The Baltic nation of Latvia has recently witnessed a rise in crypto activity, prompting the government to consider taxing cryptocurrency transactions. The Latvian government’s intention to introduce taxation on digital currency transactions is a way to cash in on the crypto craze, as other European governments have done.
Capital Gains Tax on Cryptocurrency
On March 11th, 2018, a potential law on cryptocurrency was reviewed by the Latvian parliament. Representatives of the Latvian financial regulator – the Financial and Capital market Commission (FCMC), presented the possible mandate surrounding cryptocurrencies to the Parliamentary Budget and Taxation Committee.
According to the Latvian Finance Ministry, cryptocurrency transactions could attract a capital gains tax of up to 20%. As reported on xinhuanet.com, the director of the Finance Ministry’s Department of Direct Taxes – Astra Kalane, spoke on Latvian public radio stating that digital currency transactions are akin to capital gains, hence the Finance Ministry intends to impose a similar taxation model on them.
Taxation has always been an important angle to consider when formulating a regulatory framework for the crypto sector. However, some legislators pointed out that digital currencies are not a legal tender in the country and are of a highly speculative nature.
According to the Finance Ministry, Latvian Prime Minister Māris Kučinskis has asked an independent group to contemplate and formulate a clear set of crypto regulations within three months. The group will analyze both the associated risks and advantages of the crypto industry.
Crypto Craze a Cash Cow for European Governments
The fintech sector in the country is still in its infancy and the government hopes to cater to crypto startups within regulatory boundaries. Neighboring baltic nations Estonia and Lithuania have been fertile grounds for fintech industry. Recently, Lithuania inaugurated Europe’s first Blockchain Center, which will act as a breeding ground for crypto startups.
At present, the European Union lacks a pan-Europe taxation policy for cryptocurrencies. Most European countries tend to tax digital currencies in order to benefit from the burgeoning sector.
Neighboring baltic nation Estonia has also imposed capital gains tax on cryptocurrencies. Bulgaria levies 10% capital gains on crypto gains, even though the country has no official stance on cryptocurrencies.
From Latvia to Belarus… Varied Approaches in Europe
Belgium also has no formal position on virtual currencies, but reports have surfaced that the government could charge a 33% tax on gains from crypto trading. However, one country has taken a more positive approach toward the emerging crypto space. The government of Belarus offers tax breaks on all crypto activities in order to attract crypto-related companies to the country.
Will Latvia’s plan to tax cryptocurrency transactions impede the growth of the fintech sector in the country? Let us know your views in the comments section.
Images via Pxhere, Pixabay