As the asset class has grown significantly in mainstream over the past few years, countries around the world are struggling to form a clear crypto tax regime, especially as the dynamics and use cases of the industry continue to evolve.
No taxes on transactions under $200!
The US Treasury, for example, while having clear tax guidelines that list cryptocurrencies as property rather than currency, has also irritated investors and lawmakers due to the strict reporting requirements. A bipartisan group of US House Representatives is trying to change that by bringing back a bill that would exempt consumers from paying taxes on crypto payments under $200.
Interestingly, the Virtual Currency Tax Fairness Act of 2022, which succeeds the one introduced in 2020, was announced on February 3 by representatives Suzan DelBene, David Schweikert, Darren Soto and Tom Emmer. Seeking an amendment to the 1986 Internal Revenue Code, the bill seeks to exclude earnings from certain personal virtual currency transactions.
In a statement on the matter, Rep. Suzan DelBene said:
“Outdated regulations regarding virtual currency disregard its potential for use in our daily lives, instead treating it more like a stock or an ETF.”
“Virtual currency has evolved rapidly over the past few years with more opportunities to use it in our daily lives,” DelBene said in the announcement. “The United States must stay on top of these changes and ensure that our tax code evolves with our use of virtual currency.”
An earlier version of the bill was proposed in 2017 by Representative David Schweiker who sought a tax exemption for cryptocurrency transactions worth less than $600.
It was reintroduced by the two in 2020 after the threshold for transactions was lowered to a more realistic amount of $200. Both the iteration did not receive a vote to be adopted.
Boon for payments
In the United States, cryptocurrencies are currently taxed under the Capital Gains Guidelines, which require citizens to pay taxes on income generated from the sale, exchange or transfer of their tokens. This also includes all transactions made through cryptocurrencies, regardless of their value, as digital assets are not yet classified as currencies.
Capital gains tax is currently set at around 20% under US law, and the inclusion of crypto in this scheme makes it more difficult for their use case to flourish as a payment system. . However, these lawmakers believe that lowering the threshold to exclude small transactions could significantly remove this obstacle.
As the US grapples with its existing crypto tax regime, countries with less mature markets are now beginning to formulate their own frameworks.
For example, in next fiscal year’s parliamentary budget, India introduced a massive 30% capital gains tax on cryptocurrencies. This has annoyed many industry players who believe it could deter future investors from experimenting with the space.
On the other hand, Thailand removed the planned 15% withholding tax it was going to levy on crypto investments due to strong industry pressure. Instead, the country’s revenue department has now decided to place the asset class under the capital gains gambit.