Crypto Assets Taxation On The Way In Chile

Chile has set sights on the cryptocurrency sector as it looks to generate additional revenues. Immediate reports indicate that the country’s revenue authority will start taxing the sector, in the second quarter, as it seeks to expand the current tax bracket.

Crypto Assets Taxation

The move to start taxing cryptocurrencies comes as a surprise. The South American nation had initially passed legislation exempting digital coins from Value Added Tax. However, authorities appear to have reconsidered their stance on discovering there is some value worth pursuing in the sector.

The agency tasked with the responsibility of collecting taxes has since included crypto assets in the form, which people use to file their annual income tax returns.  In the Annual Income Tax Return form, crypto assets are described as other income or third party income.

The director or of the country’s revenue authority Fernando Barraza has made it clear that all businesses dealing in cryptocurrencies will have to register their businesses. To do so, the business owners will have to file tax-exempt invoices. The invoices will allow the agency to monitor their operations in the sector.

Even with the confirmation, the tax agency is yet to make it clear; at what rate it intends to charge the crypto tax. Currently, the income tax thresholds average 39%. A move to start levying taxes on cryptocurrency operations marks the first step in the Chilean government bid to start tracking operations in the sector.

Legitimizing Cryptocurrencies

Crypto asset taxation could pave the way for legislators to pass necessary legislation that would go a long way in regulating the sector. In addition, it should help legitimize the sector at a time when it is shrouded in a lot of mysteries and uncertainties. Cryptocurrencies legal status in Chile is still unclear given that the country does not consider such currencies as a means of legal tender.

It is still unclear whether taxation of cryptocurrencies will help calm tensions between commercial banks and crypto exchanges. The country’s central bank ruled last year that banks could close crypto exchanges accounts, without seeking permission.

The ruling came amidst concerns that the handling of censorship-resistant virtual exchanges posed a significant danger when it comes to money laundering as well as terrorist financing activities.  The Supreme Court has already taken issue with the fact that the government does not issue virtual currencies and the fact that they lack physical manifestation or intrinsic value.