Key Takeaways:
- 2% digital services tax on cryptocurrency exchanges in the United Kingdom.
- According to the U.K.’s tax authorities, because cryptocurrencies are not currencies or commodities, they are not exempt from the tax earmarked for tech behemoths like Facebook and Google.
- Several countries are currently working on cryptocurrency rules.
The U.K. government established the digital services tax in April 2020 to target “big multinational firms with revenue derived from providing a social media platform, a search engine, or an online marketplace to U.K. customers.”
Global behemoths like Facebook, Twitter, Amazon, and Google have been targeted. The Telegraph, a London-based newspaper, reports that the tax rules will now apply to crypto exchanges.
The country’s tax office, Her Majesty’s Revenue and Customs (HMRC) have alerted exchanges that they will be liable to the tax in the future.
According to HMRC, digital currencies are not financial instruments and are not commodities or money. As a result, exchanges that provide them are ineligible for the exemption granted to financial marketplaces.
“There are many different types of crypto assets, each with its own set of characteristics. It is unlikely that crypto-asset exchanges will be able to benefit from the exemption for online financial marketplaces,”
the agency said in an update to its taxation guidelines.
The digital services tax imposes a 2% levy on online platforms, including crypto exchanges with global revenue of more than $665 million and U.K. sales of more than $33 million.
The digital currency business in the United Kingdom is outraged by the proposed tax.
CryptoUK, a self-regulatory trade organization for the cryptocurrency industry, believes it is wrong to treat digital currencies differently than traditional financial instruments. According to Ian Taylor, the company’s director, the exchanges are already paying more than enough, thanks to the Financial Conduct Authority’s (FCA) new licensing framework. These expenditures, he added, would be passed on to the users.
