Digging cryptocurrency - there will be new tax regulations

In 2019, a package of new tax regulations regarding virtual currencies will come into force. The draft amendment that the Sejm is currently working on envisages changes related to digging cryptocurrencies. As the experts explain, in this case the key will be the one on whose account the digital currency is being mined.

The introduction of new provisions is provided for in the governmental bill amending the act on personal income tax, the act on income tax from legal persons, the act - Tax Ordinance and on the amendment of some other acts. The project went to the Sejm 25 in September this year, and most changes to the cryptocurrencies should come into force as early as January 1 2019.

In the draft amendment, the Ministry of Finance proposed, among others, regulation of issues related to the extraction of virtual currencies and income tax. The key will be the one on whose account virtual currencies are extracted.

Cryptocurrencies for own needs

The project providers indicate that depending on whose account the digital currencies are extracted, the qualification of the generated revenues to individual sources will depend.

Kamil Hupajło, attorney-at-law and managing partner at the Law Firm Legaltec Hupajło & Partnerzy:

"Extracting cryptocurrencies on their own account will, as a rule, not be subject to income tax. Income from cash capital is to arise, however, at the time of sale of cryptocurrencies - in the case of paying with extracted crypto-bills for a good or service".

Kicking on order

Another solution will be to regulate cases where extraction of cryptocurrencies is carried out on commission, i.e. based, for example, on a contract of mandate or a contract of employment. The current version of the project provides that then the value of received cryptocurrencies as part of remuneration will be taxed as remuneration for work.

Maciej Grzegorczyk, lawyer and proxy of the Law Office Legaltec Hupajło & Partnerzy:

"The Ministry of Finance assumes that the meaning will not be whether the remuneration will be paid in full in the virtual currency or only partially. Taxation is therefore to be similar to taxation in relation to remuneration for work on the basis of a contract of mandate. The proposed regulations are not precise, however, as there are no specific indications regarding the valuation of remuneration in cryptocurrencies. If these issues are not clarified at the stage of parliamentary work, it is very likely that there will be considerable interpretation doubts".

As the expert explains, the draft submitted to the Sejm lacks clear regulations regarding the possibility of including tax costs of expenses incurred in the extraction of cryptocurrencies. The lawyer emphasizes that the final version of the amendment should clearly specify whether such expenses (eg for equipment and electricity) of the miners will be able to be included in costs.