South Korea’s government has added blockchain to the fields of research and development eligible for a tax credit meant to boost innovation, English-language local media TheNews.Asia reports on Jan. 8.

The local Ministry of Strategy and Finance announced the proposed changes to the enforcement decree of last year’s tax law, which will be enforced in February. The proposed amendments also include among the eligible fields wearable robots and fine dust reduction technology.

According to the aforementioned article, a result of this amendment will be that 30 to 40 percent of the research and development expenses of small enterprises and 20 to 30 of large and medium-sized enterprises will be tax deductible.

Currently, the research and development tax deduction rate for large corporations reportedly ranges from 0 to 2 percent, 8 to 15 percent for medium companies and 25 percent for small enterprises.

As Cointelegraph recently reported, some of South Korea’s biggest cryptocurrency exchanges have passed a government security audit, but the majority could still be exposed to attacks.

Also, in December of last year, Cointelegraph reportedthat two South Korean government ministries have launched a blockchain pilot for port logistics innovation.

*This post is credited to CoinTelegraph

Amidst a dreadful year for crypto investors, a significant upside to the dismal performance of their assets could be that the losses could end up saving them a significant amount of tax if they understand how to record and file appropriately. Under the U.S. tax code, bitcoin investors who got “rekt” in 2018 can use these losses to mitigate their tax burden for the current financial year and beyond.

Key to this is the fact that the United States Internal Revenue Service (IRS) classifies cryptocurrency as a commodity rather than currency, and so crypto trading transactions are taxed in a manner similar to how sales of stocks, land and similar assets are treated.

Favourable IRS Regulations

The tax that is relevant to this asset category is Capital Gains Tax, which goes up to 40.8 percent for short term gains and 23.8 percent for long term gains. It is levied whenever an asset is sold for more than what the holder purchased it for. In other words, if an investor bought 10 BTC a couple of years ago at $1,500 each and they decide to sell at $4,000 each in 2018, a capital gains tax will be levied on the $25,000 profit they would realise.

The flipside is that under the IRS form 8949reporting framework, if cryptocurrency assets end up being sold at a loss, the loss amount can be claimed against their total capital gains tax burden for all commodity investment activities as well as their personal income tax (up to a limit of $3,000 per financial year in the case of the latter). Investors can also carry these losses forward to the next financial year and offset their tax burden in the case of personal income tax.

Even more significantly, crypto assets are not subject to “wash sale” regulations which prevent investors from purchasing securities within 30 days of disposing of a loss-making asset. This means that it is perfectly legal for an investor to sell a portion of their crypto holdings, record the loss on the IRS form 8949 for tax purposes and then repurchase it shortly after, usually within as little as a few hours.

In order to benefit from the advantages offered by this framework, it is important for investors to keep detailed and accurate records of all their cryptocurrency trading activity in a financial year, which can be done using one of a burgeoning number of crypto accounting software solutions in case the investor is unable to realistically record everything manually.

*This post is credited to CCN

Every time you convert Bitcoin to anything, be it goods or services, other cryptocurrencies, or even tax payments, it might be a taxable event, depending on your local regulations. It’s not something a lot of cryptonaughts think about when carrying out their daily lives, but potential penalties can be steep for tax evasion. Node40 is a company that originally started out hosting Dash Masternodes for a fee – and they still do this – but then realized that their background as coders could potentially help people in the US blockchain industry accurately assess their cryptocurrency tax liabilities.

Node40 is one of the few providers in the space, having developed what amounts to a QuickBooks for blockchain tokens.

CCN spoke to Perry Woodin and Sean Ryan, the co-founders of the company, recently about the significant increase in demand for their product since Bitcoin blew up last year and many thousands of Americans, potentially millions, entered the cryptocurrency market for the first time. In Sean’s view, there is a woeful lack of education among cryptonaughts as regards their tax liabilities and burden to the US government.

“If people are transacting in digital currency, it’s important that anyone understands that there’s a tax obligation on their part. Whether they’re paying their taxes or whether they’re day traders trying to make it big in the crypto world – it doesn’t matter. Any time you’re interacting with digital currency, it’s important that people understand there is a tax liability.”

The software allows a user to easily integrate with the crypto exchanges and wallets that they use, determines the values that were traded and what needs to be reported. It streamlines the process for the users, who may otherwise find it very difficult to determine what amounts were actually traded. Ryan believes that the 1099-K forms that traders will be receiving from exchanges in the next tax season will be quite inaccurate, not telling the whole story, and that his company can help people by enabling them to have a much more detailed picture of their trade history. Perry Woodin said of the forms:

“Many people are going to be receiving 1099-K forms this year from the exchanges they’ve interacted with, and we know that those forms are likely not going to be accurate. Our system will be able to deliver a more accurate number, and people are likely to need that.”

