Regulations are currently being finalized in Albania that is aimed at taxing the profits and income generated via cryptocurrency investments. The government is planning on imposing these taxation rules the next year, as they will have to adopt proper legislation to do so, which has already been proposed for conducting public consultations.
Crypto tax to be imposed in 2023
On Friday, reports disclosed that thanks to a new income tax bill, the taxation authorities in Albania will begin collecting taxes on the income generated via crypto assets from 2023. There are several other laws as well as bylaws that the government hopes to pass this year in order to regulate the crypto industry in the country comprehensively.
Currently, the legislation for this special tax is open for public consultation. The aim of the legislation is to tax crypto assets, along with the income that is generated through virtual assets. The Albanian State has described virtual assets as a value’s digital representation, which can be transferred, traded or deposited digitally. It is also something that can be used for investment, payment purposes, or as a medium of exchange, which also includes cryptocurrencies.
It should be noted that central bank digital currencies (CBDCs) are not included in this definition. This is surprising because there is an increasing number of countries around the world that are looking into developing a digital version of their respective fiat currency. Some of these countries include Russia, China, the European Union as well as the United States.
Crypto mining to be taxed
Cryptocurrency mining will also be subject to taxes in Albania because the government considers it an activity that utilizes computing power for confirming transactions, which rewards people in the form of virtual assets. Mining of cryptocurrencies has remained a grey area, even though illegal mining facilities have been targeted by law enforcement authorities. In fact, the authorities have also brought charges against the operators of such illegal facilities.
According to the new legislation that will be introduced in Albania, any income that is generated through crypto mining or transactions will be considered corporate income. This means that it will be considered an income obtained by engaging in business activity. If private individuals turn out to be the beneficiaries and not companies or organizations, then a 15% capital gains tax would be applicable on the income.
Financial watchdog developing framework
The Financial Supervisory Authority (AFSA) in Albania was tasked by the country’s parliament to come up with new regulations for the crypto sector by the end of this year. While crypto trading platforms are permitted to work legally in the country, the country has not issued licenses to any entities as yet.
A law had been adopted in Albania two years ago, which was applicable to markets related to distributed ledger technology. The legislation was welcomed by many, but there were also critics who doubted the capability of the small nation in regulating the crypto sector, as it is struggling to prevent illegal activities in the fiat space.