Around the globe, governments are still trying to wrap their heads around blockchain and cryptocurrency. Due to its meteoric rise in popularity, more people than ever before are holding some form of digital currency and this is proving to be a bit of an issue when it comes to taxation. While some governments – such as Malta and Gibraltar – are actively implementing crypto related laws, others are still beating around the bush. This has led to many a crypto hodler filling in their tax return forms incorrectly, not paying the correct amount of taxes due as a result. While not all crypto hodlers are doing this with malice in mind, crypto assets are very much still a grey area as to whether they should be declared in the same fashion as other forms of investment.
South Africa Setting Clear Boundaries
While South Africa isn’t known for its crypto economy or any groundbreaking blockchain infrastructure, it is certainly making headway in the regulation department. Just recently, the government announced that it would be making all crypto related activities VAT exempt. This also applies to all equipment that would be used in blockchain applications and cryptocurrency mining. While this isn’t directly related to declarable income or assets, it is definitely a step in the right direction towards clarification on where people stand in terms of tax. In many ways. it is a small stepping stone to addressing the tax issue as a whole.
Malta is Tax Friendly Towards Crypto Businesses
Malta is the home to many big blockchain and crypto companies – including BitStarz. One of the reasons so many companies are flocking to Malta is the new crypto-friendly laws that were recently passed. In addition to this, Malta is well known for its low corporate tax rates, making it a popular haven for all types of companies.
In an exclusive interview with BitStarz News, Jonathan Galea said that Malta’s tax rules encourage businesses to establish a presence in the country. “The tax regime is an attractive one for foreign businesses, and the regulators serve to aid rather than hinder business,” he said.
China Pumping Up Tax Rates
Over in China, cryptocurrency hodlers are looking to change their crypto holdings into foreign real estate to avoid tax rates. The Chinese government is pumping up the tax rate on crypto assets to help fight off inflation from US sanctions. This is forcing many Chinese crypto hodlers to head overseas and take advantage of foreign property markets that are booming – and accepting cryptos. This, in turn, is driving up real estate markets around the globe, causing a lot of trouble for locals that are losing out on property deals to wealthy Chinese investors.
Norway Remains Confused
Norway is still trying to wrap its head around the best way to tax crypto holdings and gains. The Norwegian tax office doesn’t have access to crypto holding records, meaning that all crypto holdings have to be manually disclosed – this opens the system up to abuse and miscalculations. An alarming example of this is two crypto miners that managed to mine 34 BTC only had to pay $8750 in tax.
Due to the fluctuation in crypto values, Norway’s current tax return system could let people declare their cryptos when the market is in a lull – like the current situation – and pay lower levels of tax compared to declaring when the value is higher. The government is working on a system whereby crypto exchanges share Norwegian crypto hodlers wallet addresses so they can keep tabs on crypto holdings. This is similar to what America is currently doing with FATCA in many ways.
The Power is in Political Hands
As more of the world comes around to cryptocurrency as a form of payment, it is imperative that governments create a framework for crypto taxation and make citizens aware of it. This will ensure that correct levels of taxes are paid and that nobody is trying to dodge their taxes by using cryptos.
If governments don’t work on a taxation framework, people could begin to get paid in cryptos and end up not paying any taxes at all. It is a space that needs a lot of work and attention, but no doubt governments around the world are currently working on putting this framework into place.