The ‘QuickBooks of the Blockchain World’

IRS bitcoin tax crypto

Node40 has three product tiers, and users who just want the basic service can sign up for free. Users who need more advanced features can pay $750 a year, although right now it’s 50% off. They believe that demand for their product is only going to increase. Unlike most blockchain industries, they say, tax accounting software doesn’t rely on market performance. If Bitcoin goes down, people need them. If the Bitcoin price goes up, people need them even more.

Sean Ryan said that Node40 had seen a serious increase this year in the number of professional accountants and law firms who have had requests from their own clients on how to deal with cryptocurrency and the government. He said, “While we are not lawyers or accountants, we’ve developed a product that serves them. What we’re seeing is an increase in CPAs and law firms who want to see how we can fit into their world.”

On the subject of Ohio’s tax collectors accepting Bitcoin in lieu of fiat payment, Ryan said that it actually creates a federally taxable event for the user, so the user has to consider whether they are saving enough in fees to pay in that method to offset the obligations that might be created at the federal level. “Ohio doesn’t care,” he said, pointing out that in some cases it could be beneficial to spend cryptos in that manner.

“This is a good year because if I receive Bitcoin from my customers paying my January invoices in Bitcoin, I am receiving it at a very high value. Say $8,000. Now the price of Bitcoin is plummeting throughout 2018, I’m continuously getting less and less value. So the cost basis of what I’m receiving changes. Every time I receive it, it has a different value. So at the end of the year when it comes time to pay taxes, I’m using that Bitcoin that I’ve received at all different cost bases, and Ohio doesn’t care, but the federal government certainly cares that I’m disposing of Bitcoin now.”

In a press release put out after our interview which focuses on how 2018 will be the year that a lot of people report crypto losses to offset their other tax liabilities, co-founder Perry Woodin said:

“It is clear that, with the huge falls in cryptocurrency markets during 2018, many people will be weighing up whether this is a good opportunity to reveal the losses they have suffered. In doing so, they will be looking to take advantage of these losses in order to offset other tax liabilities. Having not reported their crypto activity up to now though, those choosing to reveal losses this year will need to report their crypto positions every year from now on, giving the tax authorities much better visibility of people’s crypto involvement.”

One thing is for sure: neither cryptocurrency nor the federal government are going away anytime soon, and the IRS has shown a definitive willingness to adapt to the changing times. Ryan and Woodin believe that people will be more willing to pay their taxes if they have an easier means to do so, and that by solving the education gap that intersects taxation and crypto, they will help create a more equitable and sane environment for blockchain entrepreneurs to operate in.

*This post is credited to CCN

KUALA LUMPUR, Oct 9 — The government may need to consider additional forms of taxation to address the debt amassed by the previous Barisan Nasional government, said the prime minister.

During his keynote address at the “Malaysia: A New Dawn” economic forum today, Tun Dr Mahathir Mohamad conceded that the move will be unpopular, but said the only other option was to sell off the nation’s assets.

“It was suggested we should have new taxes. I don’t think that is something that is welcomed by the people.

“But we may have to devise new taxes in order to have the money to pay our debts. Of course the other thing we can do is to sell our assets,” he said.

Such assets invariably include state-owned land, the PM noted before saying he did not think this to be a wise course of action if it meant selling to foreigners.

“But we can still sell land to locals so they can develop housing projects and settlements that they believe will give them a return,” he said.

He compared the severity of the government’s current challenge to the 1997 Asian Financial Crisis, but noted that at least the ringgit was resilient now.

Dr Mahathir did not offer hints of when these new taxes may be introduced, but Finance Minister Lim Guan Eng is due to table Budget 2019 on Nov 2.

The PM also said there is an urgent need to expand the economy to drive up revenue and for Malaysians to enjoy the fruits of such growth.

Earlier in his speech, Dr Mahathir observed a disconnect between the country’s reported gross domestic product (GDP) growth rates and the welfare as well as prosperity of Malaysians.

He conceded that while the country’s economic growth was “all right”, this did not translate directly to higher income for the people.

The pressure on average wage earners had been worsened by the previous government’s policies, he said.

