PwC revealed that the growing interest in cryptocurrency assets by tax authorities shows that cryptocurrencies are now taken seriously
Accounting firm giant PricewaterhouseCoopers (PwC) yesterday released its 2020 Global Cryptocurrency Taxation Report, revealing some insightful tax data in the cryptocurrency industry.
The report states that since the United States, Sweden and the United Kingdom launched substantive fiscal guidelines on cryptocurrencies, an increasing number of countries have followed suit.
PwC compared how comprehensive tax guidance is for each country; Liechtenstein comes first. THE PwC Crypto Tax Index measures whether a country or region has issued guidelines in 20 different areas related to cryptocurrency taxation. After Liechtenstein, Malta, Australia, Switzerland and Singapore also have substantial tax guidance on cryptocurrency, with everyone scoring higher on the list than the US, UK, Canada, Japan and others.
The guidance issued by most countries so far has focused on how to apply existing laws or policies to cryptocurrency transactions, rather than passing new legislation. Most tax regulators focus on capital gains from the purchase and sale of crypto assets, mining income tax and value added tax (VAT) on payment token trading. Only a few jurisdictions pay attention to taxing air launches, hardforks, staking revenue and cryptocurrency funds.
Some areas are not yet covered by the fiscal guidance
However, the report revealed that almost all jurisdictions have yet to provide guidance on certain areas of the cryptocurrency industry. At present, no jurisdiction has provided clear tax guidance on cryptocurrency loans and decentralized financing (DeFi). They also did not analyze non-fungible / tokenized tokens and did not apply VAT on staking revenue.
Peter Brewin, a tax partner at PwC in Hong Kong, said that while there is a lack of regulation, the situation is changing rapidly: “Tax authorities and lawmakers are still learning about how much the industry works. We expect that, in the coming years, the rate of change in the tax scenario will be as fast as that of the cryptocurrency industry”, He added.
PwC said that at the moment, most jurisdictions see cryptocurrencies as a form of ownership. This means that spending cryptocurrencies to purchase goods and services results in tax charges. PwC sees this model as limiting and will continue to prevent the mass adoption of many crypto assets as payment methods. The situation could change if technology solutions can be found to ease the administrative burden for users, PwC added.