Crypto Compliance and Taxation Outlook of the EU - Espay Exchange - PowerPoint PPT Presentation

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Crypto Compliance and Taxation Outlook of the EU - Espay Exchange

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The European Union is the second-largest economy across the globe. It is right behind famous Asian countries like South Korea and Japan in terms of Cryptocurrency investment. If you want to invest in centralized trading solutions or centralized crypto exchange platform, you must have a good understanding of legal compliance and taxation outlook of the EU. – PowerPoint PPT presentation

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Date added: 24 November 2020
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Title: Crypto Compliance and Taxation Outlook of the EU - Espay Exchange


1
(No Transcript)
2
Introduction
  • The European Union has managed to contribute at
    least 22 of all economic activity in the globe.
    In 2018, the gross domestic product of the EU
    exceeded 18 trillion. Cryptocurrency investors
    and advocates are watching the EU very closely.
    Any decision that is made by the EU about digital
    currencies will impact the global market as well
    as enterprise adoption of blockchain technology.
    The European Union has been solidly divided on
    the role Europe must play in the digital currency
    and blockchain ecosystem. The state members of
    the EU have their own policies and attitudes
    toward Cryptocurrencies. In this article, we
    cover EU crypto regulations according to the
    regions that come under its territory. We also
    will cover the Crypto taxation outlook of the EU
    countries. Lets get started.

Europe
3
Crypto Compliance Outlook of the EU
  • Most of the member states in the EU, token
    trading and ICOs are evaluated on the basis of
    case by case. However, questions of utility VS
    security tokens are still on the way. Issues
    regarding regulating white label Cryptocurrency
    exchange are still in play. In this article, we
    will be covering a few of the member states of
    the EU, reviewing their policies.
  • In 2012, the Europe Central Bank managed to
    become one of the first regulatory bodies who
    wrote about Cryptocurrency as an emerging trend.
    The ECB and EU have released new reports, general
    rules about Cryptocurrencies.
  • Regulatory in the EU has considered
    Cryptocurrencies as a lawful activity. However,
    they do not consider digital currencies as money
    for traditional means of exchange and commerce.
    Although, Cryptocurrencies are not discouraged or
    prohibited in the EU, the Europe Central Bank has
    not intended to issue a blockchain-based currency
    as a replacement for the euro.
  • Exchanges and other service providers are not
    regulated at a regional level. Nonetheless, the
    EU and ECB leave exchange regulation up to the
    judgment of member states. When a Crypto exchange
    receives approval from the national government,
    approval functions as a passport for operation
    around the Eurozone.

4
Crypto Compliance Outlook of the EU
  • In 2018, the EU agreed on the text for the Fifth
    Money Laundering Directive. This directive will
    include every Cryptocurrency exchange that put
    forward fiat conversion. As regulated
    institutions under money laundering legislation
    of the EU, crypto exchanges will need to execute
    KYC and CDD (Customer due difference) on every
    exchange user.
  • The mixture of regulations and initiatives that
    have been taken by individual member states of
    the EU has made it quite complex for blockchain
    startups to establish themselves in the EU. There
    are seven EU countries that recognized the hidden
    challenges of navigating several regulations.
    These seven EU countries have started an
    initiative, known as Mediterranean Seven.
  • The objective of this initiative is to encourage
    the use and development of blockchain technology.
    These EU countries involve France, Spain, Italy,
    Greece, Malta, Portugal, and Cyprus. Now, lets
    discuss the EU states attitudes towards
    Cryptocurrency.

5
France
  • Crypto Regulatory Sandbox Only two ordinances on
    blockchain technology have passed the French
    legislature. The first ordinance recognized a
    fine definition of Cryptocurrencies in French law
    as a type of coupon. The second ordinance
    uncovers those hidden potential utilizations
    toward financial instruments, but
    Cryptocurrencies still continue to be mainly
    unregulated in France. Frances markets
    regulator, AMF is considering a
    regulatory sandbox that is meant to study the
    impact of security tokens in the European Union. 
  • The government of France has indicated signs
    towards increased regulation and legislation in
    the upcoming years. Bitcoins and cryptocurrencies
    are not legal tenders in the EU. However, the
    ownership of such currencies is legal.
  • Trading Ban No
  • Banking Ban NO
  • Tax Haven Region No 
  • Best Place for License No because French
    regulators have recently released strict rules of
    licensing for digital asset service providers.

