The OECD has released a new report on countries' tax rules for virtual currencies, alongside an announcement that the Common Reporting Standard will be expanded next year to newly cover virtual currency assets.
The report and announcement indicate that crypto assets will be a major area of focus for the OECD, tax authorities, and governments from next year. The Common Reporting Standard presently provides for the automatic exchange of information on taxpayers' financial accounts. The expansion of the CRS to virtual currencies would better equip tax agencies to tackle tax non-compliance and make tax enforcement more feasible.
The OECD's new report brings together for the first time information received from countries – received in response to a questionnaire – on their approaches to virtual currency tax issues. Releasing the report, the OECD said, for a number of reasons, it is not possible to provide a comprehensive overview of each country's tax treatment of virtual currencies, as many countries do not have specific guidance for crypto assets or the guidance that they have released is too narrow in scope.
The report notes that, for income tax purposes, almost all countries consider virtual currencies to be a form of property; most commonly, an intangible asset other than goodwill, a financial asset, or a commodity. The assets are therefore treated as capital gain-generating assets in most jurisdictions, and in rare cases, as generating business or miscellaneous income.
The report notes that only a few of the respondent countries consider virtual currencies to be similar to currency for tax purposes: Belgium, Cote d'Ivoire, Italy, and Poland. The report notes also that just a handful of states subject crypto asset holdings to property taxes, transfer taxes, wealth taxes, or estate taxes.
The report notes that in many countries the tax treatment of transactions in virtual currencies also varies depending on the status of the taxpayer. The report notes that, although a small number of countries do not consider any exchanges made by individuals to be a taxable event for income tax purposes, most countries consider exchanges made between virtual currencies and fiat currencies to generate a taxable event. The report notes that exchanges in payment for goods, services, or wages are also treated as a taxable event in almost all countries, and the tax treatment of the underlying transaction remains unchanged.
The report highlights that the VAT treatment of virtual currencies is more consistent across countries than income taxes, with most countries mirroring the approach adopted in the European Union.
In the EU, exchanges of virtual currencies for fiat currency or other virtual currencies are not treated as a VAT event. Where a consumer pays for goods and services with virtual currencies, the underlying supply of goods or services is subject to the normal VAT rules (that is, EU states do not treat the purchase of goods and services with virtual currencies as a barter event, but as a taxable sale.) The report notes that although EU member states largely apply the same VAT rules, EU member states have different VAT policies regarding newly mined virtual currencies.
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