Hong Kong, 5 October 2020 – PwC’s first annual Global Crypto Tax Report shows that more and more tax authorities are turning their attention to this sector and are issuing guidance on how they expect industry participants to pay their taxes.
While the majority of jurisdictions surveyed have issued some guidance on the calculation of capital gains and losses for individuals and businesses, few or none have issued guidance on important topics like crypto borrowing and lending, decentralised finance, non-fungible tokens, tokenised assets and staking income.
The PwC survey reveals that the most common treatment is to view crypto-assets as a type of property. Often this means that spending these for acquiring goods and services leads to a tax charge on disposal. This will continue to act as a major impediment to mass adoption of many crypto assets as a means of payment, unless technology solutions can be found to ease the administrative burden for users.
The survey highlights our annual PwC Crypto Tax Index which ranks jurisdictions based on how comprehensive their crypto tax guidance is. Liechtenstein tops this year’s rankings, closely followed by Malta, Australia, Switzerland, Singapore and Hong Kong.
This shows that a number of the jurisdictions that have been targeting the blockchain sector are coming up on top of the rankings in terms of the guidance.
“Having specific crypto tax guidance is an essential building block of the continuous institutionalisation of the crypto ecosystem,” says Henri Arslanian, PwC Global Crypto Leader.
“The increased interest in crypto-assets that we have seen from tax authorities and other regulators shows that this asset class is now finally being taken seriously,” says Peter Brewin, Tax Partner, PwC Hong Kong. “What our research shows is that the guidance issued by many tax authorities is already getting dated. Yes – it is important that people know how to account for tax on the trading of Bitcoin and other cryptocurrencies but that is really crypto tax 101. However, what we really need, and which is lacking in nearly all jurisdictions, is principles-based guidance that is fit for the new decentralised economy.”
“The recent digital assets tax guidance issued by the Hong Kong IRD covers a wide range of areas and Hong Kong (ranked #6 in the PwC Crypto Tax Index) can be seen as relatively friendly to blockchain and fintech businesses from a tax perspective” says Gwenda Ho, Tax Partner, PwC Hong Kong “However, there is still work to be done especially when it comes helping Hong Kong as a centre for the management of crypto funds as these struggle to qualify for the available profits tax exemptions available to more traditional funds”.
Notes to Editors
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The PwC Global Crypto team is composed of over 200 professionals active in over 25 countries that offer a “one stop shop” solution for our crypto clients across our multiple lines of service. Our clients range from crypto exchanges, crypto funds, crypto investors, token issuers, traditional financial institutions as well as national regulators and central banks with regards to their crypto policies.
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