The governments around the world spanning across continents were initially reluctant to recognize the legitimacy of crypto assets. Till a few years back, some were planning ways to outrightly ban it. However, the good news is that this reluctant attitude is rapidly changing. Recently, the UK, Spain, and Brazil have brought laws to declare earnings from crypto assets and impose taxes. This essentially implies that many governments are steadily acknowledging the legitimacy of crypto assets.
UK Government’s Move To Tax Crypto Assets
The HM Revenue and Customs (HMRC) has advised crypto holders to come forward and disclose any unpaid tax on crypto assets. These include Non-fungible tokens (NFTs), utility tokens, and exchange tokens. Unlike the previous years, the UK government has now launched a specific disclosure process for people earning money from assets.
HMRC will also charge late payment interest on that tax. For instance, users will get payment reference numbers and the government will provide 30 days to transfer the outstanding amount. The taxation policy of HMRC may have some complications because crypto assets are not similar to other taxable assets. This is the reason the government views profit or loss made on buying and selling exchange tokens within the larger ambit of Capital Gains Tax (CGT).
Spain’s Latest Move to Tax Crypto Assets
Spain is clearly recognizing crypto assets and wants to have more oversight in the realm. The government has announced that Spanish residents will have to declare their assets even if they are using foreign platforms. They will have to pay their taxes by the deadline of 31st March 2024.
Spain, just like the UK, has introduced a new form 721 for those who want to declare crypto assets abroad. The Spanish government also supports a regulatory framework for dealing with cryptocurrencies. Furthermore, Spain will introduce comprehensive regulations such as the Crypto Assets Regulation to govern the space. These regulations will take effect from December 2025.
Brazil May Sanction Tax Proposals on Crypto Assets
There are over 3.2 million Brazilians along with over 89000 registered organizations taking part in crypto-related activities. The government favors the growth of crypto assets in the country and is therefore eager to impose taxes. Recently, the Brazilian Senate has accepted new income tax regulations on Brazilians. The citizens may need to pay a maximum 15% tax on income earned from cryptocurrencies. President Luiz Inacio Lula da Silva may sanction the new proposal after some modifications.
The new taxation policy will commence from 1st January 2024, in which individuals will pay more than $1200 from foreign-based exchanges. However, there will be an 8% tax on earnings accessed before 31st December 2023. The taxes on domestic crypto funds will be equivalent to those crypto funds held abroad. The move to tax cryptos is coinciding with the ever-growing popularity of the currencies. Earlier this year, the Brazilian Central Bank granted permissions to crypto asset providers. Thus, it is amply clear that Brazil may have a full-fledged regulatory framework designed specifically for cryptocurrencies.
The growing popularity of earning income from crypto assets in the UK, Spain, and Brazil has compelled their governments to impose taxes. This much-needed change is a clear indication that the initial hesitation to ban or strictly regulate cryptocurrencies is waning. Income taxes on cryptos are also good for the nations since they can prevent illegal hoarding or routing of money. Since the governments are imposing income taxes, that day is not far behind when they will have similar laws for fiat and cryptocurrencies.