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By Jan Stojaspal
The sale and conversion of cryptocurrency aren’t subject to a 1 percent civil law levy, but personal income tax will continue to apply, Polish Deputy Finance Minister Pawel Gruza said at a news briefing on April 20.
He spoke following a meeting with representatives of cryptocurrency traders and investors. His comments come more than two weeks after the Polish Ministry of Finance said the 1 percent levy would apply—an announcement met with sharp criticism from traders.
Unlike personal income tax, which is paid on taxable income, the 1 percent levy—deemed a civil law transaction tax in Poland—is paid on market value regardless of whether the taxpayer turns a profit. Several thousand people signed a petition saying enforcement of the tax would amount to taxing capital invested in cryptocurrency “hundreds or even thousands of times.”
The decision not to apply the levy will be finalized shortly, according to Lukasz Swierzewski, a spokesman for the Ministry of Finance. General rules on taxing cryptocurrency will also be refined. Officials hope to make the “regulations much more clear and precise,” he told Bloomberg Tax April 20.
“We of course are not going to resign from taxation of this sphere,” he said. “We will concentrate and focus on income taxes.”
Poland is among a myriad of countries struggling to tax cryptocurrency as the industry evolves rapidly. Types of cryptocurrency include bitcoin and ethereum.
Lukasz Kempa, a senior tax consultant at Grant Thornton in Poland, called Gruza’s comments “news most important for traders.”
Using the civil law levy “would mean taxation even if a taxpayer achieved no profit on trading (or even suffered a loss),” he told Bloomberg Tax in an April 20 email. This could mean, “in many cases, tax liability much bigger then the whole capital of a trader. Lack of it is the news traders were most eager to hear.”
“Taxing only with income tax does, in principle, mean, that the tax due will not be higher than 32% of the profit,” he said. “However, calculating a tax due is a complicated matter and there is still much room for consideration (e.g. defining deductible cost, moment of the tax liability arising). Therefore, traders are still awaiting more detailed information.”
Personal incomes are taxed in Poland on a progressive scale of 18 and 32 percent, but individuals whose cryptocurrency trading can be classified as a regular business activity can pay a flat 19 percent rate instead.
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