Increased reporting, updated rules and the wealth tax debate

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  • It will become increasingly difficult to hide the profits you make (via crypto trading) from the US IRS.
  • The EU could introduce legislation in 2022 aimed at cross-border exchange of information regarding crypto transactions.
  • Most countries will attempt to tackle crypto taxation in 2022.
  • At some point, we might even see governments trying to tax crypto-based wealth even before it is converted into fiat.

Crypto is no longer a secret, and nowhere is this more apparent than in the concerted efforts of various governments to ensure that crypto traders pay taxes on their earnings. 2021 has seen a growing movement towards creating tax regimes for crypto, and 2022 could see more governments implementing such regimes and enforcing them.

According to tax experts speaking to, a few big trends could define crypto taxation in 2022. Most notably, we could see increased reporting requirements for crypto exchanges and trading platforms, while it’s also likely that governments will introduce rules to make it easier to trade. cross-border exchange of transaction information.

Building a monolithic reporting network will leave exchanges and other crypto businesses with little choice but general compliance. And once the reporting guidelines for crypto-asset transactions are fully implemented, we could see debates about cryptocurrency-based tax wealth heating up.

Increased reporting requirements

If you are in the United States, you will find that from this year onwards it will become increasingly difficult to hide the profits you make (via crypto trading) from Internal Revenue Service (IRS). As international tax scholar Selva Ozelli notes, this is the result of changes proposed as part of the billion-dollar infrastructure bill signed into law in November.

“HR 3684, the Infrastructure Investment and Employment Act, requires cryptocurrency ‘brokers’ – which include ‘any person who, for remuneration, is commissioned to regularly provide any service that performs transfers of digital assets on behalf of another person” – to report cryptocurrency and [non-fungible token, NFT] purchases over $10,000 from the IRS on Form 8300, including names and social security numbers, or potentially face felony charges,” she said.

However, it’s worth pointing out that the crypto industry is already making efforts to reform the reporting provisions in the bill, with tax CPA (certified public accountant) Edward Zollars suggesting that their overly broad scope could be reduced in the not too distant future. .

“Given that we have already had a change in law that will require reporting of certain sales of ‘digital assets‘ and tracking of the basis (essentially purchases) by certain third parties, I would expect guidance from the IRS before these rules become final as well as the likelihood that Congress will revisit these rules over the next 2 years prior to the release of these reports,” he said.

From the crossing of the Atlantic, Niklas Schmidt, lawyer and partner of the Austrian law firm Wolf Theiss, expects the EU to adopt legislation in 2022 aimed at cross-border exchange of information regarding crypto transactions. As in the US example, this is to ensure that individual national governments can more effectively collect tax on capital gains derived from crypto.

“It had been announced that a draft directive proposal would be presented in the fourth quarter of 2021; since that hasn’t happened, we can probably expect a draft in the first quarter of 2022,” he said.

Schmidt suggests that crypto exchanges in the EU would most likely have to collect certain information about their customers (such as name, address, tax ID, crypto transactions made, and crypto balances).

“This information would then be made available to the tax authorities of the client’s home country. If, for example, a German client used an Austrian crypto exchange, the German tax authorities could use the information received from Austria to verify whether the German taxpayer had complied with their German tax reporting obligations,” he said. he declares.

In other words, the dominant tax trend for 2022 will be that crypto traders in many developed countries will finally have to pay it, or else their governments will find out that they are trying to hide the profits.

New tax rules

In addition to intensifying reporting requirements, we could also see more countries introduce new crypto taxation rules, largely because many countries simply have not formulated such rules to date.

“As is well known, most countries do not have crypto-specific tax rules and have only issued very superficial guidelines on crypto transactions. I expect most countries to try to tackle crypto taxation in 2022,” said Niklas Schmidt.

As an example, Schmidt explains that Austria will receive brand new crypto tax rules in 2022, with the new regime expected to treat crypto-assets much like stocks and apply a $27 capital gains tax to them. .5%.

“Crypto-to-crypto transactions will no longer trigger capital gains taxation and staking will also become tax-exempt. On the other hand, the exit tax will now also cover crypto-assets,” he said. added.

The new rules will not be limited only to Europe. In October, the Senate Committee on Australia as a Technology and Financial Center (ATFC) proposed a set of new rules for the crypto industry, including updated tax rules that clarify new types of crypto-related assets and activities (e.g. decentralized finance (DeFi), NFT).

While Australia’s incoming rules are as much about clarity as anything else, countries elsewhere are likely to take a harder line on crypto when it comes to taxation. Thailand is aiming to impose a 15% capital gains tax on crypto profits this year, while South Korea will impose a similar 20% tax, though it won’t take effect until 2023.

Either way, such moves show that governments around the world will spend much of 2022 going to great lengths to ensure that they receive a significant percentage of the profits made by crypto traders. And if crypto really wants to gain legitimacy and attract mainstream adoption, it will need to comply with new reporting requirements and tax rules.

“I suspect that most legitimate businesses that deal in cryptocurrency will comply with these rules, and once disclosures are in place, investors who currently ignore the law (the IRS’ position on this has been clear for some time now) will effectively be obligated to report or face the same types of notices they receive for failing to report sales of publicly traded securities and the like,” said Edward Zollars.

The future: A tax on crypto wealth?

Looking to the more distant future, one commentator suggests that at some point we might even see governments trying to tax crypto-based wealth even before it is converted into fiat. It is because, like Philipp Sandner of Frankfurt School Blockchain Center explains, a growing number of Bitcoin (BTC) and crypto investors want to hold the crypto and never sell it again.

“That would then lead to wealth that is not taxed, unless you introduce a new tax regime of taxing wealth. Therefore, we will see the question: should wealth be taxed, even if gains have not been made? he said.

Sandner suggests such a scenario is plausible, and while it requires setting up a wealth registry for every resident of a particular country, he says it is possible.

“Some countries do it (eg Switzerland) and it works. It is also fair. But it’s a huge change in the tax system,” he said.

It may seem like a distant possibility, but at a time when calls for a general wealth tax are already growing, it could happen one day, although unlikely in 2022.
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