France
6
Germany
  • Crypto Regulatory Sandbox The Germany Federal
    Financial Supervisory Authority (BaFin) has
    undertaken the regulation of Cryptocurrency
    exchanges in Germany. If you are willing to open
    a Cryptocurrency service that trades these
    virtual currencies that are qualify by BaFin, you
    will require approval from BaFin.
  • The Germany Federal Financial Supervisory
    Authority makes regulations on ICOs on the basis
    of case by case. It does not include any kind of
    guidelines for what makes a token a security
    versus a virtual currency.
  • Trading Ban No
  • Banking Ban NO
  • Tax Haven Region- Yes, foreign investors do not
    have to bother about the taxes on interest
    burden. Germany retains the privacy of account
    holders. 
  • Best Place for License- Germany harshly regulates
    crypto assets. A company seeking to do custody
    for crypto assets is restricted to provide any
    other regulated financial or banking services,
    which requires authorization.

Germany
7
Ireland
  • Crypto Regulatory Sandbox Similar to Germany,
    Ireland has ruled to find that Cryptocurrencies
    can either be tradable securities or financial
    instruments. This determination was also based on
    a case by case. Capital gains taxes apply to
    transactions where Cryptocurrency is traded for a
    profit. The finance organizations of Ireland have
    encouraged many initiatives to create Europe-wide
    cryptocurrencies regulation.
  • Trading Ban No
  • Banking Ban NO
  • Tax Haven Region- Yes, Ireland is a host to
    business tax rate of 12.5, and artists relish a
    tax-free income.
  • Best Place for License- Yes, Ireland is
    considered as one of the major European markets
    for Cryptocurrency companies.

Ireland
8
Italy
  • Crypto Regulatory Sandbox Italy agreed that
    Crypto exchanges are exempt from VAT, and it has
    rulings dating back to 2016 that classify Crypto
    profits as corporate income subject to the
    applicable tax regulations. When a Cryptocurrency
    exchange is willing to function in Italy, they
    will have to follow the similar registration
    process recommended by other European countries.
    The Laws in Italy treats Crypto exchange
    providers in the same ways as other money
    exchange operators do. 
  • Trading Ban No
  • Banking Ban NO
  • Tax Haven Region- No, but Crypto exchanges are
    exempt from VAT
  • Best Place for License- Yes, not being regulated
    by any specific law until now, the use or trading
    of Cryptocurrency is not subject to any special
    licensing requirements. You just need to keep
    proper accounting records and also file the
    essential documents with the tax authorities.

Italy
9
Malta
  • Crypto Regulatory Sandbox The government of
    Malta has been loudly pro-Cryptocurrency, and
    they consider blockchain as an opportunity to
    bring improvement as well as investment in Malta.
    While the official ruling is not yet on the
    books, it is now expected to be a crypto-friendly
    set of regulations in the EU. The ambition of
    such a ruling would be to craft an understandable
    framework for blockchain startups or White Label
    bitcoin exchange Software development companies,
    and in turn these startups would have access to
    the European market via their Maltese
    headquarters.
  • Trading Ban No
  • Banking Ban NO
  • Tax Haven Region- No
  • Best Place for License- Yes

Malta
10
Crypto Taxation Outlook inEuropian Union
  • In 2018, the EU agreed on the text for the Fifth
    Money Laundering Directive. This directive will
    include every Cryptocurrency exchange that put
    forward fiat conversion. As regulated
    institutions under money laundering legislation
    of the EU, crypto exchanges will need to execute
    KYC and CDD (Customer due difference) on every
    exchange user.
  • The mixture of regulations and initiatives that
    have been taken by individual member states of
    the EU has made it quite complex for blockchain
    startups to establish themselves in the EU. There
    are seven EU countries that recognized the hidden
    challenges of navigating several regulations.
    These seven EU countries have started an
    initiative, known as Mediterranean Seven.
  • The objective of this initiative is to encourage
    the use and development of blockchain technology.
    These EU countries involve France, Spain, Italy,
    Greece, Malta, Portugal, and Cyprus. Now, lets
    discuss the EU states attitudes towards
    Cryptocurrency.

