Following the rise of cryptocurrencies in 2017, countries around the world are beginning to enact new legislations to regulate this new form of economy, including the law that considers cryptocurrency profits as taxable income. A little over a week ago, Azerbaijan declared that it will be joining countries like the U.S. in are taxing revenue made from cryptocurrencies.
In an official report by the nation’s Trend News Agency, this announcement was made during the second annual Finance and Investment Forum (FIF 2018) in Baku. Nijat Imanov, the Deputy Director General of the Tax Policy and Strategic Research Department of the Azerbaijan Taxes Ministry, was the one who delivered the news on May 5.
“This is formalized as a profit tax for legal entities and income tax for individuals,” Imanov said. “If someone bought a cryptocurrency and then sold it after its price increased, this amount is recorded as income and therefore should be attracted to taxation.”
This decision was made in response to the growing cryptocurrency trading market in the East Asian nation. Similar to the astronomical growth rate that the global cryptocurrency market had from May through December 2017, a rapid growth of cryptocurrency trading activities was also observed in Azerbaijan during that period of time.
According to Elnur Guliyev, the director and founder of Crypto Consulting Company, even the average joe could make a profit by investing just $10 in cryptocurrencies during that golden hour.
“But this situation does not reoccur very often,” he said. “The cheapest option is to buy Bitcoin and wait for the increase in its cost for resale. This option is still working, but it is hard to say how long it will last.”
Azerbaijan Not The First Country to Tax Crypto
Among the list of countries that have set up various legislations surrounding cryptocurrencies include the U.S., South Korea, and India.
Last December, U.S. president Donald Trump signed a new bill into law, marking the first major tax reform in the U.S. in almost 30 years. This bill also mandated all citizens to declare their cryptocurrency profits as “taxable income” starting January 1, 2018. Whether it is capital gains for long-term holds or income tax from day trading, all cryptocurrency profits are ripe for the IRS’ picking.
Over in Asia, although actual taxation will not begin until 2019, the South Korean Ministry of Strategy and Finance has decided to design a taxation framework by the end of June 2018.
India, on the other hand, has always maintained an ambiguous stance on cryptocurrencies, including rumors of the Reserve Bank of India (RBI) cracking down on Bitcoin, which was later proven false. However, the tax department has brought up plans of collecting taxes from cryptocurrency traders in India.