10 mins of Googling ‘wrapped tokens tax’ brought back only this (applies to US only) with respect to wrapped coins. Not much - which suggests this is far from settled, which suggests (to me at least) that most jurisdictions are behind the curve - which may (or may not!) be of benefit when considering swapping Maid for SNT/ ERC20 depending on how long it takes.
Minting DeFi tokens may trigger tax liability
This disadvantage only applies to those electing to treat these coin conversions as taxable events. If you do not treat them as taxable events, you will not trigger tax liability by minting tokens.
As discussed above, some tax preparers treat minting tokens, like converting ETH to wrapped ETH (WETH) or converting coins to cTokens or aTokens, as crypto-to-crypto exchanges. If this is the chosen treatment, the event would considered a taxable event that triggers capital gains liability.
Some platforms may even offer to automatically swap your coins to mint DeFi tokens, so be sure that you’re aware of what actions these platforms will take with your coins.
Note that this does not apply if you are minting tokens in a loan, using your holdings as collateral.
That is excellent news, what was the other project that did a 1 for 1 transfer at par value - how exactly did you have to calculate your tax? I for example included my Polonex accounts in latest tax return. They changed the protocol on USDT there from Omni to ERC20 so almost exactly we are proposing here. It was not a lot of money but I did file the account and the value did not change so the accountant did not recommend doing any tax calculation (how could I, it was 10USDT before and after). However I had a whole bunch of tiny crypto micro transactions between coins that I did have to calculate gains/losses on though, I found it ridiculous but it is what it is.
Note the proposal is not for wrapped tokens. It is 1 for 1 par value transfer (also called a swap), Exactly what Poloniex just did for their large customer base of people with USDT Omni to USDT ERC20.
The best solution is to consult a tax expert, in each jurisdiction, specialised in cryptos.
In the world, and even in the EU, the laws are very different in each country and what may not be taxable in one country may be taxable in another.
What I find unacceptable is that you continue to insist on the non-taxability of an exchange of this type. Many people here are indicating that, at least in their own countries, it is.
It wouldn’t matter if you couldn’t endanger people who could get into serious trouble with the tax authorities. I fact your attitude in this thread is becoming abusive and dangerous.
Bittrex also did a USDT Omni to USDT ERC20 transfer/swap in 2019, as did Binance and Poloniex. Millions of users, billions in Tether. Zero evidence that this 1 to 1 par value transfer/swap was a taxable event… because 1 to 1 par value swaps are not taxable.
Any shred of evidence to the contrary would help bolster the “But think of the Tax!” argument.
How is the Maid Omni to Maid ERC20 transfer different to billions of dollars worth of USDT Omni to USDT ERC20 transfer, exactly?
Cap. gain on USDT isn’t going to be a thing. You pay for the gain on the asset value in USD when disposal happens … As Tether is a stable-coin, there is going to be very very little gain/loss unless you are disposing a really large amount.
The problem is that the price of the Maid has not been stable so the tax office, in many countries, will charge you the difference between what you paid to buy it and what it is worth at the time of exchange.
That this has to be repeated over and over again is extremely frustrating.
Don’t take this as gospel, but I’ve just asked about the token swap issue to a UK accountant that is more crypto savvy than most. This was his response:
"My view is that if you are being forced to exchange one crypto asset for the same one on a different network my inclination is that the nearest comparison would be a share for share for exchange as part of a company’s reorganisation.
In these circumstances, you wouldn’t usually expect a taxable event to arise.
Equally if bonus shares are issued as part of a company reorganisation you would not normally expect a taxable event to arise. Put very simply the original base cost of the shareholding would be diluted. I would argue that a similar situation would apply where a similar transaction happened in relation to a crypto holding."
He makes good sense and I fully agree with his sentiment - also a good precedent to use in your defense if you take the government to court … Four caveats though:
this particular swap isn’t to do with Maidsafe
it is a voluntary conversion.
who knows what your country’s tax office might say as not stocks, but crypto.
taking your government to court is expensive.
But hey, everything in life is a risk and some are worth taking. I have no idea about the outcome for any person engaging in this trade. Just be aware it’s probably not risk-free.
That sounds right. I’m pretty sure a one time change of platform a token is held on won’t be treated as a disposal, at least by reasonable tax regimes (though many are not particularly reasonable!).
Although they’re not the worst, I strongly dislike HMRC’s approach to crypto tax, which is a significant factor as to why I’m moving to Portugal ASAP if I get a visa (just applied). Portugal has zero capital gains tax on crypto, for now, at least.
What’s the problem with paying tax in UK, the tax on large capital gains isn’t punishing? Moving country could even cost more, both the cost of relocating and if you have to fork out for things you’d get for free at home. Depends of course, but I don’t see UK tax on crypto as excessive, only when it is levied on money you never had.
In our country (EU) when there is something not really clear, than every bureau office in each district may have different opinion. So the best way is to move to capital city, where is chance about 100 times lower to ever deal with bureau office.
When we convert MAID to SNT will this be a taxable event then? ERC is just a conversion isn’t it, not a transaction. I spoke to my accountant about the issue and he said if there is no money made and the intention of the swap is not to make money, only improve accessibility, then there is nothing to tax. He said it’s impossible to work out tax if there’s no difference in value before / after the conversion.
Maid is an representation of the future SNT, a placeholder token. They are the same asset but the underlying protocol will be different. So at the moment of the future swap they will have the same value and be a representation of the same asset. So there should not be an taxable event in my opinion and from some sources I have read.
If you had to sell something like a quarter of your coins at say 5£ to pay for tax on conversion, it would be better for both you and your country if you instead paid the tax when you actually wanted to realize gains. Assuming the value was higher of course. If you sold the same coins at £10 instead, you’d get more money and pay more tax so everyone would win.
I don’t have any problem paying UK taxes and agree the levels are quite fair, but the tax levied on ‘gains’ you never realised isn’t good at all. Of course many factors need to be taken into account when deciding a big move, and though the tax treatment of crypto is a significant one for my situation, there are other important factors.
I think selling crypto is zero capital gains for everyone in Portugal just now wherever it’s sold (as long as trading isn’t the seller’s professional activity), but those with NHR status can also get 0% income tax on most foreign sourced passive income (and other foreign sourced income).
Anyway, sorry for the tangent: An optional ERC20 swap would be awesome if it could be done well & without bothering the team much!
He may be correct that there’s no tax to pay in your jurisdiction in such a case, but for UK his reasoning is definitely wrong as I’ve explained above - and I would think in at least some other jurisdictions where capital gains are taxable. So be aware of differences.
What matters in UK is whether or not it’s a disposal, and if it is, there is tax to be paid on any increase in value in the asset being disposed of, which is nothing to do with the new token that you receive in exchange. In UK the new token would not be taxed until you disposed of it.
You should of course not assume what goes in UK goes elsewhere - I know little of other jurisdictions and wrt UK I’m not qualified, just someone who has done his own tax for decades.
I don’t know. I would say it’s arguable that neither should be taxable as people have already, but what matters in UK is not reasoning but what HMRC decide in a particular case.