Bulgaria Investigates Crypto Exchanges For Taxes, Asks 10% on Profits
January 16 2019 - 7:40AM
ADVFN Crypto NewsWire
The government of Bulgaria has started to
investigate crypto exchanges to demand taxes from the profits
investors generated from trading digital assets.
The National Revenue Agency (NRA) has categorized
cryptocurrencies as financial assets, which incur a 10 percent tax
on profit that individuals have to disclose annually.
Two Major Issues of Bulgaria’s Crackdown on Crypto Tax
Similar to Japan, the main problem with the NRA’s regulation of
cryptocurrencies using the same policies used to govern existing
investment vehicles is that it does not take into account the wild
volatility of the emerging asset class.
Cryptocurrencies are still at their infancy and dominant digital
assets like Bitcoin and Ethereum still demonstrate daily moves in
the range of 5 to 15 percent. Within the past two months, the
Bitcoin price has dropped from $6,500 to $3,600, by 44
percent.
Hence, if an investor in Bulgaria is required to declare profits
on taxes on an annual basis before cryptocurrency holdings are
cashed out, a substantial loss in the following year could result
in a large negative return for the investor.
Japanese lawmakers have proposed a bill to amend the existing
tax policy surrounding cryptocurrencies because investors in the
crypto market often tend to see unexpected levels of volatility
year after year.
Bulgarian authorities also consider crypto assets to be
anonymous and have said that it is easy for investors to evade
taxes in the crypto market.
However, contrary to popular belief, crypto assets by nature are
not anonymous. The public blockchain network utilized by Bitcoin,
Ethereum, and other major crypto assets allow anyone on the network
to track transactions and wallets.
With the Know Your Customer (KYC) and Anti-Money Laundering
(AML) systems integrated by regulated cryptocurrency exchanges, it
is extremely difficult to hide or confine transactions from the
authorities.
Bad Approach May Hurt Local Crypto Ecosystem
The 10 percent tax on profits is a relatively low tax rate in
comparison to leading cryptocurrency markets like Japan and the
U.S.
An aggressive approach to unravel the transaction history of
many thousands of users in a short period of time could place
significant regulatory pressure on startups.
For instance, in January 2017, Coinbase CEO Brian Armstrong
said that it cost the company
over $1 million to push back the request of the Internal Revenue
Service (IRS).
Armstrong said at the time:
We will likely incur a legal cost of between $100,000 and
$1,000,000 in the process of defending our customers from this
overly broad subpoena; funds which could be put to better use
building innovative products or hiring more employees. This heavy
handed approach by the IRS punishes one of the good guys.
An efficient approach by the Bulgarian authorities, considering
the low tax rate on crypto returns, would be to work with exchanges
and investors in a civil way to ensure that the local
cryptocurrency exchange market is not damaged by the initiatives of
the NRA.
Source:
CCN
Ethereum (COIN:ETHUSD)
Historical Stock Chart
From Aug 2024 to Sep 2024
Ethereum (COIN:ETHUSD)
Historical Stock Chart
From Sep 2023 to Sep 2024