Lithuania’s ministry of finance has released new guidelines for cryptocurrency and initial coin offerings (ICOs). The document, released on June 11, comes as a multidimensional “understanding” of securities laws, and clarifies under what conditions they would apply to ICO tokens. The guideline is further divided into four sections- regulation, taxation, accounting, and Anti-Money Laundering/ Combating the Financing of Terrorism (AML/CFT).
Minister of Finance Vilius Šapoka said that
“We do believe that certain usage of it, such us ICOs, should be regulated.Lithuania already has an exceptional regulatory advantage. We are one of the first ones in Europe who prepared comprehensive Guidelines on legal framework for ICO projects covering regulatory as well as taxation and accounting”
According to Lithuania government, these guidelines are another progression towards more sureness and straightforwardness in the administrative, tax collection, bookkeeping and other prerequisites as well as better cooperation between various partners.
He further said that
“We acknowledge that the brave new crypto economy world is here to stay, this is why we encourage and invite its participants to innovate and create in Lithuania. After all, we are not called #Litechnia for nothing”
Organizing ICO is not regulated by specific legislation, however, taking into account different ICO models and different characteristics of tokens, in some cases, such activity may be subject to the requirements of the legislation of the Republic of Lithuania and supervision of the Bank of Lithuania.
In terms of Corporate Income Tax and Personal Income Tax, according to the substance and economic sense of transactions, the virtual currency is recognized as current assets that can be used as a settlement instrument for goods and services or stored for sale. For the purposes of VAT, the virtual currency is considered as the same currency as euros, dollars etc. For the purposes of other taxes, other type of instrument, e.g. certain types of tokens, may be recognized as a virtual currency as well. Whether a certain token is to be considered as a security token, the opinion presented by the Bank of Lithuania concerning the recognition of such a token as securities does not necessarily mean that for tax purposes this token will be treated the same way.
If ICO promoter expenses for the establishment of the platform functioning on Blockchain basis are not related to the receipt of reasonably expected economic benefits from the further management of this platform after ICO issue, they are recorded as costs in the profits/loss statement. If such economic benefits are reasonably likely, as ICO promoter has the possibility of receiving intermediation and other income from the users of the established platform, such expenses may be recognized as the acquisition cost of intangible assets.
5th AML Directive has been adopted on 19 April. Ministry of Finance of the Republic of Lithuania with Bank of Lithuania and Financial Crime Investigation Service are preparing amendments of Anti-Money Laundering and Counter Terrorist Financing Law of Lithuania. First round of amendments will concentrate on provisions relevant to virtual currency exchanges and wallet services operators, aiming at increasing transparency and clarity of regulation together with stability and security of the financial market.