Tax Report – not only for those investing in crypto, NFTs and the Metaverse
Companies investing in crypto, trading NFTs and being active in the Metaverse, need clear, easy-to-understand regulations and low taxes. And these will only be possible if lawmakers understand the nature of the digital world and are familiar with the technology itself. Otherwise, we as a country will irretrievably lose talent, money and our competitive position – this was one of the main conclusions reached during the debate accompanying the publication of the first comprehensive report on taxes in the digital reality, prepared by our tax team.
Taxation of cryptocurrencies, NFTs and challenges in the Metaverse
This is the first comprehensive overview of the tax consequences that may arise in transactions involving cryptocurrencies and NFTs.
It can only come as a surprise that to date no one has ventured to summarise the current regulations, or identify the rules and practices of the tax authorities, or systemically analyse EU regulations or solutions applied in other countries.
In fact, it is very clear that everyone – both businesses already investing in crypto and NFTs and their tax advisors, but also the legislators themselves need support, knowledge and understanding of the each side’s position.
And we definitely need a broad discussion on the subject.
Tax debate on NFTs and crypto – specific demands from business and its advisers
“Should we tax crypto at all? What is the point of doing so?” asked Łukasz Węgrzyn, Partner and Head of the Technology Practice, to the debate participants.
Łukasz is one of the most experienced Polish lawyers dealing with legal issues arising from technological advances. He is also the originator and co-author of the first report on the Mateverse, a cross-sectional legal review of developments in technology and the digital reality.
To get the most complete picture of the needs and demands, we invited the following representatives from the business world who deal with all practical aspects of cryptocurrency or NFT trading on a daily basis:
- Paweł Łaskarzewski, Co-Founder & Co-CEO of Synapse Network
- Łukasz Wenskowski, President of the Management Board of RQ Wealth Management
- Tomasz Smus, PhD, CEO & Founder of Blockchain Alliance.
The authors of the report were represented by Agata Dziwisz-Moshe, Partner and Head of the Tax Law Practice, and Wojciech Śliż, tax advisor and Counsel in the Tax Law Practice – specialists in digital economics and taxes.
What are the conclusions of the debate regarding crypto, NFTs and the Metaverse?
In the current Polish legal environment there are more questions than answers.
Agata Dziwisz-Moshe and Wojciech Śliż agreed that operating in the crypto and NFT industry is associated with a multitude of fiscal risks. Therefore, it is difficult to provide maximum security for clients and assure them that they are properly fulfilling their tax obligations, which clearly deters many businesses from keeping their investments in the Polish tax jurisdiction.
“We should strive to ensure that investors are not forced to abandon Poland for crypto tax havens. Rather, we should create a system that will encourage them to stay. This requires the creation of a taxation system for the crypto and NFT market that is simple, coherent and understandable for every trader. Undoubtedly, the first step to achieve this goal is to raise the level of legislators’ technological knowledge, so that they have a chance to understand the voices coming from the market and allow them to become an equal partner in discussing specific solutions,” said Wojciech Śliż.
Agata Dziwisz-Moshe added: “The lawmakers do not have sufficient knowledge of transactions in new, technology-based markets. The consequences of this are ill-considered regulations and, even more often, controversial interpretations. This definitely discourages businesses. Paradoxically, however, when comparing our system to those of other jurisdictions such as Germany, the UK or the USA, Poland is not in a bad position, and some legal regulations are actually more favourable than those in other countries. So far, therefore, we are not doing so badly in this field. Nevertheless, there is a need to call for a significant simplification of regulations through dialogue between lawmakers and business. The question, however, is whether there is any chance for such dialogue to take place.”
Taxation of NFT and crypto – what business is saying
Business representatives, in turn, highlighted the need to adjust regulations to technological realities and create a simple and transparent tax system for doing business in the crypto and NFT markets for entities with different levels of business experience.
“It is not about changing the world, but about education and providing explanations, in partnership, so that the regulator can fulfil its mission, with entrepreneurs and investors not being at a disadvantage. This involves finding a mutually satisfactory compromise,” stressed Paweł Łaskarzewski.
Considerable time was also spent discussing the barriers that inhibit the emergence of solutions that would more effectively address the problems and unique features of cryptocurrency and NFT trading.
“The need for transparent regulations is very clear. The market is maturing and growing and therefore needs to know how to implement regulations. It is also characterised by great enthusiasm and potential, often of young and ambitious people, including programmers, who relocated to Poland from Ukraine,” emphasised Tomasz Smus.
The digital community needs to have its representatives talk about taxes
All participants agreed that the digital economy community needs to designate representatives whose role will be to educate the lawmakers, raising awareness on critical issues of rapidly evolving technology.
“The market situation has largely been determined by the immaturity of businesses, as the market is developing. Meanwhile, the discussion on market regulation needs robust, well-established partners, and is an evolving state, with more and more virtual world players wanting a voice in the public discourse. We are beginning to understand the significance of being able to influence the regulator and it is important that demands for simple and transparent regulation are not formulated too late,” noted Łukasz Wenskowski.
Taxation of NFTs and crypto – what the regulator needs (apart from knowledge)
The debaters also discussed the fact that the regulator, in order to meet the expectations of the market, needs more than just knowledge of technology. It will also need to analyse solutions used and tested in other jurisdictions. With such a background, the lawmakers will be able to propose specific regulatory paths.
And this is the idea behind the “Taxation of Cryptocurrencies, NFTs and Challenges in the Metaverse” report, which aims to be both a tool to help understand the nature of these issues and a starting point for discussion with the crypto community.
The debate and the questions that arose during the meeting showed the great expectations and need among the business community to make the Polish market progressive, competitive and transparent. Communication is the only way to achieve such changes.
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