From the previous chapters, we have that the possible outcome of the VAT in the Transactions Involving Cryptocurrencies includes only four possibilities: 1) taxable
transactions, 2) transactions out of the scope of the tax, and exceptionally, 3) transactions are levied with an additional tax rate, 4) exempted transactions.
3.1. Exchange of Cryptocurrencies
Here it can be seen that six countries tax the exchange of Cryptocurrencies whereas in four countries the transactions are out of the scope.
Regarding Chile, Colombia, El Salvador and Venezuela, the exchange is out of the scope of the tax, because the policy is to only tax the sale of goods when they are tangible or when intangible assets relate to intellectual property. Additionally, no extended definitions of other taxable transactions may reach these transactions.
However, in the case of jurisdictions where the transaction is taxable, the law covers the transactions through a different dynamic.
In the case of Argentina and Ecuador, the general tax policy is to deem as a sale of goods only the disposal of tangible goods. However, the exchange of Cryptocurrencies is covered as a special kind of taxable transaction, a digital service.
These are the only cases in which the taxation of the transactions comes from specific rules for digital services in the tax law, and not because the ordinary rules for taxing the sales of goods cover the Transactions Involving Cryptocurrencies.
In the case of Costa Rica, Mexico, Peru and Uruguay, the policy behind the taxation of the transactions is that the VAT has a catch-all definition of the taxable transactions and therefore, any kind of sale of goods, including intangible goods is covered by the tax.
Even though Costa Rica and Mexico have specific VAT legislation for the taxation of digital services and platforms, these rules do not affect the taxation of the Transactions Involving Cryptocurrencies.
3.2. Use of Cryptocurrencies as means of payments
In this case, most of the jurisdictions have the same VAT qualification as taxable or not in the exchange of Cryptocurrency and the use of Cryptocurrencies as means of payment. The exceptions are Ecuador, Argentina and Venezuela.
Regarding these transactions, in most cases, what makes them taxable transactions is not the nature of the asset, but how the jurisdictions define the sale of goods for VAT purposes.
In Costa Rica, Mexico, Peru, and Uruguay, the transaction is taxed because the payment in kind and barters are deemed to be a supply of goods. Additionally, the concept of goods includes tangible and intangible ones. Therefore, in such cases the transaction is taxable.
Again, this outcome arises from the tax policy of making the VAT a broad-based tax and covers any transfer of property, regardless of the legal form and the nature of the goods transferred.
Regarding Argentina, Chile, Colombia and Ecuador, the barters and payments in kind are only taxable when the goods transferred are tangible.
In the case of Argentina and Ecuador, the transactions seem to be out of the scope because of a legislative mistake, because the tax policy towards Cryptocurrencies is to tax any
transaction involving them. However, due to the interaction of the definition of sales of goods and digital services, the use of digital goods in barters and payments in kind is out of the scope of the tax.
This mistake may lead to tax evasion, since the taxability of the transaction may depend on the legal form used to transfer the Cryptocurrencies.
Regarding El Salvador, the use of Bitcoin is not a transaction for VAT purposes since it is a legal tender in the country.
In the case of Venezuela, there is a clear policy to disincentive the use of Cryptocurrencies since the transaction is not only taxed but subject to an additional VAT rate. This tax treatment is the same as, for example, the supply of goods classified as “luxurious”.
3.3. Mining of Cryptocurrencies
In the mining of Cryptocurrencies, the outcome is almost fully harmonized. Regarding the mining in proof of stake all the jurisdictions tax the transaction. In this case, the ordinary design of a VAT being a general tax covers the mining within the definition of services, which usually is a broad definition.
However, in the case of El Salvador and Uruguay, a different outcome arises, because the definition of services includes an additional element for the recipient of the service.
Regarding El Salvador, to be deemed as a service, it is required that the recipient acquire an obligation to pay for it. In Uruguay, it is required that the recipient obtain a certain advantage
or benefit for the service paid. There is not a clear policy justification in these cases, but it seems to be only a matter of legislative style.
3.4. Related services
In this case, the outcome of the ten jurisdictions analysed is that the transactions are taxed. A traditional definition of services covers all related services. The element of the services being related to Cryptocurrencies does not affect their taxation.
The policy reason for the taxation of these transactions is part of the nature of every VAT, of being a general tax on goods and services.
Regarding El Salvador, because of the policy toward the Bitcoin and its status of legal tender in the country, along with the policy of exempting financial services, some related services may be exempted.