Speaking hypothetically only, as I don’t know the ‘law’ … if you dispose of the original token, then you pay a tax on the gain you made from the purchase value (in dollar) of the original to the value of the token at disposal. Again doesn’t matter what you buy or sell … it’s all about the disposal and the gain (or loss, which can be a tax write-off) at the time of disposal.
Edit: the question here is whether or not the original token was “disposed of” – (according to the law - or how the law will be interpreted) … keep in mind that those who interpret it, are incentivized do so in a manner that benefits them.
At first thought… I suffered minor rage thinking about how I have X maid and want to swap it for exatly X safe network tokens without having to sell some to pay tax.
… but at the moment we all get to swap from maid to safenetwork tokens
maid will be valued at EUR P.00 but the safenettoken will not have traded so will have a value of ZERO.
Indifferent. The article 1.538 of the Civil Code states: “An exchange is a contract whereby each of the contracting parties undertakes to give one thing in order to receive another".
The 1:1 exchange does not invalidate the existence of that exchange.
You have exchanged something for something else. In fact this exchange would imply a commission so it involves other parties. Try to convince a tax inspector that this was not the case.
Read the law.
The amount of capital gains or losses shall be, in the event of transfer for valuable consideration or profit, the difference between the acquisition and transfer values of the assets,
The tax authorities compute the difference between the purchase value of the asset sold and the value of the asset purchased. If there is a difference, there is a gain or loss.
If I bought a maid at €0.1 and I make the Omni-ERC20 exchange when it is worth €1, the tax authorities consider that I have gained €0.9 and will ask for their share.
I don’t make the laws but that’s the way it is. I think it’s great that it’s different in your country, but in mine, and in others, it’s like that.
I know people who have had to pay huge fines for not doing their tax returns in this way.
It doesn’t matter what you trade for … it’s the value of what is disposed (at least in the US). If the market says you disposed of something worth $10 and you bought it originally for $1, then you have a cap. gain of $9 … if you sold your $10 token for $0, they don’t care as they will consider the market price of the thing you sold at the time you sold it, not the value of what you bought with it.
The gain is calculated on the disposed of asset, not what you buy.
This is the issue, and while some saying “no problem” are using reasonable logic, that isn’t how UK HMRC work. The question is whether or not the switch counts - in their mind - as a disposal. If it does, you incur tax on the gain you made until the disposal. It doesn’t matter if you bought something that has zero value with it, you incur the tax liability.
Ultimately the only arbiter of this question is HMRC, so I would not care if experienced accountants were giving their view on this topic. It cuts no ice and people need to be aware of how their own tax authorities behave and not make any assumptions based on what seems fair or what they think is a disposal or not.
OK, I see my Q was actually answered in your response.
However, clearly ( in my mind anyway ) you must share your pvt key / give permissions away so the funds can be moved if your coins sell, so surely its not as clear cut as having no risk, reduced risk, possibly, unless the contract is somehow exploited.
Putting ERC20 issues aside, translating this explanation to the eventual swap of MAID for SNT, doesn’t that interpretation mean that everyone will owe huge taxes once the conversion is completed?
Irrelevant. You also can pay a transfer fee when you transfer between bank accounts, ask for your stock cert to be delivered.
You have changed Maid for Maid at par value. The account is different. It is not “something else”. That is like saying the Maid on your paper wallet is different to that on the Trezor, to that on Bittrex. Of course not you do not pay taxes when your transferring at par 1 to 1 value between those different “protocols”.
No, because nothing is being sold. Nothing is being bought. Your doing a transfer at par value between accounts that you own. Same as when you pay a fee to transfer your USD from US bank to a Eurodollar USD in foreign bank. Same as when you pay a fee to get your stock cert delivered. The format (protocol) is irrelevant. What matters is the transfer happens at 1 to 1 with accounts you own.
Unfortunately I have had to being a IT expat and having done my taxes (the last few years with crypto) in the EU and outside of it. Your interpretation is blatantly way off the mark but do not take my word for it, consult a professional.
The loophole that I’ve mentioned a few times now is when you retain ownership of the original - or in other words it’s not disposed of - it is loaned out.
Fingers crossed but HMRC don’t have a good record on things like this, and you need to look at why that is. 1) they can do pretty much what they like unless you have the money to fight them in court (or the connections to twist arms), and 2) they seem to be uninterested in fairness and happy to bankrupt people who fall foul of rules for no good reason (e.g. you sell MAID for bitcoin, incur a tax liability, right away buy DUMCOIN with that bitcoin and before close of business DUMCOIN plummets and you don’t have cash to pay the liability. Tough.)
Another loophole (in the US at least) is to use an IRA. People have created crypto IRA’s and they trade within them - no cap gains on trading then. But cap-gain at the end when cashing out of IRA.
There are crypto-loan facilities too, so you can borrow against your crypto then use the fiat to buy something else - long way around and there is risk that your loan get’s liquidated and then you pay cap. gain anyway.
Unfortunately, yes. There is always the possibility of playing over time and exchanging in several years or even, if the amount is worth it, to consider changing country.
In Europe, Portugal, Malta or Cyprus have no crypto taxes, and neither do Germany or Austria if you keep them for more than a year.
There are also other possible solutions…
Yes I did answer it, sorry was not clear enough. No you do not need to share or give away your private keys: Your wallet handles the transaction (that you agreed to perform) but the private keys remain in your hands. That is why Uniswap is a $53 billion liquidity monster with others not far behind. Who needs third party risk after everything we have suffered through with scam exchanges?
Yup, it might well. Whether it is huge or not depends on the rates, but why not pay your taxes? The only problem I have is when the tax system punishes you - even bankrupts you - by demanding money you don’t have and never did have (see example).
I don’t have any problem with paying taxes on a gain like a stock sale, where you have access to the gain and you can spend it any way you like but in the case of the planned conversion of MAID to SNT you don’t have any more capability of spending it than you did before the conversion - unless you sell. Then (after selling some SNT) I don’t see an issue with paying taxes on the gain, but not at the time of conversion.
Post those laws, or even an accounting brief, anything. The one you posted above clearly does not apply.
Sounds like a perpetual foolproof argument: Rogue institution, does what it likes.
Fear mongering over taxes has been used as an excuse to shut down Maid-ERC20 progress, for years. Does not matter that 1 to 1 par value transfers are non-taxable in every asset class, regardless of protocol.
People conflating transactions/exchange/disposal of an asset with very distinct, very precise and totally different 1 to 1 par value transfers. Something that happens in the financial system constantly, if it was taxable the system would grind to a halt. Next we will be saying the stock splits are taxable events, which is very much more in line with what we are doing here than a buy/sell transaction/exchange/disposal event.
