore write again today to strongly urge the IRS to issue updated guidance, providing additional clarity for taxpayers seeking to better understand and comply with their tax obligations when using virtual currencies," state the lawmakers.

Before the IRS have had a chance to respond, the crypto community has rallied in support — with Coincenter spokesperson Neeraj Agrawal calling for a second consideration of the Cryptocurrency Tax Fairness Act, a bill first proposed last year that aims to make it much easier to use Bitcoin for everyday transactions.

Japan aims for simplification

After the catastrophe at Mt. Gox, Japanese financial regulators quickly introduced a legal framework for cryptocurrency usage. But despite high levels of adoption in the country, taxation of cryptocurrency remains relatively complicated. Under existing Japanese law, for example, proceeds from trading or mining are categorized as "miscellaneous income" — a categorization that makes it subject to taxes of up to 55 percent for high-earners.

This classification will not change with the reform, but Japan’s National Tax Agency (NTA) is now reportedly looking for ways to simplify the system so that investors are not discouraged from reporting their gains and losses by the complexity of the procedure.

This is not the first time that such a simplification has been proposed, and the suggestion was dismissed in June this year by Japan’s deputy prime minister. Nevertheless, the NTA remain persistent, and are now proposing a system that would standardize the tax filing process, including software that would make it easier to calculate profits obtained after selling cryptocurrencies from various exchanges — which often use different methods for processing transaction history data storage.

U.K. issues cryptoassets report

The Cryptoassets Taskforce — England’s collaborative body tasked with investigating cryptocurrency — have also now joined what is becoming a worldwide call for greater clarity on tax.

The group is made up of Treasury, Financial Conduct Authority and Bank of England officials, and was formed in April this year to explore the possible benefits and challenges of cryptocurrencies for the country’s financial sector.

Seven months later, they have issued their first report, which gives a balanced view of cryptocurrency and blockchain technology, and calls for updated guidance for would-be crypto-taxpayers.

Though the Taskforce admit that tax is outside their remit, and that no "substantive considerations of tax issues" have been made in the report, the group also claim that

"HM Treasury is working closely with HM Revenue and Customs (HMRC) to consider the tax issues raised by cryptoassets", and that revised guidance is to be issued by HMRC early next year:

*"Current guidance on the tax treatment of cryptoassets is set out on HMRC’s website. HMRC will further update their guidance by early 2019, drawing on the Taskforce’s work," *the report states.

At present, cryptocurrency is covered only by pre-existing tax laws in the UK, and whether or not it is subject to Income Tax, Corporation Tax or Capital Gains depends on the activities and the parties involved.

As governments shift their focus to increasing revenue from cryptocurrency transactions, the coming year could see tax laws develop to cover more fully this new class of asset.


ADVERTISE WITH BRAVE NEW COIN

BNC AdvertisingPlanning your 2024 crypto-media spend? Brave New Coin’s combined website, podcast, newsletters and YouTube channel deliver over 500,000 brand impressions a month to engaged crypto fans worldwide.
Don’t miss out – Find out more today


ADVERTISEMENT
Advertise with BNC
ADVERTISEMENT
Advertise with BNC
BNC Newsletters: A weekly digest of the most important news and analysis.
ADVERTISEMENT
Advertise with BNC
Submit an event on bravenewcoin.com
Latest Insights More
ADVERTISEMENT
Advertise with BNC