Crypto-currencies have long since left the exclusive orbit of experts, and the more popular they become, the more questions about their use multiply.
The tax issue affects those who embark on the path of acquiring digital currencies, whether for investment purposes or as a form of payment and collection of goods and services, among other uses.
“This list of questions is of interest in relation to the world of crypto-currencies, as it is an innovative phenomenon whose grey areas stem from what is, perhaps, its greatest virtue: decentralized control via the blockchain, which leaves them momentarily outside the scope of regulation by central banks and financial institutions and poses challenges for governments when it comes to exercising fiscal control,” explains lawyer Martín Litwak, founder and CEO of @UntitledLegal, a legal services boutique specializing in international estate planning and the creation of investment funds.
WHAT TAXES DO CRYPTO-CURRENCY HOLDERS PAY IN ARGENTINA?
n Argentina, crypto-currencies, like any other asset, are included in the calculation of personal property tax.
As far as income tax is concerned, since the enactment of Law 24.430 (2017), crypto-currencies have been expressly included in the chapter corresponding to capital gains and are taxed at 15% on the result of the sale (insofar as this result is positive, of course).
The calculation is made in “hard currency, not Argentine pesos, so that the exchange difference is not part of the taxable gain”, explains Litwak.
In addition, the province of Cordoba has taxed cryptocurrencies with gross income (IIBB) and “we think the trend will be for other provinces to apply it in the long term”, says the lawyer.
GETTING PAID FOR WORK WITH CRYPTO-CURRENCIES
As in most countries around the world, in Argentina, crypto-currencies are not considered currency, so when one is paid in crypto, it’s not technically considered a monetary payment but a “dación de pago”, or payment in kind, which essentially means the cancellation of an invoice with anything that isn’t currency.
So anyone who is paid in crypto will have to pay what they’ve invoiced for the work they’ve done, in the same way as if they’d been paid with, say, a car. As soon as an invoice for USD 1,000, for example, is cancelled, the taxpayer must tell AFIP: “I had the invoice cancelled for this amount” and pay it. In the case of provinces that charge IIBB to crypto-currencies, using this tool could lead to greater complications, or at least additional costs.
WHEN BILLING FOR WORK CARRIED OUT ABROAD
When you receive payment from abroad, it’s exactly the same as when you get paid in Argentina. In our country, the principle of global income applies, which means that a person must be taxed in the country where they establish their tax residence, regardless of where they own assets or where they earned what they earned.
The problem with Argentina, in particular, is when money has to be brought in, as the country has regulations on the export of services that force you to settle dollars on the official market, which means an exchange loss compared to what the dollar is actually worth on the local market. This is a very special circumstance in Argentina; in Uruguay, to take just one example, this is not the case.
WHAT’S HAPPENING IN URUGUAY WITH CRYPTO PAYMENTS FROM ABROAD? A COUNTRY TO WHICH MANY ARGENTINES ARE TURNING OR MOVING BECAUSE OF TAX PROBLEMS
In Uruguay, on the one hand, they are exempt from wealth tax, as they are assets abroad. In Uruguay, unlike Argentina, a principle of “territorial” taxation applies, albeit partially, as in almost all Central American countries, and also partially in Paraguay and Bolivia, where taxes are paid only on what is earned in the country and nothing owned or received abroad is taxed.
As for personal income tax (IRPF), they are exempt because, since they own assets abroad, they would only pay tax on coupon or dividend payments, not on capital gains. As the gains they generate are capital appreciation gains, there is no tax.
WHAT ABOUT CRYPTO IN THE UNITED STATES?
Although there is no law expressly stipulating it, the United States is a “crypto-friendly” country.
The United States treats cryptos as a financial asset for tax purposes, which means that the US Treasury does not charge for their purchase, nor for holding them in the wallet.
When the crypto is sold, what is generated is considered a capital gain, and not an income tax, the burden of which is higher. Today, the most developed countries follow the American model, i.e. they do not tax the purchase or holding, but only the sale and at the capital gains rate, like financial income.
CRYPTO IN THE REST OF THE WORLD
Countries have reacted in various ways: they’ve banned them, seen them as an opportunity to attract investment and even, more recently, adopted them as legal tender.
Some countries have even launched their own crypto-currencies, and even accept them for the payment and reimbursement of taxes and other services. This is the case of Bermuda, which uses stablecoins (USDC, in this case), a currency linked to the value of the dollar, which has received support and investment from crypto-currency companies, or – going to the other end of the ideological spectrum – Petro, Venezuela’s oil-backed digital currency.
Some governments have encouraged the use of these currencies through tax exemptions to attract investment, in addition to other tax incentives for non-residents. This is the case in Portugal, which does not tax individuals (but does tax legal entities) who sell cryptocurrencies, and does not consider them as capital gains or investment income, which are normally taxed at 28%.
A novel case is El Salvador, which has become the first country in the world to establish a particular crypto-currency as mandatory legal tender, which means, among other things, that it obliges its citizens to receive cryptos as payment, allowing us to convert them into dollars without being taxed on them and even pay taxes in that currency.
In addition to those already mentioned, such as Bermuda and Portugal, other “crypto-friendly” countries include: Andorra, Switzerland, Germany, Singapore, Belarus, Malaysia, Georgia, Slovenia, Malta, Japan and South Korea. These are countries that have recognized the advantages of this new technology and created a favorable environment for its development.
However, despite the details of the cases he describes, Litwak advises against generalized, tax-based answers when it comes to the fiscal aspects of the crypto-currency world, as “we’re still in an extremely green zone in terms of what we know about the phenomenon, which means that any official regulations on the basis of which they can be taxed today will always be very partial, as we’re dealing with a phenomenon that has yet to unfold its full potential”, he stresses.
