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IS IT REALLY A CURRENCY OR ANOTHER FANCY FINANCIAL INSTRUMENT? IS IT TAXABLE?

In a nutshell, no one cares whether Cryptocurrency is a currency or stock as long as it makes money!

However, there are some important aspects in this new era where one has to identify in detail before getting into this not so niche any more market.

It is very exciting to get a wallet account and by a few or even many of those millions CRYPTO CURRENCIES out there. It is even more exciting when they appreciate in value. But what happens when you need to cash out ?

This is where the financial and even tax planning comes in. So from one perspective it might as well be a Financial Instrument like any other listed “blue chip” stock.

A lot of countries do not yet regulate the CRYPTO CURRENCY market in their country, few countries even have a tax guidance in the way profits from such product are taxed.

Once of those countries is Cyprus – the tax guidance is clear:

Cryptocurrencies are not “titles” and as such, any realised gains from the purchase and sale of Cryptocurrencies of a trading nature are taxable in Cyprus at the rate of 12,5%.

However, under limited circumstances, it can be argued that the gains from Cryptocurrencies are of capital nature and hence not taxable. This will depend on the badges of trade of the specific case.

In simple terms; if a Company’s principal activity is trading in CRYPTO then standard corporate tax applies. If it is of capital nature i.e. only for investment purposes then it might be not hence a tax ruling in that case is strongly advisable.

Banking for Cryprocurrencies is another big story – banks have not initially looked at this market with a good eye, however, these “barriers to entry” as slowly coming down with more and more banks and/or PSPs allowing funds from CRYPTO coming in and out.

Despite banks all over the world becoming more familiar with this BLOCKCHAIN TECHNOLOGY was created to avoid the issues banks create to one another and the end customer (corporate or individual). BLOCKCHAIN ensures 100% anonymity and confidentiality – banks fight for exactly the opposite. The Organisation for Economic Co-operation and Development (OECD) and the AML Directives all over the world ensure that every single transaction which enters the banking system it has to have a known source, beneficiary and recipient.

The question is – will Cryptocurrency ever become an actual currency with which you can trade other everyday widely consumer products with it? Even further, will it ever become a currency where you can buy commodities with?

Will this currency ever replace USD or EUR? If not maybe it is not a CURRENCY?

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marinos marinou

Marinos Marinou

Author: Marinos D Marinou Tax Planning specialist at  D Marinou & Co EST 1988 offering a range of corporate services including company incorporation, audit, vat and tax planning in Cyprus companies and international Clients.

Marinos is specialized in International Tax Planning, Advanced Consulting, and Corporate Services.

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