Cryptocurrencies and taxes in the spotlight. Crypto-traders in trouble?

Cryptocurrencies taxes, or how the Ministry of Finance has settled (?) Active traders

Since the popularity of cryptocurrencies on the Polish market increased, there were no doubts regarding the settlement of the tax on trading in cryptocurrencies. There were various interpretations, although there was no official one, that is from the Polish government.

Recently, the National Tax Administration has entered the game, requiring the access to the register of transactions and their participants from the cryptocurrency exchanges and other industry institutions (we wrote about it in a separate article). This time the vote was taken by the Ministry of Finance presenting guidelines on the distribution of taxes from cryptocurrencies. The verdict can be deadly for many market participants, both acting as legal and physical persons.

Tax after tax

source: libtertarianin.org

Pursuant to the Act on personal income tax, income derived from the sale of cryptocurrencies is taxable according to general principles. This means the 18-percent rate. for the first tax threshold, ie to 85.528 PLN, and 32-percent from this amount up. The interpretation of the Ministry of Finance assumes that the income is:

• Sale of cryptocurrency - conversion of any cryptocurrency into a traditional currency, e.g. PLN, USD, EUR, GBP,
• Exchange of cryptocurrency into another cryptocurrency, for a good or for a service - the exchange of cryptocurrencies should be treated as a form of its payable disposal.

The second point raises considerable controversy. This means that the conversion of eg Bitcoin to Ethereum, and from Ethereum to Ripple will result in the need to pay tax on each of these transactions. In addition, as in the case of stock exchange or Forex / CFD transactions, the tax obligation arises at the time of the transaction, and not at the moment of withdrawal of funds to a bank account.

This is not the end of problems. As in the case of an investment account in a foreign currency with a Forex broker, here too it is necessary to convert each of the transactions at a rate from a given day into Polish zloty. FX traders are assisted by the NBP and a table of exchange rates on which, among others, our action is based Tax Program 5.0. But the cryptographers do not have such an ease anymore.

PCC, or tax growing indefinitely?

The revelation continues. The nightmare of active crypto-traders begins only here. According to the interpretation of the Ministry of Finance, a tax on civil law transactions, ie PCC, must be paid on the sale or exchange of any cryptocurrency, because according to the legislator, cryptocurrencies are defined as property law.

Fragment of the MF interpretation:

The contract of sale and conversion of cryptocurrencies, which is a property right, is subject to the tax on civil law transactions (PCC). In the case of a sales contract, the obligation to pay this tax - in the amount of 1 per cent. the market value of the acquired property right sold to the cryptocurrency - it concerns the buyer. At the exchange agreement, the obligation to pay tax - in the amount of 1 percent. the market value of property law, from which a higher tax applies - it concerns jointly the parties to the transaction. (...) PCC's tax-free contract is the sale or exchange of cryptocurrencies subject to VAT - insofar as it is subject to VAT, or if at least one of the parties to the transaction is exempt from VAT for doing so. - we read in the interpretation published by the Ministry of Finance

And here we are dealing with further complications. When trading on the stock exchange, we do not know who the other side of the transaction is, as both traders are anonymous to each other. Only that KAS having access to these registers will already have such information. Alternatively, you can be tempted to "overpay" the tax, assuming that we only traded with natural persons. But is it just THIS exit?

To top it off, you will need to submit a separate PCC-3 print for each transaction. You do not need to think about the nightmare of traders using eg automated strategies that contain several dozen transactions each day. And for PCC-3, we only have 2 weeks from the time of the transaction.

Each trader knows perfectly well that the number of transactions does not necessarily translate into a result. 500 transactions with a value of 1000 PLN may mean for us an exit eg on 0, but this PCC will cause that we will still have to pay a tax of 5000 PLN.

Reaction of traders

The voices of indignation from investors, especially the most active ones, for whom the position of the Ministry of Finance seems to be a decisive blow do not diminish. Industry representatives have announced the fight for their rights in European courts and do not exclude the organization of protests under the Ministry of the Interior in the near future.

At the moment, it is not known how in practice the Tax Offices throughout Poland will approach the settlement of taxes on cryptocurrency trading. Nevertheless, the interpretation published by the ministry leaves no illusions - the cryptocurrency industry will face hard times in Poland and a fierce fight.