Tag Archives: taxes

MicroStrategy may owe taxes on $19B unrealized Bitcoin gains: Report

MicroStrategy may owe taxes on $19B unrealized Bitcoin gains: Report

Despite never selling any Bitcoin, MicroStrategy may have to pay taxes on its unrealized gains.

Michael Saylor’s MicroStrategy, the largest corporate Bitcoin BTCUSD holder, may have to pay federal income taxes on its unrealized gains, according to the Inflation Reduction Act of 2022.

The act established a “corporate alternative minimum tax” under which MicroStrategy would qualify for a 15% tax rate based on the adjusted version of the company’s earnings, according to Jan. 24 report in The Wall Street Journal.

Still, the US Internal Revenue Service (IRS) may create an exemption for BTC under President Donald Trump’s more crypto-friendly administration.

MicroStrategy’s holdings have surpassed 450,000 BTC, worth more than $48 billion, after the company bought $243 million of BTC on Jan. 13.

According to MicroStrategy’s portfolio tracker, the company’s Bitcoin holdings have an unrealized gain of over $19.3 billion.

The report comes six months after MicroStrategy agreed on June 3, 2024, to pay $40 million to settle a tax fraud lawsuit that had accused it and Saylor of tax evasion.

The attorney general of the District of Columbia sued Saylor and MicroStrategy in August 2022, alleging the executive had paid no income taxes in the district for at least 10 years while he lived there.

MicroStrategy and Coinbase push against corporate alternative minimum tax

MicroStrategy and cryptocurrency exchange Coinbase have pushed back against the corporate alternative minimum tax (CAMT) regulation.

The two firms have requested that the US Treasury and IRS adjust the final rule to exclude unrealized crypto gains from the adjusted financial statement income (AFSI) to “avoid serious unintended consequences to US corporations holding substantial cryptocurrency.”

The two firms wrote in a joint letter to lawmakers on Jan. 3:

“The unforeseen combination of CAMT and a newly promulgated accounting standard are creating unjust and unintended tax consequences… CAMT imposes a 15% minimum tax on the AFSI of any corporation whose AFSI averages at least $1 billion in the prior three-year period.”

“Because the standard affects a corporation’s AFSI, corporations that own enough appreciated crypto (or have enough other book income) to be subject to CAMT must now pay tax on unrealized gains in the value of that cryptocurrency,” the letter stated.

US crypto tax laws gain prominence after IRS issued crypto tax guidelines in 2024

Crypto tax laws gained increased investor interest in June 2024 after the IRS issued a new crypto regulation, which will make US crypto transactions subject to third-party tax reporting requirements for the first time.

Starting in 2025, centralized crypto exchanges (CEXs) and other brokers will start reporting the sales and exchanges of digital assets, including cryptocurrencies.

According to the IRS, the decision aims to help investors “file accurate tax returns with respect to digital asset transactions” and to address potential noncompliance in digital currency.

This decision could push crypto investors to decentralized platforms in a “paradoxical situation” that could make tax revenue harder to track, Anndy Lian, author and intergovernmental blockchain expert, told Cointelegraph.

Showcasing the crypto industry’s backlash, the Blockchain Association filed a lawsuit against the IRS in December 2024, arguing that the rules are unconstitutional because they include decentralized exchanges under the “broker” term, extending data collection requirements to them.

 

Source: https://www.tradingview.com/news/cointelegraph:83010f015094b:0-microstrategy-may-owe-taxes-on-19b-unrealized-bitcoin-gains-report/

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

www.anndy.com
j j j

UAE’s Bold Move: Eliminating Crypto Transaction Taxes and Its Implications

UAE’s Bold Move: Eliminating Crypto Transaction Taxes and Its Implications

In a sweeping decision that could reshape the global cryptocurrency landscape, the United Arab Emirates (UAE) has abolished taxes on  cryptocurrency transactions. By exempting individuals and businesses from a value-added tax (VAT) on the transfer and conversion of digital assets, the UAE is positioning itself as a potential super hub for digital currencies. This policy shift raises important questions: Will this boost the  crypto industry, or will it introduce unforeseen challenges for the UAE economy?

The UAE has long been recognized for its forward-thinking approach to economic development, especially its embrace of technology and innovation. By removing VAT from crypto transactions, the country is sending a clear message—it intends to become a global player in the blockchain and cryptocurrency sectors. This move is part of a broader strategy to diversify away from oil dependency and position the UAE as a leader in digital finance.

The VAT exemption stems from amendments to the Executive Regulation of Federal Decree-Law No. 8 of 2017, which governs VAT regulations. Effective November 15, the changes underscore the UAE’s commitment to fostering a supportive environment for digital asset innovation. By dismantling tax barriers, the country hopes to lure more startups, investors, and established companies to explore opportunities within its borders.

From my perspective, this is a visionary step that could deliver considerable benefits. One of the key advantages is the potential for increased adoption and innovation in the crypto space. By alleviating the tax burden, the UAE makes it more financially attractive for businesses and individuals to engage in cryptocurrency activities, potentially leading to a rise in both daily transactions and blockchain development.