“In the meantime there is a necessity to grow the economy. If we grow the economy at a high rate then the (country’s) debts will appear smaller than it is now. The [debt-to-GDP] ratio would be resolved by increasing or growing the economy of this country,” he said.

Dr Mahathir explained that he actively solicited investments during his visits to the US and the UK, saying his efforts received promising response.

The prime minister then ventured into the topic of Bitcoin, saying he did not trust the new financial technology development, primarily due to not understanding the value proposition behind the cryptocurrency.

Dr Mahathir said he has not worked out how a virtual currency that once cost cents could now be worth thousands of dollars.

Bitcoin, the best known cryptocurrency among myriad copycats, came close to breaching US$20,000 last year.

“I must admit I can’t use this money because I don’t know what the value is. But now we are having more and more of this virtual money and I’m quite sure it will affect the markets or countries with whom we trade,” he warned.

*This post is credited to MalayMail

U.S. Rep. Tom Emmer (R-MN) is planning to introduce three bills to support blockchain technology and cryptocurrencies, according to a press release published September 21.

The three upcoming bills are entitled the “Resolution Supporting Digital Currencies and Blockchain Technology,” the “Blockchain Regulatory Certainty Act,” and the “Safe Harbor for Taxpayers with Forked Assets Act.”

The legislation is focused on the support and development of blockchain technology, as well as the establishment of a safe harbor for taxpayers with “forked” digital assets.

The bills would prompt the federal government to provide a “simple legal environment,” and restrict fines against individuals who report “forked” digital assets until the Internal Revenue Service (IRS) presents formal guidance on the appropriate means of reporting. According to Emmer, “taxpayers can only comply with the law when the law is clear.” The representative further commented on the initiative:

“The United States should prioritize accelerating the development of blockchain technology and create an environment that enables the American private sector to lead on innovation and further growth, which is why I am introducing these bills.”

Moreover, Emmer has taken up the position of co-chairman of the Congressional Blockchain Caucus, a platform for the industry and government collaboration to examine the implications of blockchain and digital currencies. According to the announcement, “the Caucus believes in a hands-off regulatory approach to allow this technology to evolve the same way the Internet did; on its own.”

Earlier this week, U.S. lawmakers called on the IRS to issue clarified and “comprehensive” crypto taxation guidance. The lawmakers argue that while the IRS has proactively continued to remind taxpayers of the penalties for non-compliance with its guidance, its failure to introduce a more robust taxation framework “severely hinders taxpayers’ ability” to meet their obligations.

Also this week, Cointelegraph reported that the American National Standards Institute is going to discuss blockchain and Artificial Intelligence (AI) issues at its next Legal Issues and Joint Member Forum. The attendees will reportedly focus on legal and ethical concerns and explore concrete applications of blockchain technology and AI.

*This post is credited to CoinTelegraph

The long-awaited regulations for the Indian cryptocurrency ecosystem are now likely to come only by the end of the year.

That’s because a finance ministry panel is still evaluating how to treat blockchain and cryptocurrencies separately. Although the Narendra Modi government and the Reserve Bank of India (RBI) had expressed their inclination to adopt blockchain, there have been misgivings on the latter.

The panel, set up in December 2017 under Subhash Chandra Garg, secretary in the department of economic affairs, to suggest regulations on cryptocurrencies, was expected to submit its proposal by July. Now that “looks difficult,” according to a senior government official privy to the panel’s discussions.

“There are lots of issues that need understanding and lots of studying needs to be done,” the official added, requesting anonymity.

The key issue facing the panel is if regulations can be drawn up to push the use of blockchain independently. Blockchain is a digitised and decentralised public ledger for all cryptocurrency transactions. If financial application is removed from it, this tool is essentially a bookkeeping platform that is owned by nobody but can be accessed by anybody on the internet.

“Blockchain is an interesting thing. We definitely want to milk it effectively for financial transactions. So all officials are really trying hard to understand how to separately use blockchain, without cryptocurrency,” the official explained. “And understanding a new software takes time.”

An email sent to the finance ministry remained unanswered.

Crypto versus blockchain
Meanwhile, representatives of India’s cryptocurrency community have met the government to help them understand the subject better.

“In fact, we had one meeting specifically on this topic,” said Ajeet Khurana, head of the blockchain and Cryptocurrency Committee, a lobby of bitcoin players in India. “A public blockchain needs to have a token and you can’t have it by excluding cryptocurrencies. Moreover, a public blockchain is analogues to the internet and no one can control it.”

And although the industry is open to further discussion, the exclusion of cryptocurrency seems somewhat problematic.

