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Latvian Government to Tax Bitcoin Transactions



While governments around the world debate over the legality of cryptocurrencies, Latvia has a simple solution to keep the industry running; Make it legal and charge high taxes. Additionally, the government is mulling over the introduction of clear regulations for digital currencies.

Latvian Government Discusses Crypto

In the first week of April 2018, Latvia’s Ministry of Finance expressed its views on cryptocurrency transactions during a meeting with deputies from the Parliamentary Budget and Taxation Committee.

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The Ministry’s representatives proposed a 20 percent tax on capital gains from cryptocurrency investments while maintaining that digital currencies are risky investment vehicles.

Representatives of Latvia’s Financial and Capital Market Commission also explained the market behavior of cryptocurrencies to MPs in attendance, talking about the “wide fluctuations and the possibility of a bubble phenomenon.” The commision also identified other risks associated with cryptocurrencies, which include: Insufficient transparency, the risk of misleading information, and possible pyramid schemes.

However, the officials agreed that bitcoin and other cryptocurrencies indeed “function as a means of exchange.”

Prime Minister to Create a Task Force

The Finance Ministry also revealed that the government has decided to introduce tax laws, alongside introducing regulations in 2018, with Prime Minister Māris Kučinskis tasked to assemble a group that would prepare the proposals.

The team would evaluate potential benefits associated with cryptocurrencies, create frameworks for managing risks and introduce security and regulatory measures.

Dmitrijs Kacanovs, representing the Association of Latvian Payment and Electronic Money Service Providers (LMENA), added:

“There has to be a regulation on cryptocurrency to set clear rules for all players on the market, but the government should proceed with caution and not rush it.”

MPs Criticize Digital Assets

The meeting also drew criticism of the financial instrument, with officials expressing concerns over their price volatility, unknown owners, and absence of any “tracking” mechanism.

Viesturs Burkans, who chairs the Office for Prevention of Laundering of Proceeds Derived from Criminal Activity, said that while authorities can track and follow cryptocurrency transactions, it is “impossible” to determine the parties involved in such an operation.

However, Bank of Latvia’s Edvards Kusners spoke in support of digital currencies. Kusners believes that most associated risks are “due to poor knowledge of the matter,” and can easily be solved with a strict legal framework meant for risk mitigation.

Currently, Latvian laws do not cover cryptocurrencies, but the Finance Ministry suggests introducing a flat 20 percent tax on every transaction made via cryptocurrencies until further regulations are introduced.

Comments on whether this would be exempt from Latvia’s 23 percent income tax were not made.

Government Support of Cryptocurrency Proportional to Tax Money

Interestingly, Latvia’s government is not the first to propose taxes on cryptocurrencies before introducing any legal regulations. Across Europe, several countries have decided to introduce respective legislation on income made in 2017, despite the mostly negative stance on the sector.

As observed, every country has introduced its own tax rates, and not in any accordance with the EU. The income is largely considered as “capital gains,” and is subject to the same tax brackets as traditional stock or bond income.

While BTCManager understands that taxing digital currencies is an inevitable part of their mass-adoption, it does seem laughable that a tax season is all it takes for influential governments to start delivering a perspective on the digital asset sector.



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