The management of EY Financial Services, a US tax company, has warned clients that new cryptocurrency tax legislation will soon be implemented.
EY Financial Services CEO Thomas Shea said the authorities are preparing new legislation that will require reporting for at least some cryptocurrency transactions.
“When these rules go into effect, there will be significant changes,” Shi explained.
He noted that amid the growing popularity of cryptocurrencies, legislators are exploring opportunities to generate income through taxation and regulation of cryptoassets:
“We see that some jurisdictions are developing regimes, rates and reporting unique to digital assets. In the US, digital assets are subject to regulations and reporting is usually limited to securities rather than property.”
According to the CEO of EY Financial Services, crypto investors it is important to understand the principles of taxation:
“Although not many people can calculate income tax, it is more important to understand the changing tax implications associated with the digital asset market. This is crucial.”
The lawyer recalled that the purchase or sale of cryptocurrency affects whether the transaction is taxable or not. The purchase of cryptocurrencies with fiat and any unrealized appreciation is tax-deductible. However, the sale of cryptocurrency is a taxable event. Shi added that “gain or loss is usually capital in nature” and may be taxed:
“Even if the owner exchanges his cryptocurrency for other assets, such as bitcoin or ether, the transaction is taxed, and the holder of the cryptocurrency is required to report profits or losses as a result of the transaction.”
Shea added, that this rule also applies to the non-fungible token (NFT) market.
“If you purchase an NFT with fiat, it is not taxed. However, the purchase of NFT for cryptocurrency is similar to the exchange of cryptocurrency for another cryptocurrency – it is taxed.
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