Lack of international tax consensus on cryptocurrency
The definition of cryptocurrency and how it should be taxed varies widely among different tax authorities around the world.
With a lack of consensus on the nature of cryptocurrency, tax and revenue authorities in different countries have had to take a stand and issue guidance on their own official position on what it is and how it should be taxed.
Attitudes around the world
There have been mixed results. For example, in Canada cryptocurrency is seen as a commodity, not a currency and is taxed as property. Whereas in Germany, it qualifies as units of account and is therefore a financial instrument, taxed like any other currency. In the U.S. it is considered to be personal property and each transaction results in a capital gain or loss.
In Australia, transactions are viewed as barter arrangements and cryptocurrencies are considered assets for capital gains purposes. And in South Korea, transactions are financial transactions taxed as a capital gain or miscellaneous income.
Resolving the differences
Jurisdictions that define cryptocurrency differently will have conflicting views on the timing of taxable events, the nature of the resulting income (ordinary or capital), and the sourcing of the income (country A or B). However, international tax treaties have not yet made provisions to resolve these differences.
As a result, depending on how the jurisdiction defines and taxes cryptocurrency, individuals who are subject to taxation in multiple jurisdictions may face significant issues when claiming foreign tax credits to offset double taxation.
Tax authorities are currently focused on sorting out the tax treatment in their respective home countries, particularly as initial coin offerings, chain splits, air drops, token swaps, giveaways and other events are presenting new complexities.
It may be some time before the international tax challenges are resolved.
For more information, contact:
The Wolf Group, U.S.
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