Increased cryptocurrency adoption has always invited government attention. Well, the latest government to turn its eyes to the regulation of crypto is Georgia.
Yesterday, multiple news reports revealed that the Republic of Georgia has elected to exclude cryptocurrencies from its Value Added Tax (VAT) structure. A report from industry news outlet Bitcoin.com detailed that Ivane Matchavariani , the Finance Minister of Georgia, has signed a bill looking to provide tax regulations for business entities that mine or trade cryptocurrencies.
Per the report, the new bill had already been entered by the end of June, and it defines cryptocurrencies as assets that are exchanged over a network or electronically. The definition adds, “Their exchange does not require a reliable intermediary, and they are managed using distributed ledger technology.”
Thanks to the enforcement of this bill, Bitcoin traders and other crypto enthusiasts can now conduct crypto-to-fiat conversions on cryptocurrency exchanges and other platforms without having their transactions subject to VAT. The development is especially good news, given the fact that most taxable transactions in Georgia are subject to a whopping 18 percent VAT rate (although this also varies between companies and business fields).
However, while the tax relief is welcome news, Matchavariani also gave insight on the government’s view on bitcoin trading and other assets, clarifying that they would not allow the assets to be used as payment options. In addition to that, the report also detailed that cryptocurrency mining companies registered in the country will still be required to pay the VAT going forward.
Just like countries such as China, Georgie does provide a surplus of cheap electricity to its citizens and organizations, and this particularly makes the country prone to an influx of miners, all of whom will lead to skyrocketing energy consumption levels. In a bid to keep costs down, Georgia has imposed the tax on local mining firms.
However, a workaround could simply be local mining firms establishing their headquarters outside the country and running tax-free mining facilities within Georgia. It’s unclear how the government will move to counter this loophole, but imposing a sweeping tax levy on all mining companies seems to be the best solution.
Georgia is the second country to be providing taxation clarifications for cryptocurrencies in the past two weeks. Recently, the Inland Revenue Authority of Singapore (IRAS) published an e-Tax guide, in which it claimed that the government will be looking to exclude some crypto assets from its Goods and Services Tax (GST).
The GST is actually Singapore’s version of VAT, and in the guide, the IRAS revealed that the tax, which ideally applies to every form of digital asset transfer, will now exclude transfers of crypto assets intended to function as exchange media.
The IRAS explained that up till now, the transfer of exchange-focused crypto assets has been seen as a form of barter trade. However, in addition to this exclusion, the guide revealed that the GST won’t include the exchange of “digital payment tokens” for fiat currencies or other digital payment tokens.