As everything that revolves around crypto market generates controversy, if there is an issue that makes them more interesting, it is the fact that they do not require a tax return as such since they are not regulated assets.
The perspective changes if cryptocurrencies are legal in the countries and must follow a tax scheme created exclusively for them because they are such new elements that affect family and business finances and economies.
The profits generated by cryptocurrencies are pretty high, which means that their users manage a considerable level of enrichment compared to developing a salary for performing functions for an employer.
Although there are many forms of fiscal control, most countries still do not have a strict approach to monitoring execution concerning the income from cryptographic operations.
Due to the anonymity of the operations carried out with digital currencies, something that does not allow the identity of the people who operate to be determined, this complicates verifying the natural or legal persons subject to tax withholdings.
Cryptocurrencies complicate tax measures
Having cryptocurrencies in our assets does not imply that they must be declared to the treasury of the country of residence when they are sold or exchanged.
The fiscal effect resides on all profits that people receive during a determined budgetary period, which becomes an obligation for citizens to declare said profits.
In the case of cryptocurrencies, the EXCHANGE or sale of crypto assets may generate profits. Still, suppose they are sold, and the profits are not as expected due to the volatility of these digital assets. In that case, they should not be subject to tax withholding.
For countries where operations with cryptocurrencies are handled, tax transactions are still quite complex since they must be reflected mainly in the legal tender of each country.
Suppose profits are received from the sale of a property, and the operation was carried out with crypto assets. In that case, the transaction will be reflected before the corresponding entities at the rate equivalent to legal tender.
The situation for tax inspectors and customs agents is complex since they cannot determine with certainty what is the amount to which the tax calculation should be made.
Just as in the traditional economy, many people and even companies tend to evade tax obligations; unfortunately, cryptocurrencies can be considered a resource for what is the diversion of capital and thus reduce the tax declaration before the State.
This procedure is considered the most complex since there is no verifiable access to the operations other than an infinite number of operations on the blockchain accounting book.
Some guidelines for declaring cryptocurrencies
As we have said, few countries apply the current tax regulations regarding the declaration of taxes for cryptographic income, but, in the case of the countries that have created a legal foundation; they have determined the following instances in which they are assumed to be: declare.
- If profits or losses are generated in the sale, purchase, and exchange of crypto assets.
- When interest earned from cryptocurrency trading operations is generated as if fixed-term income was developed in the case of stacking.
- Any income that exists through bonuses, prizes, or other types of profit without directly carrying out the cryptographic operation.
- When financial and economic operations are carried out through the mining or trading of digital currencies.
These could be considered some of the specific cases subject to withholding and tax declaration.
The interest of the institutions in exercising control over the income and profits obtained by cryptographic operations is that the State does not accept that these sums of money, in many cases significant, do not reach their hands to distribute it in social benefits.
In addition, enrichment must be subject to fiscal supervision; let us remember that after the pandemic, income from cryptocurrency transactions increased considerably and more so among very young people.
Conclusion
The tax issue is one of those that require the most evaluation. In many cases, it is challenging to verify cryptographic operations unless there is some document that verifies and certifies digital financial operations.
To regulate this type of operation, regulations must be established that are most adapted to a changing market and subject to technological changes since cryptographic functions are 100% digital.