Well, to begin with, taxes regarding cryptocurrency trading and transactions can be different for all countries. So, it would not be wise to pin-point any one tax law or tax regulation from a particular country, and generalize it. For example, if you are residing in Australia, the tax considerations surrounding crypto trading can be based upon certain key features and areas, which we’re going to discuss in this article, followed by the legal implications and considerations in other countries in Europe, Middle-East, in the US, or for that matter in the Australasia region. Lets’ begin.
Tax Considerations when Using Cryptocurrency for Payments in Australia
The Australian Taxation Office (ATO) has noted and mentioned certain key considerations for a cryptocurrency transaction to be brought under the tax rule. And, they are:
- The nature of the business/company undertaking the transaction.
- The nature, extent, scale and complications involved in the transaction.
- The nature and extent of other activities undertaken by the business enterprise or company.
- The duration over which the transaction takes place.
- The amount of money involved in the transaction and the scale of profit margin sought or obtained.
- Whether the cryptocurrency has any other usage, other than crypto trading. For example, buying of goods and services, or for currency conversion only on blockchain.
Tax Consideration for an Investor in Australia
An investor is a person who stores, holds or trades in cryptocurrencies for making capital or monetary gains. A majority of individuals who buy, sell and hold crypto of digital currencies come under this category. If you’re into the same business, you definitely come under the ambit of taxation, thereby paying taxes on any kind of capital gains made. You may also possess the right to claim capital losses or carry forward it, depending on the outcome of the sale. So, let’s understand, as to exactly when a crypto transaction is taxed with a Capital Gains Tax (CGT), as per the ATO rules & regulations.
- In case of selling and gifting cryptocurrencies.
- Trading of exchanging cryptocurrencies like Bitcoin (BTC), Ethereum (ETH), Dogecoin (DOGE), etc.
- Converting cryptocurrencies into regular or fiat currencies like AUD, USD, EUR, etc.
- Using cryptocurrencies to purchase goods and services.
FYI, if you store or hold onto your cryptocurrency assets for a period of 12 months, you’re eligible for a 50% Capital Gains Tax (CGT) discount. The capital gain is calculated on the value of the cryptocurrency you receive. In order to make the whole process simple and easier to understand, you can definitely tie-up with an expert like “UniPayment” that can help you understand the nitty-gritties involved in cryptocurrency payment and transactions.
Legal Considerations Surrounding Cryptocurrency
As the use of cryptocurrencies are growing all over the world, so also the cases related to fraud and malpractices are being heard, quite often. So, let’s look into some of the legal considerations surrounding digital currencies.
Issues Related to Contract – The most striking feature of blockchain technology is “smart contracts”. It is actually a set of guarantees and promises that are specified in a digital form, which actually forms the basis upon which two different parties in a crypto transaction fulfill their promises. In a smart contract, the payment is automatically done, when a contract is respected and upheld by both the said parties. In the US, there’s NO federal contract law regarding cryptocurrency legal taxation , as such that applies to the country as a whole. The contract law may vary from one state to another.
Issues Related to Jurisdiction – The main idea behind blockchain technology is that it is in no way able to pinpoint or specify the actual location of a ledger. In fact, all cryptocurrency transactions performed on blockchain offer a higher degree of privacy than any transaction performed on conventional platforms. And, when you are on reputed exchanges like “UniPayment”, the privacy level is even higher. But, privacy also poses a complex jurisdictional challenge. As the nodes of crypto transactions are located in different jurisdictions, they can be subject to issues related to legal framework. Secondly, the cryptocurrency software for a “residence country” is ‘next impossible’ to determine due to the lack of physical location of the ledger.
Issues Related to Data Theft & Fraud – Financial fraud, fund diversion, data theft and phishing attacks are becoming quite common in the cryptocurrency trading fraternity. The guarantee of anonymity and freedom from federal regulations in blockchain attract many users/hackers who are involved in unlawful activities, as they use digital currencies for performing monetary transactions. They can access and steal critical business and personal information like name, residential address and phone numbers of digital wallet owners, which actually happened with Ledger’s customers, which is a crypto wallet maker. It is still unclear and shady whether the existing laws are enough to curtain such thefts and fraudulent practices.
Issues Related to Privacy – As a matter of fact, all privacy issues are interrelated to data theft in the cryptocurrency world. Interestingly, the main reason why Bitcoin (BTC) was introduced as a cryptocurrency, was to provide users with the aspect of anonymity, while performing transactions. However, as proved by an expert, this anonymity was somewhat compromised or threatened due to the steady advancement in blockchain analytic tools & software. As per today, the US has no comprehensive data protection framework in place, as the prevalent data security and privacy laws do not address the privacy concerns that are a result of the blockchain technology.
Money Laundering – With the advent of cryptocurrency, criminals have found a new way to commit fraud and other financial crimes. This is possible because of the level of anonymity offered to crypto traders, as a result of blockchain technology. As a matter of fact, cryptocurrencies are mostly used for funding illegal activities and crimes across the globe, with very little chance of being caught, tracked or identified by cyber sleuths. In fact, various government agencies have listed drug dealers as criminals, who exchange harmful drugs for crypto.
Conclusion
These legal and tax considerations or challenges faced by crypto traders are slowly being worked out by different governments across the world, providing customers, merchants and traders with a seamless experience. However, in case of fraud, there’s no mechanism available to settle such a dispute because of the decentralization of cryptocurrency. The tax issues are also being streamlined for a better understanding among concerned parties.
Categories: News
Source: thpttranhungdao.edu.vn/en/
