Sometime this week in Poland, its government released amended income tax regulations for approval by President Andrzej Duda. This recently updated framework that consists of provisions referring to cryptocurrencies is expected to be implemented on the 1st of January, 2019.
These new changes have been long awaited by the Polish cryptocurrency community, address the taxation of cryptocurrency related income. Earlier this year, there was a temporary suspension of all transactions involving digital funds, disregarding profit or loss. This attempt to impose the existing Civil Law Transactions Tax (PCC) has provoked angry reactions and the government has postponed the move until a permanent and comprehensive solution can be found.
Not so long ago, a Polish publication called Kryptowaluty reported that there are several key provisions in the draft amendments sent to the president and one of the most important one’s concerns the conversion of one cryptocurrency into another. According to the amendments, such crypto-to-crypto transactions will be exempted from income tax.
Nonetheless, the draft notes that a tax rate of 19 percent will apply when digital assets are exchanged for “a payment instrument, commodity, and service or property right other than virtual currency.” Income from the sale of cryptocurrencies for fiat money or other non-digital assets will, therefore, be treated just like income from capital gains and investments. The same flat rate will be valid for both corporate entities and private individuals.
Come the beginning of next year, residents of Poland will be required to report all purchases made with cryptocurrencies on their annual tax returns, in addition to all purchases of digital coins. Businesses will not be able to compensate cryptocurrency-related losses with revenues from other activities. They will also be required to separate costs related to cryptocurrency transactions from other costs.
Finally, revenues that come from these types of activities like sale of digital assets will be put through the so-called “solidarity tax,” if the income is more than 1 million Polish zloty (about $265,000 at that time). In these type of cases, an extra 4 percent tax rate will be applied.
However, the proposed amendments constitute a comprehensive approach to regulating the taxation of cryptocurrency income. The future of the PCC tax is still doubtful. The obligation to pay the government 1 percent on all crypto transactions means traders could potentially lose all their digital funds to taxes.
By the 30th of June, 2019, the suspension of Civil Law Transactions Tax will expire. The Polish authorities have not yet dismissed the possibility of imposing it. Until that happens, the crypto-community in the country has had little reason to celebrate.