Bitcoin Exchanges Facing A Digital Tax Raid

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Bitcoin exchanges were dragged into the Treasury’s technology tax after the HMRC said they would not qualify for an exemption given to financial services companies.

The tax office has informed online cryptocurrency exchanges that they are subject to the tax, which is designed to ensure that tech companies like Google, Facebook, and Amazon pay more at the Exchequer.

The HMRC has stated that crypto assets “are not financial instruments” and are not considered commodities or money, which means that online exchanges that sell cryptocurrencies such as Bitcoin and Ethereum do not. cannot claim an exemption for financial markets.

The digital services tax, which came into effect last year, imposes a 2% levy on online sales, search engines and social media services that generate more than $ 500 million in global revenue pounds sterling and UK sales of over £ 25 million.

It is expected to be phased out after a G20 tax deal earlier this year to punish avoidance, but remains in effect until a replacement measure takes effect.

Companies likely to be affected by the tax include Coinbase, one of the largest exchanges in the world. Its UK subsidiary reported revenue of € 21.2million (£ 18million) last year, but the company recently announced that global revenues have quadrupled, meaning it will exceed probably the UK threshold in 2021.

CryptoUK, an industry body, is lobbying HMRC and the Treasury over this, saying it is unfair to treat cryptocurrencies differently from other financial assets. In the United States, they were treated like commodities.

In an update to its guidance on the digital services tax, HMRC said, “There is a wide variety of crypto assets, each with different characteristics. He said that because cryptocurrencies do not represent commodities, financial contracts, or money, “crypto asset exchanges are unlikely to qualify for the exemption for online financial markets.” .

Ian Taylor, director of CryptoUK, said the move was yet another blow to cryptocurrency exchanges after the “arduous” licensing regime introduced by the Financial Conduct Authority (FCA), and would result in higher fees for them. people buying and selling cryptocurrencies.

Amazon and Google both passed on the cost of the digital service tax to merchants and advertisers respectively.

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