While U.S crypto traders continue to wait for a clear crypto tax guidance from the Internal Revenue Service (IRS), their counterparts in France had good news to cheer on, and more reasons to keep trading cryptocurrencies.
According to Bloomberg Tax, French Finance Minister Bruno Le Maire disclosed today that the country’s tax authority would only tax gains on cryptocurrency trades when a trader decides to convert the earnings to fiat currency. In other words, profits that traders make while trading one crypto for another will remain tax-exempt.
Le Maire was also quick to explain which France decided to adopt such a stance instead of insisting on collecting tax on profits made via crypto-to-crypto trades.
He noted that the right time to assess taxes is the moment when the gains are converted into traditional money, and rightly so since it removes the ambiguity that traders face in trying to file their tax reports accurately given the heavy fluctuations in the value of crypto assets.
Meanwhile, Le Maire further noted that the same tax principle that France uses for crypto-to-fiat trades would also apply to Value Added Tax (VAT), implying that taxes will only come into consideration “when a cryptocurrency asset is used to acquire an asset or a service.”
New Tax Method Promotes Crypto Trading
As mentioned earlier, the new approach to crypto taxation in France greatly favors the cryptocurrency industry since investors and traders no longer have to pay taxes unless they decide to cash out.
Another way to understand that is that it incentivizes people to store their wealth in cryptocurrencies as a way to avoid taxes, leaving more money in the crypto markets than off it.
With that in mind, there is no doubt that crypto traders especially the U.S, will hope that the long-awaited guidance from the IRS will make a similar provision by assessing taxes only when a trader decides to convert their digital assets to fiat or use them to fund a purchase.
Whether that would happen, though, is a question that only time will answer.