Cryptocurrency Taxation in Japan, HK, Singapore

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In this lesson we will be discussing the taxation of Cryptocurrencies and the Blockchain Industry across three countries, Japan, Singapore, and Hong Kong. We will consider taxation and the implications from both a personal and corporate level. We will look to appreciate the key differences between each jurisdiction as well as the design of their taxation regimes. You will gain a basic understanding of structuring entities at both a personal and corporate level to manage taxation in a compliant & regulatory sound manner.

Lesson Objectives

In this lesson you will learn the following objectives:

  • The Current Legislation across Japan, Singapore, & Hong Kong.
  • The Legal and Regulatory requirements relating to the taxation of Cryptocurrencies.
  • The likely future direction of Taxation Legislation and the present sentiment of the market.
  • Effective and Compliant manners to structure personal tax affairs with respect to funds from a cryptocurrency source.

Terminology

Taxation: Refers to the levying of a fee on incomes or assets by regulatory bodies or the government.

Personal Income Tax (PIT): Tax imposed on an individual for the gross income he or she makes during a particular year.

Company taxation: This is the tax levied against a firm, a corporation, a company, or a legal entity by the government.

Capital Gains Tax (CGT): Tax paid on the gains or profits that one makes when selling or exchanging certain types of assets. They are in most cases assets that you hold for a longer time (or so when the laws were created).

Enterprise tax: This is tax paid by self-employed individuals.

Terminology

Property tax: This is tax paid by owners of long-term properties like land, estates, and so on.

Consumption tax: The tax paid on the purchase of goods and services.

Vehicle related tax: This is tax imposed on owners of automobiles, like cars, buses, trucks, or any other heavy duty automobile. Also, when a new car is purchased, a vehicle acquisition tax is expected.

Liquor, tobacco, and gasoline tax: When customers buy any of the aforementioned goods, they are required to pay this compulsory tax levied on them. Tax fees on liquor and tobacco are also called sin tax.

Return on Investment (ROI): This is used to find out either the gain or the loss on an investment with respect to the money invested.1.

Introduction to Cryptocurrency Taxation

Taxation refers to the levying of a fee on incomes or assets by regulatory bodies or the government. Taxation is an act and the fees are known as taxes. A lot of people are quite concerned about taxation as it relates to cryptocurrency. You may likely be interested in the topic as well have a functional interest due your present holdings or continuous use of cryptocurrencies. It may be that you own it personally or as part of a business.

Finding out potential tax requirements is a normal thing to do, rest assured that you are not alone. In this lesson we will seek to provide some clarity around taxation, more specifically cryptocurrency taxation. It is important to keep in mind that as a result of the only quite recent innovation and adoption of cryptocurrencies, there is not yet a comprehensive global taxation framework.

The year 2017 was very explosive in the cryptocurrency world. With many digital coins rising in value toward the final quarter, many countries are now becoming more aware of cryptocurrencies and some countries are attempting to create a regulatory framework. This has led many nations to start drawing up taxation guidelines to help potential investors know what is required of them and how they can navigate through them successfully. The lack of effective regulation is not only greatly slowing adoption but it is creating a tremendous compliance burden due to the uncertainty.

One notion that should be understood clearly is that cryptocurrencies are not tax free.

Even though there wasn’t much emphasis on taxes with respect to cryptocurrencies before 2017, there has been momentous growth in the cryptocurrency world since then. In the United States of America, the Internal Revenue Service (IRS) has their eyes fixed upon the tax revenue that can be realized from the profits emanating from the cryptocurrency industry. As cryptocurrencies are known for their volatility it is sometimes difficult to know how to rightly apply general taxation laws to it.

1.1 Introduction to Cryptocurrency Taxation

An example is the issuance of ICOs. There has been a serious debate whether ICOs should be referred to or categorized as “Securities”, and be regulated as such. But for the purpose of taxation, the Taxation Departments in some countries have decided to classify all cryptocurrencies as ‘Owned Property’ as opposed to classifying it as ‘Traditional Currency’. As a result of this, it will be subject to taxation.

Follow the link and learn all about Cryptocurrency Taxation in Japan, HK, Singapore: UBAI.co

This is the same position that was maintained in an IRS bulletin that was released a few years ago. A part of it reads: “They (cryptocurrencies) do not have a legal tender status in any jurisdiction… the notice provides that virtual currency is treated as property for U.S. federal tax purposes. General tax principles that apply to property transactions apply to transactions using virtual currency.”

So in effect, any transaction, be it sale or purchase or even a total exchange of a digital asset, or any of its alternative use to carry out any form of transaction is to be seen as an investment. And as known to be true of all investments, it will incur taxable consequences.

Some cryptocurrency investors have tried to evade such taxes. This may be because they do not see their cryptocurrency asset as taxable investments. By doing this, they have pocketed a lot of cash when they should have been paid as taxation. The IRS now is trying to recoup such cash back and will continue so into the future.

The information was turned over at the behest of a court order from a federal judge. In a statement to customers, Coinbase explained: “The court ordered Coinbase to provide taxpayer ID, name, birth date, address, and historical transaction records for certain higher-transacting customers during the 2013-2015 period.”

The Wall Street Journal notes that “Driving the IRS’s decision was its belief that few bitcoin investors appear to be paying taxes due on sales.” A tax lawyer by the name of Bryan Skarlatos, whose main focus is cryptocurrency recently opined that “Digital currency holders shouldn’t think they can hide from the IRS.”

As was mentioned earlier, cryptocurrency is regarded differently in every country.

Taxation differs from one country to another, both in terms of rates as well as in implementation.

The key is to understand the different taxation system in these countries. This will further strengthen the confidence that the general populace has in cryptocurrency.

We will discuss four countries (US, EU, China, and Australia) as our case studies to compare the differences in taxation as it varies from one country to another.

The United States of America (USA)

In the USA, digital currencies are treated as property for the purpose of taxation. It is in other words treated as real estate and not as a currency. This makes it subject to some (but not all) laws governing real estate. It translates to mean that any cryptocurrency-to-cryptocurrency trading is viewed as a taxable transaction. But when you buy a cryptocurrency asset with fiat currency, like the US dollars, it is not viewed as a taxable transaction. This is because buying digital currencies does not yield any gain in itself.

It is until the digital currency is traded with and yields any gain, and at that point, making it taxable.

If cryptocurrency is received as a gift, it is not taxable except of course if it is a large sum. An example is when the recipient of the cryptocurrency coins sells his/her gift; any profit above one hundred U.S. dollars ($100) is taxable.

In the USA, the FIFO (First in First Out) rule is optional. In fact, it is recommended that the LIFO (Last in Last out) rule is used if you hold cryptocurrencies with the aim of realizing long-term capital gain. There are punishable offenses though. For instance, if someone tries to hide his or her cryptocurrency assets, that is termed ‘tax evasion’ and it is a federal offense which can warrant a jail term if found guilty. If you feel that you may be owing taxes from previous years, it will be a good thing to pay up before the IRS appears demands the funds.

Follow the link and learn all about Cryptocurrency Taxation in Japan, HK, Singapore: UBAI.co

You can always get additional support and ask me any questions. Just find me in Linkedin: linkedin.com/in/kudryashev-mihail/

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