11
France
  • For companies, cryptocurrencies profits are
    prone to tax under the general corporation tax
    regime for losses and profits.  Currently,
    corporate income tax is levied at the 33.33
    rate. The standard rate is assumed to be
    gradually reduced to 25 in 2022. Profits from
    Cryptocurrency mining and speculation are treated
    as commercial and industrial profits subject to
    the ongoing income tax schedule.
  • According to the French Supreme Court,
    Cryptocurrency assets that are associated for tax
    purposes to intangible assets, their VAT
    treatment should look similar to the following
    aspects
  • When Cryptocurrency is exchanged for fiat
    currencies, no VAT is due on the Cryptocurrencys
    value and in respect of the fees. If there is any
    VAT, it will be charged by the intermediary. 
  • Revenue that is received from Cryptocurrency
    mining activities is subject to VAT as a supply
    of goods or services.
  • Acquisition of services or goods through
    Cryptocurrency payments are also subject to
    French VAT.

France
12
Germany
  • In Germany, the tax treatment is not completely
    settled by the regulation. Profits will be
    taxable as current income, capital gains, or not
    at all. Cryptocurrencies will be regarded as an
    asset for the purposes of tax. The scope of
    taxation will depend on whether the
    Cryptocurrency is held as business or private
    asset.  However, companies are treated as holding
    assets as business assets. If anyone has held
    them as business assets, all profits will be
    subject to tax. If anyone has held them as a
    private asset, then profits from lending are
    taxable as income. Payments made in
    cryptocurrencies are treated as a Cryptocurrency
    sale and lead to the tax outcomes.
    Cryptocurrencies mining is subject to tax as a
    business income based on different
    circumstances. 
  • VAT treatment in Germany has issued on the
    following guidelines
  • Generally, revenue obtained from Cryptocurrency
    mining tasks is outside the scope of VAT.
  • Revenue obtained for the provision of wallets for
    which certain charges are made is subject to
    VAT. 
  • When cryptocurrencies are exchanges for fiat
    currencies, the Cryptocurrency transfer is exempt
    from VAT. 
  • Charges for the provision of a platform to sell
    and buy in cryptocurrencies are considered a
    technical service subject to VAT.

Germany
13
Italy
  • The Italian Tax Authority has provided some
    specific guidelines to understand Cryptocurrency
    taxation (direct taxes and VAT) outlook of Italy.
    A few of them are given below
  • Any individual, who is occupied in speculative
    activities, will be taxed at 26.
  • Traders in the cryptocurrency industry are
    subject to tax on profits as income. This will
    also involve non-residents trading via a
    permanent establishment in Italy.
  • For those companies that are subject to
    corporation tax, the losses or profits on
    exchange movements among cryptocurrencies are
    taxable.
  • If you want to pay in Cryptocurrency for any
    service or good, the value of the supply on which
    VAT is due will be the Euro value of the
    Cryptocurrency at the moment the transaction
    takes place.
  • The sale and purchase of Cryptocurrency in an
    exchange for Euros are considered as a foreign
    currency transaction. And that transaction margin
    is exempt from VAT.

Italy
14
Spain
  • If any individual has held Cryptocurrency as an
    investment, the Cryptocurrency will be considered
    as an asset for capital profits tax. The capital
    profit is charged when the Cryptocurrency is
    handed over by the individual who is paying tax.
    For companies that are subject to corporate tax,
    losses, or profits derived from exchange
    activities among crypto and other kinds of
    currencies are taxable.
  • Revenue obtained from Cryptocurrency mining
    movements is outside the scope of VAT. Charges
    made over the value of the Cryptocurrency for
    sorting or carrying out any Cryptocurrency
    transactions are exempt from VAT.

Spain
15
Final Thoughts
  • The European Union is the second-largest economy
    across the globe. It is right behind famous Asian
    countries like South Korea and Japan in terms of
    Cryptocurrency investment. The future of
    Cryptocurrency in the EU depends on shared
    regulations and clean frameworks for blockchain
    businesses moving ahead. If you want to invest
    in centralized trading solutions or centralized
    exchange platform, you must have a good
    understanding of legal compliance and taxation
    outlook of the EU.

16
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