Digital currency exchanges in the UK will now be subject to a 2% digital services tax. The UK tax agency has claimed that since digital currencies are not currencies or commodities, they are not exempt from the tax reserved for giants like Facebook and Google.
The digital services tax was introduced in April 2020 by the UK government to target ‘large multinational companies whose income comes from providing a social media platform, search engine or online market to UK users â. It has targeted global giants such as Facebook, Twitter, Amazon, and Google.
It will now apply to digital currency exchanges, according to London newspaper Telegraph reports. Her Majesty’s Revenue and Customs (HMRC), the country’s tax agency, has informed exchanges that they will be subject to tax in the future.
HMRC says digital currencies are not financial instruments and are not considered commodities or money. As such, the exchanges that offer them are not eligible for the exemption offered to financial centers.
âThere is a wide variety of crypto assets, each with different characteristics. Crypto asset exchanges are unlikely to qualify for the exemption for online financial markets, âthe agency said in an update to its tax guidelines.
The digital services tax imposes a 2% levy on online platforms, which will now include exchanges, with global revenues exceeding Â£ 500million ($ 665million) and UK sales exceeding 25million sterling ($ 33 ââmillion).
Once imposed, one of the victims of this new tax will be Coinbase. The US-based exchange operates a local branch in the UK, which it says had $ 24 million in revenue last year. While not eligible for the tax, Coinbase claimed that by 2021 its sales quadrupled.
The UK digital currency industry is angry with the new tax. CryptoUK, an industry self-regulatory trade association, says it is unfair to treat digital currencies differently from other financial instruments. Ian Taylor, its director, believes that the stock exchanges are already paying more than enough thanks to the new licensing regime introduced by the Financial Conduct Authority (FCA). He also noted that these costs would be passed on to users.
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