First step evaluation: cryptoasset buying and selling in Austria

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Africa tax in brief - Lexology

Cryptoasset trading

Fiat currency transactions

Which rules and restrictions govern the exchange of fiat currencies and cryptoassets?

The fifth EU money laundering directive was recently implemented into Austrian law. The guideline extends the due diligence obligations against money laundering (AML) and know-your-customer (KYC) to:

  • Providers that offer exchange services between virtual currencies and fiat currencies (i.e. cryptocurrency exchanges); and
  • Electronic wallet providers (i.e., companies that provide private cryptographic key protection services to hold, store, and transfer virtual currency on behalf of their customers).

Since January 2020, certain providers of services with regard to cryptocurrencies have been subject to the AML and KYC and customer due diligence, reporting and registration requirements with the Financial Market Authority (FMA). This concerns providers who offer one or more of the following services:

  • Services for the protection of private cryptographic keys for storing, storing and transmitting virtual currencies on behalf of a customer (custodian bank wallets);
  • Exchange virtual currencies into fiat currencies and vice versa;
  • Exchange of one or more virtual currencies into one another;
  • Transfer of virtual currencies; and
  • the provision of financial services for the issuance and sale of virtual currency.

Depending on the specific business model in connection with the exchange of fiat currencies and cryptoassets as well as the functions and payment flows associated with the exchange, a license from the FMA may be required for the service concerned in accordance with the applicable banking, payment services or securities brokerage laws provider or platform operator.

Profits from the exchange may also be subject to tax law. The exchange of cryptoassets for cryptoassets or fiat currencies will be treated as a sale for income tax purposes. For companies, the exchange of crypto assets is subject to a corporate tax rate of 25 percent.

For individuals who hold cryptoassets as corporate assets, the exchange of cryptoassets is subject to the progressive income tax rate of up to 55 percent. For people who hold cryptoassets as non-business assets, profits from the exchange of cryptoassets are tax-free if they are realized after the one-year speculation period has expired. Profits made before the end of the one-year speculation period are subject to the progressive income tax rate of up to 55 percent. The aforementioned tax treatment does not apply if the cryptoassets are rented with interest. In that case, any capital gains realized on the exchange would be subject to an income tax rate of 27.5 percent.

The exchange of crypto assets should not be subject to VAT.

Exchanges and secondary markets

Where are investors allowed to trade crypto assets? How are exchanges, alternative trading systems and secondary markets for crypto assets regulated?

In Austria there are generally no special legal requirements that prescribe where investors can trade crypto assets. However, restrictions may arise from internal guidelines or investment guidelines of institutional investors (e.g. asset managers).

Due to differences in the technical, functional and economic design of cryptoassets exchanges and trading platforms, the individual business model of the respective trading venue and the special features of the respective cryptoassets must be evaluated in order to determine which rules and regulations apply to such a trading venue.

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How are cryptoasset custodians regulated?

This depends on the government classification of the specific crypto-asset (i.e., whether it is a virtual currency, a transferable security or a commodity). If the relevant cryptoasset is:

  • a virtual currency: custodian banks are subject to registration and must comply with the Austrian and EU AML and KYC requirements;
  • Transferable Collateral: The safekeeping and administration of this instrument is subject to the provisions of the Securities Custody Act. A banking license is required for these activities. or
  • a commodity: The storage and management of this instrument is subject to Austrian trade laws and requires a trade license.

Broker-dealer

How are Cryptoasset Broker-Dealers Regulated?

This depends on the government classification of the specific crypto-asset (i.e., whether it is a virtual currency, a transferable security or a commodity). If the relevant cryptoasset is:

  • Transferable Security: Broker-Dealers are subject to the provisions of the Banking Act and the Securities Supervision Act and require a license to provide banking or securities services. or
  • a commodity: broker-dealers are subject to Austrian commercial law and require a trade license.

For the connection of fiat lenders with potential borrowers, either a banking license or a trading license according to Austrian commercial law is required for the brokering of loans. New or alternative payment methods brokers may need to be licensed when brokering deposits, loans, or insurance.

Decentralized exchange

What is the legal status of a decentralized cryptoasset exchange?

There is currently no specific regulation for the decentralized exchange of crypto assets in Austria. Due to differences in the technical, functional and economic design of cryptoassets exchanges and trading platforms, the individual business model of the relevant exchanges and the special features of the respective cryptoassets must be evaluated in order to determine which rules and regulations apply to a decentralized cryptoasset exchange.

Peer-to-peer exchange

What is the legal status of peer-to-peer transfers (person to person) of cryptoassets?

There are no specific legal rules for peer-to-peer transfer of cryptoassets. Depending on whether the Cryptoasset is classified as a transferable security, means of payment or commodity, peer-to-peer trading on a commercial basis may require approval from the FMA in accordance with the applicable banking, payment services or securities brokerage laws or a commercial license.

Trading with anonymous parties

Does the law allow cryptoassets to be traded with anonymous parties?

Yes, unless the AML and KYC requirements apply.

currency

Are foreign cryptocurrency exchanges subject to the laws and regulations of your jurisdiction for exchanging cryptocurrencies?

Yes, foreign cryptocurrency exchanges may be subject to Austrian laws and regulations (including approval and prospectus requirements) if they are actively aimed at the Austrian market. According to the FMA, whether the Austrian market is actively being addressed is indicated by various factors such as an Austrian website, Austrian contact details, marketing activities in Austria or the establishment of an Austrian sales network. According to the case law, suitable technical provisions to ensure that offers in Austria are excluded, and clear and factually correct exclusions of liability are justified reasons for arguing that an offer avoids targeting the Austrian market.

Under what circumstances can a citizen of your jurisdiction lawfully exchange crypto assets for currency?

In general, there are no special legal requirements that prescribe the circumstances under which Austrian citizens may lawfully exchange crypto assets for foreign currency. However, foreign cryptoasset exchanges that offer their services to Austrian citizens may be subject to Austrian laws and regulations.

However, there are currently no exchange controls, border restrictions or obligations to declare stocks of crypto assets.

Taxes

Are there any tax liabilities when exchanging cryptoassets (for other cryptoassets as well as for fiat currencies)?

The exchange of cryptoassets for other cryptoassets or fiat currencies will be treated as a sale for income tax purposes. For companies, the exchange of crypto assets is subject to a corporate tax rate of 25 percent.

For individuals who hold cryptoassets as corporate assets, the exchange of cryptoassets is subject to the progressive income tax rate of up to 55 percent. For people who hold cryptoassets as non-business assets, profits from the exchange of cryptoassets are tax-free if they are realized after the one-year speculation period has expired. Profits made before the end of the one-year speculation period are subject to the progressive income tax rate of up to 55 percent. The aforementioned tax treatment does not apply if the cryptoassets are rented with interest. In that case, any capital gains realized on the exchange would be subject to an income tax rate of 27.5 percent.

The exchange of crypto assets should not be subject to VAT.

Legal date

Right on

Provide the date when the above content is correct.

23 October 2020.