PwC prepared an overview on the taxation of crypto-assets in the PwC Annual Global Crypto Report 2022, which covers many countries around the world, including Estonia, and gives a good overview of how issues related to the taxation of crypto assets have been resolved by country.
Here are some global industry issues that may affect crypto asset taxation in 2023 and beyond.
- Regulatory push back on the industry after the bankruptcy of FTX. This has led to public scrutiny and calls by lawmakers and regulatory agencies for clearer guidelines for crypto exchanges to operate under.
- The Ethereum Merge is likely to bring increased focus to the taxation of staking income around the world. The recent upgrade to the Ethereum network, shifting from proof of work to proof of stake, will mean more market participants earning staking income. As this is a new form of passive income, the associated tax issues - including how the international taxing rights on staking income are allocated – will need to be considered by policy makers.
- Financial regulators are already exploring how to enforce regulation on decentralised systems and decentralised autonomous organisations (DAOs). For example, there are comments on decentralisation within the latest Financial Action Task Force (“FATF”) guidance, as well as the recent Commodity Futures Trading Commission (“CFCT”) action against Ooki DAO where token holders participating in governance were deemed to have responsibility over the actions of the DAO. We expect tax authorities to follow the lead of financial regulators in determining who in such organisations is responsible for tax reporting and compliance. Expect more updates in this area in the coming years.
- The rise of stablecoins is creating a risk of there being economically equivalent transactions with very different tax treatments between traditional finance and crypto. It will therefore be important for governments to find mechanisms to clearly define whether a stablecoin is or is not treated in the same way as a fiat money transaction for tax purposes.
- Tax enforcement will continue to increase in 2023 and beyond after the recent developments in the industry and therefore taxpayers should be prepared for the likely need to provide accurate and more comprehensive transactional level details to all their activities, as governments obtain more access to data via third-party crypto software providers.
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