Jurisdictions handle crypto taxes very differently. According to PwC, Liechtenstein is the country with the clearest crypto tax guidance globally. Here are the latest insights of the Annual Global Crypto Tax Report 2020.

PwC’s latest Annual Global Crypto Tax Report 2020 lists Liechtenstein as the top jurisdiction worldwide for crypto tax guidance. The survey’s Crypto Tax Index ranks jurisdictions based on the comprehensive structure of their tax guidance.

Crypto taxes have increasingly received attention from lawmakers and regulators in recent years. As the asset class is growing, regulators fear national treasuries are being left out of the loop. Tax frameworks thus need to keep up with the technological developments. Today, most jurisdictions have some sort of crypto asset taxation in place. They mostly do not have introduced new legislation, but rather apply current frameworks on the asset class.

Liechtenstein comes out on top

PwC’s crypto tax report looks at the latest global crypto tax developments and tax information in over 30 jurisdictions worldwide. Looking at the survey results, Liechtenstein comes out on top, followed by Malta and Australia. Switzerland is at rank four, Germany makes rank 21.

Source: PwC’s Annual Global Crypto Tax Report 2020

The index measures if regulators have issued guidance on crypto asset taxation and gives an overall score. Not all questions are relevant to all jurisdictions; for example, Hong Kong does generally not charge any form of VAT, goods and services tax, or sales tax. In such cases, the score is calculated based on an average of the relevant areas for that particular jurisdiction.

When interpreting the scores, it is essential to keep in mind that the report only measures if there is any guidance on crypto asset tax. It does not measure the quality or usefulness of that guidance.

Although Liechtenstein has come out as the country with the most guidance on crypto taxes, it wasn’t the country that has first issued such guidance. The timeline below shows that many other countries had already covered the topic before Liechtenstein. Nevetheless, Liechtenstein has the most comprehensive tax guidance.

Source: PwC’s Annual Global Crypto Tax Report 2020

While most countries have some sort of crypto tax guidance, not all kinds of taxes are being covered. 61% of the surveyed jurisdictions have guidance on crypto capital gains taxes. 52% have issued guidance for the taxation of mining income. Guidance thins out the more specialized the activity becomes. No jurisdiction has yet issued any guidance on crypto borrowing and lending through DeFi platforms. GST or Sales taxes on staking income is another area largely neglected by regulators.

Source: PwC’s Annual Global Crypto Tax Report 2020

The bottom-line of the report is that taxation is straightforward in some areas, while in others, there is no guidance at all. The key challenge for regulators is to develop tax laws that ensure proper taxation while not putting up roadblocks for the industry’s growth. Another challenge is the global scope of the asset class, which would be best regulated with a global framework. These challenges ask for new ways of thinking and an understanding of the technology. But one thing is also for sure: Regulators are catching up, and the wild west days of crypto are soon to be over.

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