As someone who has closely followed the rapid evolution of the cryptocurrency industry, I see the UAE’s tax-friendly environment acting as a magnet for global crypto exchanges, blockchain startups, and fintech companies. This influx could drive job creation, stimulate economic growth, and bolster the UAE’s reputation as a financial hub. Additionally, the move is likely to spur growth in the digital economy. As crypto use becomes more widespread, the demand for related services—like digital wallets, blockchain infrastructure, and cybersecurity—will rise, further contributing to economic diversification.

There’s also the exciting possibility of enhanced financial inclusion. Cryptocurrencies can bridge the gap between the unbanked and underbanked, offering access to financial services to previously excluded populations. The UAE’s crypto push could thus provide greater financial access to its residents and extend to broader regional impacts. For me, this aligns with a larger goal of using technology to empower individuals by removing barriers to financial participation.

Yet, alongside these opportunities lie challenges that cannot be ignored. Chief among them is the need for a strong regulatory framework to prevent illicit activities such as fraud and money laundering. As the crypto industry grows, the UAE must ensure its regulatory environment keeps pace, maintaining investor confidence while protecting consumers. It is crucial for the UAE to craft regulations that are both comprehensive and flexible, capable of adapting to the fast-changing world of digital assets.

Then, there’s the volatility inherent in cryptocurrencies. This presents significant risks to investors and businesses alike. The UAE must prioritize educating the public and businesses about these risks, offering clear guidance on how to navigate the crypto market responsibly. Having witnessed the roller-coaster nature of the market firsthand, I believe that education and awareness are essential for helping people make informed financial decisions.

On a more practical level, the UAE must invest in the necessary technological infrastructure to support the burgeoning  crypto ecosystem. This involves developing secure and efficient blockchain networks, as well as fostering partnerships between government, private companies, and academic institutions. Without these foundational elements, the UAE may struggle to sustain long-term growth and fully realize the potential benefits of its tax exemption.

Furthermore, the UAE faces competition from other countries eager to establish themselves as crypto-friendly hubs. While the VAT exemption is a bold move, the UAE will need to continuously innovate and refine its policies to stay ahead in the global crypto race. Staying competitive will require keeping pace with international developments and ensuring that the regulatory and economic frameworks remain attractive to global investors and businesses.

This decision by the UAE comes at a time when many countries are wrestling with how to regulate and tax  cryptocurrencies. Some, like El Salvador, have fully embraced digital currencies, adopting Bitcoin as a legal tender. Others have taken a more conservative approach, imposing strict regulations to limit crypto’s influence.

In contrast, the UAE’s balanced approach—fostering innovation while maintaining regulatory oversight—stands out. This could serve as a model for other nations seeking to harness the benefits of cryptocurrency without stifling its growth. Personally, I find this balanced approach refreshing, acknowledging the potential of digital currencies while addressing the need for regulation.

Let’s consider some critical statistics to gauge the potential impact of the UAE’s tax exemption.

The global cryptocurrency market was valued at approximately $2.32 trillion as of October 7, with projections suggesting it could reach $4.94 trillion by 2030, growing at a compound annual growth rate of 12.8%. The UAE’s tax exemption could accelerate this expansion by attracting more market participants.

Between July 2023 and June 2024, the UAE attracted over $30 billion in cryptocurrency investments, ranking it among the top 40 countries globally and establishing it as the third-largest crypto economy in the MENA region.

As of 2023, the UAE is home to over 1,800 blockchain startups, with Dubai and Abu Dhabi as primary hubs. The tax exemption will likely fuel a surge in startup activity, cementing the UAE’s role as a leader in blockchain innovation.

The UAE’s decision to eliminate crypto transaction taxes is a bold, strategic move that could yield significant benefits for the country’s economy and citizens. By striking a balance between encouraging innovation and ensuring regulation, the UAE has the potential to create a thriving ecosystem for digital assets, fostering job creation, economic diversification, and financial inclusion.

However, to fully capitalize on this opportunity, the UAE must address the challenges posed by the volatile and complex nature of the cryptocurrency market. By implementing robust regulatory frameworks, investing in technology, and educating the public, the country can maximize the benefits of this forward-thinking policy.

From my vantage point, this is an exciting moment for the UAE and the global cryptocurrency community as a new chapter in the financial world unfolds.

 

Source: https://intpolicydigest.org/uae-s-bold-move-eliminating-crypto-transaction-taxes-and-its-implications/

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

www.anndy.com
j j j

How to Avoid Paying Taxes On Your Crypto

How to Avoid Paying Taxes On Your Crypto

Cryptocurrencies have become a popular and lucrative form of investment for many people around the world. However, they also come with tax implications that vary depending on the jurisdiction and the type of crypto activity undertaken. Here, we’re going to explore how to avoid unnecessary taxes and how to remain compliant in your country.

Method 1: Hold Your Crypto for More Than a Year

One of the simplest ways to avoid paying taxes on your crypto gains is to hold your crypto for more than a year before selling or exchanging it. This is because most countries treat cryptocurrencies as capital assets, and apply different tax rates depending on how long you hold them.