“If a common man is involved in a blockchain that can be used to mine or validate a particular transaction then it takes resources. The investors are then incentivised by paying in cryptocurrencies, so if these digital coins are removed from the equation then it doesn’t make sense,” explained Shubham Yadav, co-founder of Coindelta, a Pune-based cryptocurrency exchange.

The dilemma
The Modi government has been looking into the cryptocurrency ecosystem ever since April 2017 when it set up a panel comprising officials from the finance ministry, the RBI, and India’s market regulator, the Securities and Exchanges Board of India (SEBI). This group recommended slowly choking the industry, primarily to safeguard investors.

Subsequently, in December 2017, the government appointed the Garg-led committee, which has veered away from banning cryptocurrencies outright and is instead mulling treating them as a commodity. “The issue here is about regulating the trade and we need to know where the money is coming from. Allowing it as (a) commodity may let us better regulate trade and so that is being looked at,” a government official told Quartz last month.

But India’s cryptocurrency ecosystem has already been pushed into a corner. Earlier this year the RBI cracked the whip on the exchanges, asking banks to wind up all business relationship with them and investors. Since then, several exchanges have challenged the RBI in the supreme court. A final date for hearing the matter has been set for Sept. 11.

*This post is credited to QZ.

There has been a lot of buzz surrounding cryptocurrency and blockchain lately. As the cryptocurrency trend continues to gain traction in everyday life and business, the inevitable topic of taxes and financial impact has steadily trailed.

As of today, tax authorities have yet to release enough guidance for tax professionals to provide taxpayers with adequate answers and sound advice regarding crypto activity. While there are plenty of unanswered questions to theorize and extrapolate, this article will focus on the facts we know and how they affect taxpayers.

Background

Cryptocurrency first surfaced as a result of the 2008 financial crisis that severely damaged consumer confidence in banks and other trusted third parties. A form of electronic cash, cryptocurrencies are a type of decentralized digital currency created to work without a central bank or single administrator.

Bitcoin, ethereum, litecoin, ripple, Zcash, IOTA and many others were created in response to growing consumer demand, after which bitcoin steadily rose in popularity to become the most widely recognized virtual currency. Over the last few years bitcoin has gained significant attention as questions concerning taxes and financial legitimacy swept the world. Smartereum.com reports as of July 2018, the market cap is around $417 billion and is expected by some to reach a cross valuation of $1 trillion.

The tax guidance we know

  1. Virtual currency is treated as property and not as currency, therefore, general tax principles applicable to property (business, investment and/or personal) will apply to cryptocurrency transactions. Furthermore, virtual currency is not subject to foreign currency gain or loss.
  2. Transactions, such as payment for goods or services, are taxable events and the fair market value of the virtual currency on the date of the receipt must be included in calculating taxable income for the tax year.
  3. The exchange of virtual currency triggers a gain or loss, however, whether these gains or losses are capital in nature will depend on whether the virtual currency is a capital asset versus inventory and/or other property in the hands of the taxpayer.
  4. If a taxpayer is involved in cryptomining (validating or authenticating cryptocurrency transactions and updating the blockchain with the transaction information) that person is rewarded with small amounts of cryptocurrency. The IRS views any successful mining as taxable income and the fair market value of the virtual currency received must be included in the taxpayer’s gross income. The IRS treats these net earnings as a trade or business and it is subject to self-employment tax if the mining is not performed as an employee.
  5. The IRS confirmed that a virtual payment with a value of $600 or more (including rent, salaries, wages, annuities and compensation) must be reported to the IRS and the payee accordingly. Further, payments greater than $600 made to independent contractors are also required to be reported on Form 1099-MISC using the fair market value on the date of payment.
  6. Virtual currency payments are subject to backup withholding, similar to payments made in property. This means that the payer must request appropriate information (such as taxpayer identification numbers) from the payee, otherwise backup withholding from the payment is required. In certain cases the IRS may send a notification that such withholding is required.
  7. As with any tax law, there are consequences for not properly following the rules. The IRS warns that failure to treat virtual currency transactions properly (as specified by IRS Notice 2014-21 on March 25, 2014) will result in penalty.

As the crypto market cap continues to grow, so does the need for increased guidance and regulation. While there remains vast uncertainty with respect to cryptocurrency, one thing remains clear — it’s here to stay. Be sure to stay informed and stay abreast of new regulations and updates as tax guidance continues to shed light on this highly intricate topic.

*This post is credited to Bizjournals