Increased Reporting, Updated Rules, and a Wealth Tax Debate

Coinmama
Increased Reporting, Updated Rules, and a Wealth Tax Debate
Fiverr


Source: Adobe/GOD Bless

____

____

It will become increasingly more difficult to hide any profits you make (via crypto trading) from the US IRS.The EU might introduce legislation in 2022 aiming at a cross-border exchange of information regarding crypto transactions.Most countries will try to tackle crypto taxation in 2022.At a certain point we may even see governments trying to tax crypto-based wealth before it’s even converted into fiat. 

Crypto isn’t a secret anymore, and nowhere is this more apparent than in the concerted efforts of various governments to make sure crypto traders pay taxes on their gains. 2021 saw an increasing movement towards the creation of taxation regimes for crypto, and 2022 might see more governments actually implementing such regimes and enforcing them.

bybit

According to tax experts speaking to Cryptonews.com, a few main trends could define crypto taxation in 2022. Most notably, we might see increased reporting requirements for crypto exchanges and trading platforms, while it’s also likely that governments will introduce rules intended to facilitate the cross-border exchange of info concerning transactions.

The construction of a monolithic reporting network will leave exchanges and other crypto businesses with little option other than blanket compliance. And once reporting guidelines for cryptoasset transactions have been fully implemented, we may see debates about tax crypto-based wealth heating up.

Increased reporting requirements

If you’re in the United States, you’ll find that, from this year onwards, it will become increasingly more difficult to hide any profits you make (via crypto trading) from the Internal Revenue Service (IRS). As international tax specialist Selva Ozelli notes, this is the result of changes proposed as part of the USD 1trn infrastructure bill signed into law in November.

“H.R. 3684, the Infrastructure Investment and Jobs Act, requires cryptocurrency ‘brokers’ — which includes “any person who for consideration is responsible for regularly providing any service effectuating transfers of digital assets on behalf of another person” — to report cryptocurrency and [non-fungible token, NFT] purchases of over USD 10,000 to the IRS on Form 8300, including names and Social Security numbers, or potentially face felony charges,” she told Cryptonews.com.

However, it’s worth pointing out that the crypto industry is already making efforts to reform the reporting provisions in the bill, with tax CPA (certified public accountant) Edward Zollars suggesting that their overly broad scope may be narrowed in the not-too-distant future.

“Since we already had a law change that will require reporting of certain “digital asset” sales and tracking of basis (essentially purchases) by certain third parties, I would expect some IRS guidance before those rules become final as well as a likelihood that Congress will revisit those rules sometime in the next 2 years before those reports are issued,” he told Cryptonews.com.

Crossing the Atlantic, Niklas Schmidt, a lawyer and partner with the Austrian law firm Wolf Theiss, expects the EU to introduce legislation in 2022 aiming at a cross-border exchange of information regarding crypto transactions. As with the American example, this is to ensure that individual national governments can more effectively collect tax from crypto-derived capital gains.

“It had been announced that a draft proposal for a directive would be presented in the fourth quarter of 2021; since this did not happen, we can probably expect a draft in the first quarter of 2022,” he said.

Schmidt suggests that crypto exchanges in the EU would most likely have to collect certain information regarding their customers (such as name, address, taxpayer identification number, crypto transactions carried out, and crypto balances).  

“This information would then be made available to the tax authorities in the customer’s home country. If for example, a customer from Germany were using an Austrian crypto exchange, the German tax authorities could use the information received from Austria to check whether the German taxpayer had complied with his German tax reporting obligations,” he told Cryptonews.com.

In other words, the overriding tax trend for 2022 will be that crypto traders in numerous developed nations will finally have to pay it, on pain of their governments finding out that they’re trying to hide profits. 

New tax rules

Aside from stepping up reporting requirements, we also might see more countries introducing entirely new crypto taxation rules, largely because many nations simply haven’t formulated such rules to date.

“As is well known, most countries have no specific crypto tax rules and have issued only very superficial guidance on crypto transactions. I expect that most countries will try to tackle crypto taxation in 2022,” said Niklas Schmidt.

As an example, Schmidt explains that Austria will receive completely new crypto tax rules in 2022, with the new regime set to treat cryptoassets much like stocks and apply a 27.5% capital gains tax on them.

“Crypto-to-crypto transactions will not anymore trigger capital gains taxation and staking will similarly become tax-exempt. On the other hand, exit tax will now also cover cryptoassets,” he added.

New rules won’t be restricted only to Europe. In October, the Senate Committee on Australia as a Technology and Financial Center (ATFC) proposed a set of new rules for the crypto industry, including updated tax rules that provide clarity for newer types of crypto-related assets and activities (e.g. decentralized finance (DeFi), NFTs).

While Australia’s incoming rules are as much about clarity as anything else, other nations elsewhere are likely to take a harder line on crypto when it comes to tax. Thailand aims to impose a 15% capital gains tax on crypto profits this year, while South Korea will impose a similar tax of 20%, although it won’t come into effect until 2023.

Regardless, such moves show that the governments of the world will spend much of 2022 going to great lengths to ensure that they receive a significant percentage of profits crypto traders have made. And if the crypto does really want to gain legitimacy and attract mainstream adoption, it will have to comply with new reporting requirements and tax rules.

“I’m suspecting that most legitimate businesses that deal in cryptocurrency will comply with these rules and, once information reporting is in place, the investors that currently are ignoring the law (the IRS position on this has been clear for quite a while now) will be effectively forced to report or face the same types of notices they receive for failing to report sales of publicly traded securities and the like,” said Edward Zollars.

The future: A tax on crypto wealth?

Looking to the more distant future, one commenter suggests that at a certain point we may even see governments trying to tax crypto-based wealth before it’s even converted into fiat. This is because, as Philipp Sandner of the Frankfurt School Blockchain Center explains, a growing number of Bitcoin (BTC) and crypto investors want to hold crypto and never again sell it. 

“This would then lead to wealth which is not taxed, unless you introduce a new tax regime for taxing wealth. Therefore, we will see the question: should wealth be taxed, even if gains have not been realized?” he said.

Sandner suggests that such a scenario is plausible, and even if it will require setting up a wealth register for every resident in a particular nation, he says it’s possible.

“Some countries do this (e.g. Switzerland) and it works. It is also fair. But it is a huge change in the tax regime,” he told Cryptonews.com.

This might seem like a remote eventuality, but at a time when calls for a general wealth tax are already increasing, it could one day happen, although not likely in 2022._____Learn more: – Metaverse Trends in 2022: Prepare for More Gaming and New Virtual Experiences with NFTs- Bitcoin & Crypto Mining in 2022: New Locations, Technologies, and Bigger Players

– CBDCs in 2022: New Trials and Competition with Crypto- NFTs in 2022: From Word of the Year to Mainstream Adoption & New Use Cases

– Bitcoin and Ethereum Price Predictions for 2022- Crypto Adoption in 2022: What to Expect? 

– 2022 Crypto Regulation Trends: Focus on DeFi, Stablecoins, NFTs, and More- DeFi Trends in 2022: Growing Interest, Regulation & New Roles for DAOs, DEXes, NFTs, and Gaming

– Crypto Security in 2022: Prepare for More DeFi Hacks, Exchange Outages, and Noob Mistakes – How Global Economy Might Affect Bitcoin, Ethereum, and Crypto in 2022

– Crypto Exchanges in 2022: More Services, More Compliance, and Competition- Crypto Investment Trends in 2022: Brace for More Institutions and Meme Manias 

Find more predictions for 2022 here.



Source link

Coinbase

Be the first to comment

Leave a Reply

Your email address will not be published.


*