The legal aspect of cryptocurrencies
Virtual currencies or cryptos do not always require an underlying blockchain.
The legislator has determined that all digital representation of value that is not issued or guaranteed by a central bank or a public authority and does not possess a legal status of currency or money but is accepted by natural or legal persons as a means of exchange and which can be transferred, stored, and traded electronically, is a virtual currency.
There is not much information on the taxation of the profit gained from cryptocurrency transfers and trades. Finnish courts have dealt with it only a couple of times, and the cornerstone of the subject is the guide “Taxation of virtual currencies” from the Finnish Tax Authority. The guide has been updated following a ruling by the Finnish Supreme Administrative Court in 2019.
Our firm is well versed in the taxation of cryptocurrencies, and we can certainly advise you on your taxation.
The only supreme court ruling on taxation is KHO 2019:42. The ruling confirmed that the Income Tax Act’s provisions concerning profit on sale apply to the taxation of profits gained from cryptocurrency transfers.
In short, the person who has sold cryptocurrencies can deduct the expenses that resulted from acquiring the cryptocurrencies and also deduct the losses resulting from selling cryptocurrencies. Taxation that was carried out before the ruling can now be appealed, with which we can help you.
The Act on Cryptocurrency Service Providers entered into force on 1 May 2019, and now cryptocurrency service providers must register to the Financial Supervisory Authority if they want to offer these services legally. The service providers must register on 1 November 2019 at the latest, but new service providers must register before offering their services.
The obligation to register concerns virtual currency issuers, virtual currency exchange services and wallet providers.
The Act also contains other obligations:
1. Storing documents (10 §)
2. Protecting and storing client funds (10 §)
3. Marketing (12 §)
4. Customer identification (13 §)
The obligations include creating different practices and documentation, practical implementation of these practices and regular internal assessment, which might prove difficult to execute properly.
In addition, the Act’s phrasing does not tell the whole truth about the registration process; thus, the process might drag on. Nordic Law has actively researched the Financial Supervisory Authority’s requirements for registration and has, for example, helped Prasos Ltd. in the registration process.
Please do not hesitate to contact us if you need help with legal questions concerning cryptocurrencies.
Questions?
We are more than happy to meet with you, discuss your needs and offer you some solid advice.