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Crypto Taxes

U.S. Senators Seek to Amend New Crypto Tax Rules

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A separate bipartisan bill aims to soften new cryptocurrency tax reporting requirements.

Senators Ron Wyden (D-OR) and Cynthia Lummis (R-WY) want to make tax reporting rules introduced in the infrastructure bill more lenient for cryptocurrency brokers, Bloomberg reports.

President Joe Biden is expected to finally sign the $1 trillion legislation into law this Monday after months of heated debates.

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The legislation was widely criticized by the cryptocurrency community because of its tax reporting provisions that affect miners, wallet developers and other groups of participants.

Businesses will also be required to report crypto transactions that exceed $10,000.

Cryptocurrency-focused lobbying groups were close to amending the bill, but a last-minute dispute over military spending thwarted their plans.

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By narrowing the rule, Wyden and Lummis’s bipartisan bill fix proposed by the two lawmakers aims to exclude individuals developing blockchain tech, according to Wyden:
Our bill makes clear that the new reporting requirements do not apply to individuals developing blockchain technology and wallets.

Treasury Secretary Janet Yellen supported amending the cryptocurrency provision in the infrastructure bill. Hence, the industry is pinning its hopes on the Treasury’s favorable interpretation of the term “broker.”

The new rules are expected to come into effect in 2024.

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Crypto Exchange

‘New Blow’ as Large Crypto Exchanges Are Told to Pay British Tech Tax

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Crypto exchanges operating in the United Kingdom – including the likes of Coinbase â€“ will be forced to pay a recently created tech tax – with the British tax body, HM Revenue and Customs (HMRC), declaring that cryptoassets “are not financial instruments.”

The British Treasury last year announced the launch of a new 2% sales charge on online vendors, search engines and social media providers with global revenue of over USD 666.4m and domestic sales above the USD 33.3m mark.

Per the Telegraph, the tax office has informed crypto exchanges that they are subject to the levy, which was created in a bid to make sure the likes of Google and Amazon â€“ who have been criticized for finding tax workarounds in the UK – contribute more to the Treasury’s coffers.

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The same media outlet noted that although Coinbase’s UK operations had reported sales worth just under USD 24m, “the company recently reported that global revenues had quadrupled, meaning it is likely to pass the UK threshold in 2021.”

However, the tax may be short-lived, at least in its current form: earlier this year, the G20 agreed to create a streamlined tax essentially aimed at global tax giants. The measure will force some of the world’s biggest companies to cough up some USD 150bn in extra tax revenue each year.

Last month, the BBC reported that G20 chiefs had agreed to create a global minimum tax rate of 15% for large companies, and would enforce the measure starting in 2023.

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In the meantime, however, the British “tech tax” is still in place – and Coinbase is likely to have to pay it.

HMRC’s ruling that cryptoassets “are not financial instruments” is key. Financial providers are exempt from the tax, but the tax body’s insistence that tokens “do not qualify as commodities or money” means that crypto trading platforms cannot slip through the net.

The same media outlet quoted the crypto pressure group CryptoUK as claiming that it was “unfair” to classify crypto “differently to other financial assets” – particularly as the UK tax body’s American counterparts largely consider coins to be commodities.

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CryptoUK director Ian Taylor was quoted as calling the move “a new blow” to crypto exchanges, who were already reeling from “arduous” licensing measures announced by the regulatory Financial Conduct Authority â€“ ultimately leading to higher fees for exchange customers.

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Crypto Exchange

Crypto Exchanges Facing “Digital Tax” Blow in U.K.

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Cryptocurrencies are neither currencies nor commodities, according to Her Majesty’s Revenue and Customs

Cryptocurrency exchanges have to pay a 2% digital services tax in the U.K., according to a Sunday report by The Daily Telegraph.

They do not qualify for an exemption granted to financial marketplaces since the Her Majesty’s Revenue and Customs office doesn’t recognize cryptocurrencies as “financial instruments.”

The tax on the local revenues of large tech companies was introduced in April 2020.

CryptoUK, a crypto lobbying group, is not happy about the lack of the exemption since it would further stifle the industry.

The U.K. arm of the Coinbase exchange is expected to easily surpass the revenue threshold of £25 million ($33 million) due to the crypto trading boom in 2021.

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However, HMRC is adamant that crypto assets cannot be classified as either commodities or currencies.  

In October, European governments forged a deal with the U.S. to establish a new global tax regime to eschew America’s retaliatory tariffs.

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Crypto Taxes

China’s Tax Official newspaper calls for Crypto taxation, Does this indirectly legalize crypto?

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The Chinese tax publication, China Tax News called for taxing past cryptocurrency profits using the Ex post facto law, also known as the principle of “law is not retroactive”. This means that the services provided by overseas exchanges to residents of China before the official crypto ban will now be required to pay tax in accordance with China’s tax law, on their income from China before the government officially announced the decentralized markets’ illicit status in the country.

During the month of September, ten ministries and commissions along with the Central Bank issued the “Notice on Further Preventing and Disposing of the Risks of Virtual Currency Trading Hype” against foreign crypto exchange organizations in China. It laid down the legal framework that specified, “the provision of services by overseas virtual currency exchanges to Chinese residents through the Internet is also an illegal financial activity.”

“After the promulgation of the ban, some domestic trading platforms chose to “go overseas” to provide domestic users with related trading services in the form of “overseas institutions”, and gradually formed an exchange industry led by Binance, Huobi, and Ouyi. With the popularity of the virtual currency market in recent years, the transaction volume of related platforms has increased rapidly. The total 24-hour transaction volume of spot and derivatives on the top platform even exceeds one trillion yuan, which is close to the single-day transaction volume of the A-share market.”, stated China Tax News.

Unclear Crypto laws in China

However, the Chinese Journalist, Colin Wu argues that since China’s Central Bank had defined all crypto activities as illegal, taxation could indirectly recognize their legalization. Furthermore, even predate taxation still invalidates the government’s stance, as Chinese authorities had already defined crypto as illegal several times before the official PBOC notice.

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Additionally, the China Tax News also stated that within the current legal framework, China has not banned individuals from holding cryptocurrencies such as Bitcoin. However, the transaction of virtual currencies is marked as an “invalid civil act”, which means its not explicitly prohibited by law. This raises manifold questions on China’s crypto stance, and on the government’s unclarity and contradicting crypto laws.

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