Does a new era of crypto tax transparency lie ahead?

The EU Commission is continuing its crypto regulation policy and intends to impose strict transparency rules to prevent potential tax fraud and tax evasion by those gaining income from crypto assets. Significant amendments to the Austrian taxation regime of crypto assets only add fuel to the fire.

Kick-off for crypto data collection

The fifth Anti-Money Laundering Directive issued by the European Union in 2018 was transposed into national law in Austria by the amendment to the Financial Markets Anti-Money Laundering Act ("AMLA"), and brought various measures affecting companies that have a crypto angle to them. Besides the uniform (and intentionally broad) definition of virtual currencies, the Austrian legislator extended the scope of the AMLA  to include virtual currency platforms (exchanges) as well as (custodian) cryptocurrency wallet providers and consequently obliged them to provide full user identification, similarly to pre-existing requirements of banks and other brokerage service providers. Crypto-related companies also need to implement even more stringent due diligence in regard to "high-risk" third countries. Customers from such third countries, deemed as presenting an increased risk, are thus subjected to more detailed background checks.

A fiscal approach to receiving collected crypto data

Since crypto assets and e-money have so far not been covered by the reporting obligations of the Directive on Administrative Cooperation ("DAC") or the EU Mutual Assistance Directive, tax authorities currently do not have access to such crypto information (e.g. identity, beneficial owner, purpose or intended nature of the business relationship, origin of assets, etc.). The European Commission therefore proposed amending the Directive on Administrative Cooperation ("DAC 8") to expand the exchange of information frameworks in the field of taxation to include crypto assets and e-money. Consequently, crypto exchanges and brokers may have to provide tax authorities with data on their customers' purchases and sales of crypto currencies like Bitcoin, Ethereum and so on. The authorities thus could, on a transaction-by-transaction basis, find out what was traded on an EU exchange, and then calculate what the potentially taxable profits were and check whether those were properly reported in the respective income tax statement. Although detailed amendments to the DAC 8 are still under discussion, it envisages uniform EU-wide rules concerning the exchange of information for issuers and service providers of crypto assets as well as e-money institutions.

"Although detailed amendments to the DAC 8 are still under discussion, it envisages uniform EU-wide rules concerning the exchange of information for issuers and service providers of crypto assets as well as e-money institutions."

Significant amendments to the tax qualification of crypto assets in Austria

Austria's government has recently published drafts of significant amendments to the Austrian taxation regime of crypto assets held as business assets or held privately. It is envisaged that from 1 March 2022 onwards earnings resulting from the sale or interest-bearing investment of privately or business held crypto assets will be qualified as capital gains with a flat tax rate of 27.5 % (for individuals) or 25 % (for corporations), irrespective of any disposal period. Nevertheless, the swap of cryptocurrencies into other cryptocurrencies will not constitute a taxable transaction. Crypto gains deriving from transactions which occur up until 31 December 2022 have to be declared in an income tax statement, while from 1 January 2023 the taxation of crypto gains will be conducted via withholding tax, if the crypto trading provider has a sufficient Austrian nexus (e.g. through a registered office). For crypto assets acquired before 28 February 2021, the present tax regime will still apply. Currently, crypto gains are only deemed taxable at a progressive tax rate if the period between acquisition and disposal does not exceed one year for private investors.

The Austrian Government's intention behind these amendments is to tax potential speculation with cryptocurrencies to the same extent as speculation with securities. Therefore, it can be expected that stricter rules on the exchange of information on crypto transactions will mark the final alignment between the taxation of crypto assets and securities.

"The Austrian Government's intention behind these amendments is to tax potential speculation with cryptocurrencies to the same extent as speculation with securities."

authors: Roman Perner, Marco Thorbauer, Tobias Hayden, Benedikt Gröhs, Lukas Pirringer and Bence Peter Komar