Cryptocurrency investors in Chile will have to report their earnings and losses for the first time in April. This is after the country’s tax collector, the Servicio de Impuestos Internos, included digital assets on the country’s list of “other own income and/or third-party income” on their annual income declaration form. The rate of tax is not yet known however, although if they choose to echo the actions of many other countries such as the US and the UK then crypto users can expect to pay capital gains tax, which would levy a 27% fee in Chile.
Welcome to the Tax Party, Chile
Chile last year declared cryptocurrencies to be an “intangible asset”, which meant they could not be considered for VAT, a ruling that gave some a false hope that they would be exempt from tax of any kind. This news, whilst unexpected to many, dashes those hopes, and puts Chile in line with many other countries in the world who include them as part of an annual tax return. The act of calculating taxable gains seems, on the surface, relatively easy, but this depends on whether crypto-crypto transactions must be included as well as fiat-crypto-fiat.
Using the US and the UK as examples again, investors are required, in theory at least, to record every single trade, both crypto-crypto and crypto-fiat, and calculate profit and losses on these transactions. Some say that the necessity to calculate tax on every transaction is holding back the adoption of crypto, and Chilean accountants may soon find crypto enthusiasts knocking on their door with abandoned spreadsheets as they flounder in trying to work it out for themselves. Until the proposal is rubber stamped, digital currencies remain in a legal gray area, what local law experts apparently call ‘alegal’.
The Future Looks Bright for Crypto in Chile
This ruling isn’t the first brush that Chile has had with cryptocurrencies this year. On January 3, cryptocurrency trading desks were granted protection by the nation’s anti-monopoly court, granting them protection from financial institutions who were trying to cut ties with organizations that dealt with digital assets. This news, coupled with the introduction of cryptocurrencies into the tax framework, clearly means that Chile, like many countries, sees value in digital assets, which bodes well for the industry.