Cryptocurrencies and PCC tax. The new exemption is not for everyone

Contracts for the sale or conversion of a virtual currency for almost a year will not be charged with a tax on civil law transactions (PCC). Assuming the abandonment of tax collection, the Ministry of Finance decree entered into force on July this year. Experts indicate that this is a step towards normalization of the legal and tax situation of the cryptocurrency market. However, the timing of the new exemption raises doubts.

Amendments are introduced by the Regulation of the Minister of Finance of 11 July 2018 on the cessation of collection of tax on civil law transactions against a contract of sale or conversion of a virtual currency (Journal of Laws of 2018, item 1346). The new regulation came into force on July this year.

The regulation provides for abandoning the collection of PCC tax on taxpayers purchasing a virtual currency referred to in Art. 2 sec. 2 item 26 of the Act of 1 March 2018 on counteracting money laundering and financing of terrorism (Journal of Laws of 2018, item 723 and 1075). The abandonment itself will apply from 13 July 2018 to 30 June 2019.

Controversy with PCC

According to information from the Ministry of Finance, the new regulation is a response to the controversy regarding the interpretation line on taxation of PCC tax on the sale and exchange of cryptocurrencies.

Big doubts aroused by the fact that digital currencies were classified as property rights in judicial jurisdiction. Such a line was adopted, for example, in the judgment of the Supreme Administrative Court of 6 in March 2018 (file reference - II FSK 488 / 16). As a result, it is considered that trading in virtual currency under a sales or exchange agreement should be subject to the PCC tax.

Kamil Hupajło, an expert of the kryptoprawo.pl website, legal advisor and managing partner at the Law Firm Legaltec Hupajło & Partnerzy:

"The PCC tax is 1 per cent, and the specificity of the cryptocurrency market means that a part of persons and entities trading virtual currencies contains very numerous contracts. The lack of clear and transparent legal and tax regulations for the crypto market is also a problem. Individuals and companies dealing in the trading of digital currencies are therefore exposed to various risks. One of them is the taxation of PCC".

As a consequence, in some cases tax liabilities due to PCC are disproportionately high and may even exceed the market value of owned cryptocurrencies. During the legislative work, the Ministry of Finance itself also admitted it.

"Applying a strict interpretation of the provisions of the Act on tax on civil law transactions may result in imposing unenforceable obligations on taxpayers, which in many cases lead to the confiscation of property, and thus violation of the constitutional principle regarding the right to protection of property"- pointed out in the justification for the draft new regulation of the Ministry of Finance.

Exemption not for everyone

As is apparent from the 11 regulation of July 2018, the PCC tax will not be charged for almost a year. The abandonment is, however, only temporary. According to the announcements of the Ministry of Finance, work is still underway on system solutions that will normalize the entire cryptocurrency market also in the tax context.

Maciej Grzegorczyk, an expert of the kryptoprawo.pl website and a lawyer and proxy of the Law Firm Legaltec Hupajło & Partnerzy:

"The head of the Ministry of Finance, of course, has the right to apply so-called tax abolition by issuing the relevant regulation. This is the case here, but the abandonment of the tax collection was limited only to the period from the 13 of July this year. by the middle of next year. It simply means that the exemption does not include cryptocurrency sale / exchange agreements that were concluded earlier. This conservative approach of the Ministry of Finance may be surprising, because in the case of similar regulations regarding the abandonment of tax collection, the ministry often uses a much wider time frame, also referring to many months before the date of entry into force of a given regulation".

As the expert of kryptoprawo.pl emphasizes, the new regulation is a step towards normalization of the legal and tax situation of the cryptocurrency market, but at the same time puts in a disadvantage the taxpayers who concluded cryptocurrency sale / exchange agreements before the entry into force of the new regulation.