Bitcoin and the new regulatory tax
The European Union is finally in the process of regulating, via a tax, Bitcoin and the rest of cryptocurrencies. The taxation is just one of many regulatory maneuvers that will start in 2023, the year of transparency and regulation of crypto businesses.
From capital gains tax to redefining Bitcoin’s value, here are the EU’s moves
On Thursday, the EU specifically stated that it will ensure that all companies that engage in the crypto world, report the holdings of its European users to the tax authorities. The directive has a clear purpose and can go as far as forcing companies based outside the EU to register with local tax authorities.
“Anonymity means that many users of cryptoassets who make significant profits fall under the radar of domestic tax authorities. This is not acceptable.”
These are the words of the EU Tax Commissioner, Paolo Gentiloni.
It is not yet known how these measures will be used, given the different units and residences in different jurisdictions in cryptocurrency industry. Asked how the EU would apply the measures to companies outside the bloc, Gentiloni told reporters:
“We will work on this. What matters to us is that EU residents are targeted for these measures, even if they use cryptocurrency providers from elsewhere.”
What we do know about the proposed measures is that they would advance the regulation of cryptocurrency markets in the EU, which allow foreign companies to acquire EU customers using a procedure known as reverse solicitation.
The tax plan requires any company with EU customers to register and report within the bloc, but could face logistical challenges in an industry where companies are largely online and sometimes claim they have no headquarters at all.
The EU said it believes the move could generate up to $2.5 billion (€2.4 billion) through the introduction of the directives.
Crypto taxation in Italy: there is room in the new budget law
In the draft budget law 2023, as many as five articles are dedicated to regulating the taxation of cryptocurrencies and related activities carried out. Account is taken of various aspects of operations, transparency, regulation of these and taxation of business.
Included in the Budget Law 2023 are plans to impose a 26% tax on profits over 2,000 euros made on cryptocurrency trading, according to Bloomberg.
Historically, digital currencies have had lower tax rates because they have been considered “foreign currency”.
The bill presented by Prime Minister Giorgia Meloni’s government also gives taxpayers the option to declare the value of assets from January 1, 2023, and pay a tax of 14%. The aim is to encourage Italians to declare their holdings of digital assets in their tax returns. The bill, which can be amended in the Storting, also includes disclosure requirements and extends stamp duty to cryptocurrencies.
The new rules will come amid a prolonged rout in digital asset prices that has accelerated the fall of several major cryptocurrency platforms. The spate of spectacular failures and collapses (including the recent FTX stock market crash) has led regulators globally to tighten controls on the nascent asset class.
Premier Giorgia Meloni and her government, are trying to follow in the footsteps of Portugal, one of the nations most connected to the crypto world in Europe. In fact, Portugal has proposed one 28% tax on capital gains from cryptocurrencies held for less than a year.
In its 2023 state budget, the Portuguese government addressed the taxation of cryptocurrencies, which had previously been untouched by the tax authorities because digital assets were not recognized as legal tender.
The introduction of such innovative legislation increases the need to harmonize tax treatment in the right way both for the past and the future. Finally, in addition to the above, it should not be forgotten that crypto-assets and cryptocurrencies do not have a status that can be attributed to traditional currencies or currency.
