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India Proposes To Tax Cryptocurrency: How Digital Currencies Are Regulated In Other Countries

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Cryptocurrency has gained a lot of exposure. From being speculative products that no one wanted to invest in, they are now a growing investment option. The NFTs and other digital currencies are much more accepted.

However, it is their decentralized technology that has the ability to modify the traditional financial system. It is, for this reason, the governments, lawmakers, and economic think tanks who have been analyzing the use cases. On April 1, India introduced a tax on “virtual digital assists.’

Any income that you get from the transfer of these digital assets will be taxed at 30%. This tax rate will apply even when you gift digital assets. Along with there is a 1% TDS that applies to all transactions. Other countries are using a different approach to manage this crypto revolution. Though some have wholly adopted it, others have banned or restricted them.

El Salvador: The South American country is one of the most significant cryptocurrency users. In September last year, El Salvador was the first country which has adopted Bitcoin as a legal currency. So all the businesses and retailers in-country can accept bitcoin as a payment for the products and services. Their president is even thinking of creating a Bitcoin City’ where the bitcoin will not have to pay property and capital gains taxes.

Russia: Russia has also approved the legalization of crypto and is now going to roll out the laws to govern the same. The present draft of laws suggests that the crypto will get treated like foreign currencies. This implies that licensed providers can trade in the cryptos. But for the day-to-day transaction, the crypto tokens should be first converted into Rubles. Any crypto transactions above 600,000 Rubles must be declared to the tax authorities.

China: An emerging global power China has so far been quite hostile to crypto and mining activities. In the beginning Xi Jinping the Chinese president talked about supporting blockchain technology in 2017. But when he saw the impact of cryptocurrency on China’s economy, he banned any of the virtual asset trading activities seen in 2021. After the trading ban, China again trimmed down the bitcoin mining activities, mentioning environmental issues.

Japan: Japan maintained a progressive opinion on the crypto regulation. They identify crypto as legal property under the Payment services act or PSA. The country’s crypto exchanges have to register with Japan’s Financial services agency and oblige with the anti-money laundering obligations. The gains a person makes from crypto can come under miscellaneous income. The tax rates on these crypto gains will depend on the income, but usually, the high earners could get taxed up to 55%.

United Kingdom: All the businesses and start-ups that engage in crypto asset activities in the UK have to register with their Financial Conduct Authority or FCA. The Crypto asset businesses have to apply for the ‘Authorized Payment Institution License.’ They have to follow the present Anti-Money laundering measures. Under the UK common law, the assets like Bitcoin can be considered property. Your disposing of the crypto assets will be subject to the capital gains tax. For high taxpayers, this is 20%, and for basic rate taxpayers 10%.

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European Union (EU): Cryptocurrency transactions have been legalized throughout the EU countries. However, the governance of the individual countries could vary. The taxation rules are also different for different countries, starting from 0 to 50%. In 2020 the EU recommended that the markets coming under Crypto-Asset Regulation (MiCA) framework should increase consumer protection and introduce new requirements for licensing.

Canada: The Canada Revenue Authority or CRA treats cryptocurrency as a commodity under its Income Tax act as per a Thomson Reuters Institute report published this year. The country also expanded its Anti-Money Laundering Monitoring and Terrorist Financing laws to cover the cryptocurrencies offered on crowdfunding platforms. This move is a response to the anti-vaccine protests seen in the country with the resources they have gained from bitcoin crowdfunding.

South Korea: South Korea does not treat crypto as a financial asset. This implies that the crypto transactions do not fall under capital gains tax. The financial supervisory services see the crypto exchange regulations in this country. Exchanges follow the Anti-money laundering guidelines set.
Last November they delayed their cryptocurrency taxation bill to 2023. This bill would have further levied 20% capital gains tax for any gains more than 2.5 million Won ($2,122).

Australia: Australia categorized crypto as a legal property; therefore, they are subjected to the capital gains tax. Exchanges could only operate in the country if they get registered with the Australian Transaction Reports and Analysis Centre (ATRAC) and meet all the Anti-money laundering obligations. The Australian taxation office takes cryptocurrency as a personal use asset if you use it to buy goods or exchange it with any other currency. But it is not a personal use asset if you use it for investment. Personal use assets can be disposed of when used to be subjected to the capital gains tax.

Singapore: The country is a pioneer in cryptocurrency regulations. It is legal to trade crypto there, and they regulate it through the Monetary Authority of Singapore (MAS) under Singapore’s Payment Services Act. Businesses could also gain a license to run the exchanges. There is no capital gains tax, and the appreciation in any asset does not mean the individual or business has to pay taxes on them. But individuals may have to pay 17% tax if they get involved in the crypto business.

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