Cryptocurrency taxation is a subject that concerns a growing number of users, traders and investors. An area that creates a lot of confusion among taxpayers is the application of VAT, or the value-added tax most countries levy on the sales of goods and services. Georgia has become the latest nation to free crypto-fiat transactions from VAT, a decision that affirms Bitcoin’s status as a currency. The same has already happened in many other jurisdictions, despite the absence of comprehensive regulations.
VAT-Free Crypto Exchange, No Income Tax for Traders
Traders of digital coins, both companies and individuals, will not owe VAT to the government in Tbilisi. That’s according to a newly adopted bill aimed at regulating the taxation of entities that trade or mine cryptocurrencies. The law was recently signed by Georgia’s finance minister Nodar Khaduri and entered into force at the end of June. The document provides a legal definition for decentralized digital money:
"Cryptocurrencies are digital assets that are exchanged electronically and based on a decentralized network. Their exchange does not require a reliable intermediary and they are managed using distributed ledger technology."
From now on, residents of the South Caucasian republic exchanging coins to local or foreign fiat currency will not be obliged to pay the value-added tax. Furthermore, private citizens who conduct such transactions will also be spared from income tax. Khaduri stressed that the national currency, the Georgian lari, will remain the only legal tender in the country and using cryptocurrencies for payments will not be allowed. But that’s valid for any foreign currency as well.
Mining companies will have to pay VAT unless they are registered abroad. Georgia, which offers abundant and cheap electrical energy generated by its many hydropower plants, has become a regional mining hotspot over the past few years. Now many companies from the industry are likely to relocate their official headquarters to offshore zones while maintaining their operations in the Caucasus. Read More at Bitcoindotcom...