Founders need legal certainty if their businesses are based on cryptocurrencies or they use them for financing. Certainty exists if legislators clearly regulate the legal framework for cryptocurrencies, especially with regard to taxes. This is one of the results of the international tax barometer of ECOVIS International – a global network of consultants.
Due to the hype caused by Bitcoin and other cryptocurrencies, the consulting firm Ecovis, which specializes in advising medium-sized businesses on accounting, tax and legal issues, asked its international network about cryptocurrencies, namely
- if and how relevant cryptocurrencies are in their countries and
- whether customers require services regarding cryptocurrencies.
Finally reliable guidelines for the taxation of cryptocurrencies exist – this was stated by 30 percent of those questioned. These guidelines contain regulations on income tax and value added tax. In Australia, Estonia, Italy and Lithuania, cryptocurrencies are considered by local authorities as foreign exchange. There are different views in other countries how they classify cryptocurrencies. Some countries regard them as currencies, such as Estonia or Italy, others as intangible assets or securities. “The Australian government is definitely demanding income taxes, even though the Tax Office’s view on the tax treatment of what it considers cryptocurrencies is still evolving. We strongly advise comprehensive record keeping as the key to ensuring a clients position on cryptocurrency will be accepted by the Tax Office”, says Scott Hogan-Smith of Ecovis in Sydney. In Hong Kong the situation is different. “We do not tax investment income from cryptocurrencies if it satisfies certain conditions to classify this investment income as capital or offshore income. This makes Hong Kong very attractive for businesses with cryptocurrencies”, says David Yeung of the Hong Kong Ecovis office.
Services customers demand
Asked about the services that customers demand concerning cryptocurrencies, the majority of respondents answered
- tax planning, followed by
- private investment,
- business start-up
- cryptocurrency as crowdfunding method and
- share investment.
Future plans and strategic direction
The ECOVIS International partner network regards cryptocurrencies as particularly interesting when it comes to financial investments or when new businesses are based on cryptocurrencies. Josef Debono of Ecovis in Malta says: “The Maltese government has attracted key players and companies in the industry dealing with cryptocurrencies. The new legislations will provide transparency, integrity, legal certainty and stability within the industry, through licensing and due diligence requirements – which are essential elements sought by market participants, investors and customers alike.” Alejandro Bouzada of Ecovis in Uruguay points out that cryptocurrencies as well as blockchain technology will change whole branches of business such as banking, healthcare, insurance and real estate. He adds: “Uruguay is still in its infancy with regard to precise rules for cryptocurrencies “.