International Cryptocurrency Tax Compliance Challenges: Information and Income Tax Reporting Obligations

Businesses and individuals want the opportunities and advantages of owning and exchanging cryptocurrency; however, the tax compliance burdens are problematic, primarily because specific guidance is lacking. What is clear are the numerous and substantial penalties charged in the U.S. for reporting and income tax noncompliance.

Adding to the confusion is the varying treatment and definitions of crypto outside the U.S. Some countries treat these assets like property, while others treat them as currency or a financial investment. In Taxing Virtual Currencies: An Overview Of Tax Treatments And Emerging Tax Policy Issues, the OECD divides crypto assets into three tiers: payment tokens (virtual currencies), security tokens (asset or financial), and utility (consumer) tokens and recognizes that "these categories may be interpreted differently across jurisdictions, which may result in a different classification of assets and different tax implications."

Selling, exchanging, or using crypto assets for purchases can generate tax filing and reporting obligations. If an individual or entity, resident or nonresident, has cryptocurrency income from a U.S. source, this income will be taxed by the U.S. If they have income from cryptocurrency outside the U.S., they may have tax obligations in the other country. International tax practitioners, individuals, and multinational entities need to understand their filing and tax obligations in the U.S. and abroad.

Listen as our panel of international cryptocurrency experts explains the U.S. and other countries' filing and reporting requirements for holding and utilizing crypto assets to avoid penalties and sanctions.