The government of Venezuela passes a decree that requires crypto-traders to pay taxes in cryptocurrency.
A Necessity for ‘Strengthening of the Current Fiscal Regime’
Calling the move an absolute necessity for ‘strengthening of the current fiscal regime’, the Venezuelan government announced the new payment terms for taxes for various trades via official gazette no. 6420, dated December 28 on Monday.
Part of the Gazette contained decree number 3719 which highlights the changes in tax payment rules for crypto-trade. According to Dinero Publication:
“The government of President Nicolás Maduro published a decree that will require taxpayers who carry out operations in foreign currencies or cryptocurrencies to pay their taxes in that same currency and not in bolivars.”
This has been reflected in Article One of the decree which mentions that all taxpayers in Venezuela ‘who carry out operations’ in foreign currency or cryptocurrency ‘must determine and pay [their tax] obligations in a foreign currency or cryptocurrency’.
What Are the Factors That Influenced the Move?
The decree mentions the reason behind the decision as:
“The Venezuelan people are currently facing a fierce war waged by internal and external factors that pursue the deterioration of the economy, which is why it is necessary to adopt sufficient measures to ensure the strengthening of the current fiscal regime.”
The move comes out as a hint towards financial reconstruction in the country with the aim of boosting the economy.
Taxations and the Role of ‘Petro’
Petro is the national cryptocurrency of Venezuela. The taxation amount revolves around Petro, which has been chosen as the basis for calculating business taxes.
The intendant of Servicio Desconcentrado de Administración Tributaria [Sedemat], Jean Carlos Martínez, in an interview to Noticia al Dia publication, a local publication, notified that “‘taxpayers will not be charged taxes in Petros’.
This clarification comes into light as Venezuelans were sent into a tizzy as they thought everyone(crypto-traders and non-traders alike) has to pay taxes in Petro.
Martinez further explained:
“We are using the value of the Petro as a reference unit to be able to determine the minimum tax since the ordinance of the current economic unit is still stipulated in percentages of gross income.”
Martinez went on to add that Petro has two values: the first as a cryptocurrency and the second as a unit of account that is equivalent to 9000 sovereign Bolivars. These values will be used in case of passport procedures or current salaries.
Rules That Govern the Decree:
According to the new decree, the economic activities of each company or microenterprise will be the major factors in determining their tax rates.
Martinez further explained the decree by stating:
“If someone had transactions in Petro, bitcoin or other currency, [they] should declare [their income] according to the currency that [they] manage.”
There are two exemptions mentioned in the decree. These are ‘transactions of securities traded on a stock exchange’ and ‘the export of goods and services carried out by public bodies or entities’.
Payments such as tax refunds for established cases will also be made in Petros.
The Ministry of Popular Power of Economy and Finance is in charge of executing the decree. It will become ‘effective’ starting ‘the time of the publication in the national gazette’.