France Amends its 2019 Budget Bill to Reduce Tax On Cryptocurrencies

Very often, taxing gains from cryptocurrencies lead to confusion among investors around the globe. For its part, the governments are also trying their best to remove the uncertainty on treating the gains from virtual assets. As a result, the percentage of tax varied from the regular capital gains tax. Given this background, France has adopted an amendment to its 2019 budget bill that reduces capital gains tax on bitcoin from 36.2 percent to 30 percent. The move could be interpreted in several ways.

Non-Real Estate Assets

For instance, the reduction in tax rate could be taken as a move to encourage bitcoin and other digital coins. However, the government is transparent in its thinking, i.e., to bring the transactions in respect of cryptocurrencies on par with any other non-real estate assets. Incidentally, this segment has attracted a flat tax rate of 30 percent only. The finance commission has adopted the budget amendment in the Parliament’s lower house. However, it is not enough to become a full-fledged law.

For the final version of the bill, it must be approved by a more full Parliament and only then it will become a law. If things go as planned, then the new tax rate will come into effect in January 2019. In any case, the move assumed significance since, at one point in time, taxes in France has hit 45 percent for gains from cryptocurrencies. However, this has been reduced by the Council of State by bringing it on par with the capital gains of movable property.

Exception of Earnings

There was a considerable reduction in tax rate. At the same time, earnings from the mining of digital currencies were exempted since it is taxed as non-commercial profits. Also, such income is treated as income from professional activity, which comes under industrial and commercial benefits. The country’s president, Emmanuel Macron, is doing all that he can to transform the country into a business haven and that included virtual currencies.

For instance, he has unveiled the “Action Plan for Business Growth and Transformation” (PACTE) early this year with the objective of making it easy for enterprises to operate in the country. This included legal framework for fundraising exercises with the help of token sales, which is emerging rapidly. This was followed by guidelines for initial coin offerings (ICOs) in September. At that time, France finance minister, Bruno Le Maire, indicated that the regulations would allow Authority des Marches Financiers (AMF) to approve the ICOS.

Specific Guarantees

The financial regulator was also empowered to permit enterprises to float ICOs in the country. However, it has placed restrictions, i.e., only if “those projects provide specific guarantees for investors.” This meant that those raising money through tokens would have to provide complete disclosure to the AMF. The government was keen that investors should be provided with whatever disclosures available so that they make informed decisions.

Before this, the regulator has raised concern on the absence of regulation in respect of digital token sales. The AMF felt that there existed an inherent risk thus increasing the possibility of incurring losses by investors. Similarly, the regulator was concerned about using the virtual asset for illegal purposes like terror funding and money laundering.

Viraj S

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