Tax Codes Evolving to Account for Digital Assets

With digital assets providing the ability to transact value on a global scale, it is no wonder people get confused when it comes to taxes surrounding their use.  Thankfully governments around the world are working to provide clarity within eaches respective borders.  The following are a few examples of this from recent days as global tax codes evolve to account for digital assets.

Venezula to Impose Up to 20% Tax

Despite its fragility, Venezuela is not ready to give up on its national currency – the Bolivar.  Losing well over 70% of its value in recent years, one wouldn’t be surprised to hear the nation was moving to a BTC standard.  This is not the case however, as Venezuela will reportedly begin charging a tax of up to 20% on cryptocurrency transactions.

According to local reports, the decision to impose a hearty tax is to ‘encourage’ citizens to use the Bolivar.  It is believed to apply to any transaction which is not based on the Bolivar, but rather uses alternative assets.

While Venezuela is not ready to succumb to the lingering inflation surrounding its currency, other nations in a similar state could soon consider adopting a BTC standard.  El Salvador has already taken the plunge for its own reasons, making BTC legal tender in late 2021.  Will a nation with its own floundering FIAT be next?

India Moves from Ban Towards Taxation

Ambiguous laws and treatment of digital assets in India has proven to be a confusing mess for some time now.  There have been rumours of a ban, a pending CBDC, and conflicting commentary from the RBI.

Some of these questions have recently been answered though, in a speech given by Indian Finance Minister, Nirmala Sitharaman.  Not only was a CBDC officially confirmed to launch in the coming year, a gains tax on digital asset transactions was revealed.  This development will see any income seen from digital asset transactions will be subject to a 30% tax.  In addition, digital asset transactions resulting in a loss are not eligible to offset and gains.

While this tax may seem hefty at first, it most definitely a more welcoming approach towards digital asset than was expected.  Despite rumours, stemming from a now defunct draft bill, indicating a potential ban, it would appear as though the Indian government has finally made its intention clear that this will not occur.

IRS Amending Tax Rules?

Meanwhile in the United States, lawmakers such as House Representative Suzan DelBene are working to ensure the IRS keeps pace with the rapidly developing digital asset sector.  In a recently submitted bill, a proposal which would see transactions under $200 involving digital assets exempt from taxes was put forth.

DelBene elaborated on why such a move is needed, stating, ‘Antiquated regulations around virtual currency do not take into account its potential for use in our daily lives, instead treating it more like a stock or ETF…Virtual currency has evolved rapidly in the past few years with more opportunities to use it in our everyday lives.  The U.S. must stay on top of these changes and ensure that our tax code evolves with our use of virtual currency.  This commonsense bill cuts the red tape and opens the door to further innovations, ultimately growing our digital economy’.

As it stands, the gains from every transaction are subject to taxes, regardless of size.  Coin Center Executive Director, Jerry Brito, believes that this approach results in obvious ‘friction’ when using cryptocurrencies, and ‘…puts cryptocurrencies at a disadvantage relative to other digital payment methods’.