Only a few states have issued guidance on the sales tax treatment of digital currency transactions. On November 2, 2020, Kansas joined this group, with Notice 20-04, Sales Tax Requirements Concerning Digital Currency Under the Retailers’ Sales and Compensating Tax Acts, issued by the Kansas Department of Revenue.
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Structured Finance and Securitization 2019 Year in Review
In 2019, Hunton Andrews Kurth LLP’s structured finance and securitization team closed a number of substantial transactions, developed novel structures for our clients and advised on important tax, regulatory and other industry developments, including emerging uses of blockchain solutions.
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Congress Considers Virtual Currency Tax Fairness Act
On January 16, 2020, Reps. Suzan DelBene (D-Washington) and David Schweikert (R-Arizona) introduced H.R. 5635, the Virtual Currency Tax Fairness Act of 2020. Under current IRS guidance, taxpayers who sell virtual currency must recognize any capital gain or loss on the sale, subject to any limitations on the deductibility of capital losses. Taxpayers can also recognize gains due to fluctuations in exchange rates between virtual currencies and fiat currencies.
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United Kingdom Issues Revised Guidance on Taxation of Cryptocurrency
The United Kingdom tax authority, HM Revenue & Customs (HMRC), has issued revised guidance regarding the tax treatment of cryptocurrency.
Separate guidance has been published for individuals on the one hand, and businesses on the other.
The revised guidance represents more of an elaboration of the basic principles set out in prior guidance than any significant change in HMRC’s approach to the taxation of the receipt and disposal of cryptoassets.
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IRS Updates Guidance on Cryptocurrency
On October 9, 2019, the Internal Revenue Service (Service) released Revenue Ruling 2019-24. The revenue ruling considers whether taxpayers should realize gross income under two common scenarios involving cryptocurrency and includes a number of illustrative examples. The Service concluded that a so-called “hard fork” on a cryptocurrency blockchain does not create taxable income if a taxpayer does not subsequently receive new units of cryptocurrency, but taxable ordinary income is generated by “airdrops” following a hard fork that delivers new units of cryptocurrency to a taxpayer.
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British Tax Authorities Go Knocking On Crypto Exchanges’ Doors
The United Kingdom (UK) tax authority, Her Majesty’s Revenue & Customs (HMRC), has taken the first steps toward recovering tax that it believes may be outstanding from UK resident cryptocurrency investors: it has been reported that several crypto exchanges have received demands from HMRC relating to customer details and their transactional activity.
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The Growing Trend of Digital Services Taxes in Europe, and Why They Matter to US Companies
As reported in the July 26, 2019 Hunton Andrews Kurth LLP client alert, first France and now the United Kingdom have joined the growing number of European countries that have, in recent months, announced they are considering a new form of tax specifically directed at “digital” businesses. The new form of digital services tax is based on the premise that traditional methods of profit allocation between different countries are no longer fit for their purpose and that, in the context of “digital businesses”, a fresh approach needs to be adopted that takes into account the value added by the business’s user base.
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Annual SEC Update
The year 2018 was a busy one for the SEC in the digital asset space, with the agency cementing its role as the primary de facto regulator of crypto finance in the United States.
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CFTC Publishes Primer on Smart Contracts
The Commodity Futures Trading Commission (“CFTC”) recently published a detailed primer on smart contracts. The Primer discusses their functionality, use cases, regulatory environment and potential risks.
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Ohio Allows State Tax Payments in Bitcoin
Ohio is the first state in the United States to accept tax payments in cryptocurrency. Starting today, December 3, 2018, companies operating in Ohio can elect to pay certain Ohio state taxes in Bitcoin.
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