Alex Milcev, EY: Cryptocurrencies, a market too large to be left unregulated

Anca Alexe 20/02/2018 | 14:50

Alex Milcev, partner and leader of the Fiscal Assistance Department at EY Romania, talks about ways in which income obtained from cryptocurrency transactions can be taxed. He argues that the virtual currency market is too large to be left out of fiscal legislation.

Bitcoin and other cryptocurrencies have been a hot topic for a while, but taxation in this area is not discussed very often. Many users prefer a simplistic approach – “it’s not a regulated currency so the income is not recognised by fiscal authorities, therefore there’s no reason I should pay taxes.”

However, if we look at the definition of bitcoin – a decentralised payment system and electronic payment currency – and at the fact that bitcoin and other cryptocurrencies are correlated to traditional currencies, fiscally speaking we could talk about a type of income.

Romania and most other countries are far from regulating these coins as a concept, much less create a fiscal treatment for them. However, a lack of provisions in the current Fiscal Code doesn’t necessarily mean that it is not essentially an income. The question is how to frame this income when it’s obtained by individuals.

One approach is to see this income as personal goods, different from assets or property, which means they wouldn’t be taxable. However, since cryptocurrency transactions are generally repetitive, they could be seen as a “professional” activity, as “other income from investments” or “income from other sources” in the Fiscal Code, which are taxable.

Furthermore, since many participants who invested in cryptocurrencies at peak market value could have losses considering the recent fluctuations, we should also clarify what happens to these losses from a fiscal point of view. Regardless of which of these two options is chosen, the individual needs to include it in their annual income statement.

In the following year after obtaining the income from crypto transactions, if it exceeds the social contribution cap (12 minimum gross salaries, meaning RON 22,800 for 2018), the 600 Statement could also be submitted and 10 percent of the sum paid as health insurance contribution.

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