Not long ago, the Ministry of Finance for Lithuania released a comprehensive guideline for cryptocurrency and initial coin offerings (ICOs). This new guideline details regulations, accounting, and taxation.
The Republic of Lithuania’s Ministry of Finance published guidelines this week for cryptocurrency and ICOs. They divided the guideline into four sections namely; regulation, accounting, taxation, Anti-money Laundering/ Combating the Financing of Terrorism (AML/CFT). However, the guideline has the title ICO Guidelines with three out of the four sections all focused on cryptocurrency.
Vilius Sapoka, the Lithuanian Minister of Finance noted that the guidelines describe only part of the aspects examined by a relevant institution, in case of discrepancy between guidelines and position of an institution the latter shall prevail. Also, Sapoka stated that “We acknowledge that the brave new crypto economy world is here to stay, this is why we encourage and invite its participants to innovate and create in Lithuania.”
In the regulation section of the ICO guidelines, the finance ministry notes: “Organizing ICO is not regulated by specific legislation, adding; taking into account different ICO models and different characteristics of tokens, in some cases, such activity may be subjected to the requirements of the legislation of the Republic of Lithuania and supervision of the Bank of Lithuania.” Sapoka elaborated on that saying “We are one of the first ones in Europe who prepared comprehensive guidelines on the legal framework for ICO projects coving regulatory as well as taxation and accounting.”
The taxation section outlines the treatment of cryptocurrency for different tax purposes, as well as tax exemptions and deductions. For corporate and personal income taxes, virtual currency is recognized as current assets that can be used as a settlement instrument for goods and services or stored for sale. As for VAT, it is considered the same currency as euros, dollars etc. The document notes: “Income received from individual purchases and sales of virtual currencies will be taxed standard 15% fixed income tax rate.”
The accounting section offers guidelines such as when tokens should be recorded as costs in profits and loss statements, in off-balance accounts, or accounted as fair value. As stated by the ministry, accounting of tokens circulated by the token promoter depends on whether they are attributed to payment, utility and securities token. Accounting of acquired tokens also depends on the type of tokens. This document also details the accounting and evaluation of cryptocurrencies used as payment means according to Business Accounting Standards (Lithuania GAAP).