According to Thomas Shea, an EY crypto tax executive, purchasing cryptocurrency with fiat or any “unrealized appreciation” is not a taxable event.
While many refer to cryptocurrency as the “Wild West,” some feel that this will only last a short time.
According to Thomas Shea, crypto tax head at EY Financial Services, taxation for cryptocurrency is a developing area, and new legislation may be enacted soon. “There is new law requiring reporting for at least some crypto transactions, and when those rules take effect, major changes will occur,” Shea explained.
The EY executive stated that as cryptocurrency’s popularity grows, authorities are constantly looking for new ways to collect income through taxation and regulation of digital assets.
“We’re seeing states design regimes, pricing, and reporting for digital assets that are unique. In the United States, we are seeing digital assets subject to rules and reporting that are traditionally reserved for stocks (rather than property).”
While some may object to their crypto assets being taxed, Shea believes that knowing the evolving tax implications of crypto is critical. According to the tax expert, market players must be aware of the “scope of their transactions that may trigger a taxable event and the corresponding reporting requirements.”
According to Shea, the manner in which one purchases or sells cryptocurrency has an effect on whether it is taxable or not. Purchasing cryptocurrency using fiat currency and any unrealized gains are not taxable events. The tax official did note, however, that selling cryptocurrency constituted a taxable event. He emphasised that “usually, the gain or loss is capital in character” and so subject to taxation.
Even if a holder exchanges their cryptocurrency for another asset such as Bitcoin (BTC) or Ether (ETH), the EY executive said that users have a “taxable event and must report gain or loss on the disposed crypto.”
Similarly, nonfungible tokens are nonfungible. “If you paid for an NFT using fiat, there is no taxable event,” Shea explained. Purchasing NFTs with cryptocurrency, on the other hand, is treated very similarly to a crypto-for-crypto exchange. “The overall proceeds less your tax basis in the asset, which normally includes any associated fees/costs,” the cryptocurrency tax expert explained.
Shea further recommended individuals to seek the advice of qualified tax professionals whenever they became aware of their tax obligations.
“In a business where technology serves as the architectural foundation, having an adviser who is also a technology expert and knows your objectives enables you to make the greatest tax-saving decisions possible.”
Meanwhile, crypto dealers in Thailand are said to be exempt from the country’s 7% value-added tax on regulated exchanges. Domestic traders would also be able to offset losses against gains on an annual basis.
The Indian government recommended a 30% income tax on cryptocurrency revenue in February. However, many rejected the concept, as a 30% crypto tax is about double the rate at which corporations pay taxes, which hovers around 16%.
Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.