In the US, if you hold your crypto for more than a year, you will pay long-term capital gains tax, which ranges from 0% to 20%, depending on your income level. However, if you hold your crypto for less than a year, you will pay short-term capital gains tax, which is the same as your ordinary income tax rate, which can go up to 37%.

By holding your crypto for more than a year, you can significantly reduce your tax liability. However, this method also has some drawbacks. First, you will have to deal with the volatility and risk of the crypto market, which can affect the value of your investment. Second, you will have to keep track of the cost basis and holding period of each crypto transaction, which can be complicated and time-consuming.

Method 2: Use Tax-Advantaged Accounts

Another way to avoid paying taxes on your crypto gains is to use tax-advantaged accounts, such as Individual Retirement Accounts (IRAs) or Roth IRAs in the US, or Self-Invested Personal Pensions (SIPPs) or Individual Savings Accounts (ISAs) in the UK. These accounts allow you to invest your money without having to pay taxes on the gains until you withdraw them, or not at all.

For instance, if you use a traditional IRA in the US, you can contribute up to $6,000 per year (or $7,000 if you are 50 or older) with pre-tax dollars. This means that you can reduce your taxable income by the amount of your contribution. Then, you can invest your money in cryptocurrencies or other assets within the IRA account without paying any taxes on the gains. However, when you withdraw your money from the IRA account after reaching the age of 59.5, you will have to pay income tax on the withdrawals.

Alternatively, if you use a Roth IRA in the US, you can contribute up to $6,000 per year (or $7,000 if you are 50 or older) with after-tax dollars. This means that you cannot deduct your contribution from your taxable income. However, you can invest your money in cryptocurrencies or other assets within the Roth IRA account without paying any taxes on the gains. Moreover, when you withdraw your money from the Roth IRA account after reaching the age of 59.5 and holding the account for at least five years, you will not have to pay any taxes on the withdrawals.

However, this method also has some limitations. First, you will have to follow the rules and regulations of the account provider and the relevant tax authority regarding contribution limits, withdrawal rules, and eligible investments. Second, you will have to lock your money in the account until you reach a certain age or face penalties for early withdrawal. Third, you will have to find a reliable and reputable custodian that offers cryptocurrency investment options within these accounts.

Method 3: Harvest Your Losses

Try to avoid paying taxes on your crypto gains by harvesting your losses. This means selling or exchanging crypto that has decreased in value since you acquired it and using the losses to offset your gains from other crypto transactions or other sources of income.

For example, in the US, if you sell or exchange your crypto at a loss, you can use the loss to reduce your taxable income by up to $3,000 per year. If your net loss exceeds this amount, you can carry forward the excess loss into future tax years until it is fully used up. This way, you can lower your tax bill and also reduce your exposure to the crypto market.

Unsurprisngly, this method also has some challenges. First, you will have to keep track of the cost basis and holding period of each crypto transaction, this can be a complex task. Second, you will have to be careful not to trigger the wash sale rule, which prevents you from claiming a loss if you buy back the same or substantially identical crypto within 30 days before or after the sale. Third, you will have to accept the fact that you are realizing a loss on your investment.

Method 4: Donate Your Crypto

You can avoiding paying taxes on your crypto gains by donating your crypto to a qualified charitable organization. This means that you transfer your crypto directly to the charity without selling or exchanging it first. This way, you can avoid triggering a taxable event and also claim a tax deduction for the fair market value of your donation.

In the US, if you donate crypto that you have held for more than a year to a qualified charity, you can deduct the full market value of your donation from your taxable income, up to 30% of your adjusted gross income. However, if you donate crypto that you have held for less than a year or to a non-qualified charity, you can only deduct the lesser of the cost basis or the market value of your donation, up to 50% of your adjusted gross income.

As with the others, this method also has some issues. First, you will have to find a charity that accepts cryptocurrency donations and verify its tax-exempt status. Second, you will have to obtain a written acknowledgment from the charity that states the amount and date of your donation and whether you received any goods or services in return. Third, you will have to report your donation on your tax return.

Method 5: Move to a Tax-Friendly Jurisdiction

Another possible route to avoid paying taxes on your crypto gains is to move to a tax-friendly jurisdiction. This means that you could relocate to a country or region that has low or no taxes on cryptocurrency or income in general. This way, you can reduce or eliminate your tax liability on your crypto profits and also enjoy other benefits of living somewhere new.

Some of the countries or regions that are known for their favorable tax treatment of cryptocurrency include Singapore, Portugal, Malta and Germany.

Obviously, this method also has some drawbacks, such as uprooting your life, applying for residency and visas and having to deal with double the amount of financial paperwork.

Summing Up

Cryptocurrencies offer many opportunities for investors who want to diversify their portfolio and increase their wealth. However, they also come with tax implications that vary depending on the jurisdiction and the type of crypto activity. There are ways to overcome these obstacles, but before you embark on any of them, do your research, weigh up the pros and cons and act according to the law.

Be sure to check out our regular postings on crypto tax to stay up to date.

 

Source: https://www.financemagnates.com/cryptocurrency/how-to-avoid-paying-taxes-on-your-crypto/

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

www.anndy.com
j j j