Official standpoint of the Minister of Finance on the principles of taxation of trade in cryptocurrencies | TAX Alert
On April 4th, the Ministry of Finance published on its websites its official standpoint on the taxation of trade in cryptocurrencies with personal income tax (PIT), VAT and tax on civil law transactions (PCC).
According to the Ministry, the taxable revenue from trade in a cryptocurrency is generated when the cryptocurrency is sold (that is converted to a traditional currency such as PLN, EUR, USD), as well as when it is converted into a different cryptocurrency, merchandise or service.
The aforementioned stance complies with the current interpretations of the tax law issued individually for taxpayers. Although it directly applies exclusively to the personal income tax, it cannot be excluded that it will be analogically applied to corporate income tax payers as well.
According to the Ministry, revenues from trade in a cryptocurrency correspond to revenues from property rights. As a result, the respective income should be taxed progressively (18% and 32%).
When a cryptocurrency is traded by a taxpayer within the framework of their business activities, the respective revenue should be classified as non-agricultural business activity subject to linear 19% rate or progressive rates of 18% and 32%.
According to the Ministry, the sale and conversion of a cryptocurrency into a traditional currency and vice versa as well as conversion of a cryptocurrency into a different one, if not subject to VAT, is a paid performance of services exempted from VAT.
As a result, it is impossible for any VAT payer to deduct VAT charged on purchased goods and services associated with cryptocurrency mining and sale/purchase.
Any cryptocurrency sale or conversion agreement is taxed with 1% PCC, unless it is subject to VAT payment on the terms referred to above.
The Ministry’s stance is compliant with the current practice of tax authorities. Still, some of the tax consequences of the trade in cryptocurrencies pointed out by the Ministry can seem controversial (e.g. with respect to the moment of creation of the taxable revenue), while other are merely a reference to general provisions of tax-related acts of law which are not adapted to the specificity of trade in cryptocurrencies (e.g. PCC taxation terms).
If you are interested in the impact of the Ministry of Finance’s standpoint on your tax situation, do not hesitate to contact us.
Tomasz Wickel – Partner, radca prawny
Przemysław Szabat – Associate, doradca podatkowy