The list of legislative works undertaken by the Council of Ministers dated 23 August 2018 states that the government is working on several changes in tax regulations. Some of these changes had already been signalled earlier by the Ministry of Finance, e.g. introduction of tax on unrealised capital gains (the so-called exit tax), favourable taxation of income from intellectual property rights (IP Box), and a reduced CIT rate for small companies (9%).

These new regulations will also address the issue of cryptocurrencies, as the government plans to directly regulate the taxation of income from trading in cryptocurrencies. Under the new regulations, such income is to be taxed as follows:

• For personal income tax (PIT) purposes, as income from cash capital (similar to income from sale of shares) at a rate of 19%.
• For corporate income tax (CIT) purposes, as capital gains. The CIT Act makes the tax rate dependent on the size of the taxpayer—in case of small taxpayers the tax rate is 15% (we can expect a reduction of tax to 9% for companies with annual revenue up to EUR 1.2 million) and 19% in other cases.

The proposed tax regime will not apply to entities classified as providing services of cryptocurrency exchange (exchange of a cryptocurrency for another cryptocurrency, or exchange of a cryptocurrency for a traditional currency).

Under current practice, for PIT purposes, income from cryptocurrencies can be taxed in two ways:

• If trading is private, the income is classified as income from property rights and is taxed according to general rules (tax rate: 18% and 32%).
• If trading is made in the course of business activity, this income may be subject to taxation at a 19% flat rate (if the taxpayer has chosen such method of taxation) or according to general rules (tax scale).

For CIT purposes, income from trading in cryptocurrencies is subject to general rules of taxation.

In both cases (PIT, CIT), it is difficult to determine the moment when the tax obligation arises, i.e. whether a mere exchange of one cryptocurrency for another gives rise to an obligation to pay tax, or whether one should wait until the cryptocurrency is converted into traditional currency or is used to purchase goods or services. The first approach prevails, although the administrative court has ruled at least once in a more taxpayer-friendly manner.

There are even greater problems and doubts when it comes to determining which documents the taxpayer should hold in order to recognise the cost of trading in cryptocurrencies as a tax-deductible cost. In this respect, it is unclear, among other things, what documentary value is attached to a statement of accounts issued by a cryptocurrency exchange. This is an issue the parliament should address. It is also important for the parliament to take into account the reality of trading in cryptocurrencies and not require taxpayers to provide documents and information impossible to obtain or disproportionately time or cost consuming.

In general, we should positively assess the willingness to clearly specify the rules for taxation of income from trading in cryptocurrencies, given the activity of Polish investors on the cryptocurrency market. It is to be expected that the rules will be clearly structured, in particular with regard to determination of the cost base and the time when the tax obligation arises. However, it is a pity that lawmakers did not seek a more favourable or simpler tax regime, e.g. by adopting a lower tax rate or opting for a low flat-rate tax on income from sale of cryptocurrencies. Such solutions would win recognition from foreign investors in the cryptocurrency industry and generally the whole blockchain technology sector.

Michał Nowacki