Colombia and taxes on cryptocurrency activity

This article was written by Marcos Zocaro, Argentine tax expert, university professor, author of numerous articles and several books, including Cryptocurrency Manual. In addition, he is a member of the NGO Bitcoin Argentina.
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At the end of 2023, the National Tax and Customs Directorate (DIAN) of Colombia published the document “Unified Concept on Cryptoactives”, through which it provided essential notions about cryptocurrencies and their tax treatment in Colombia. Using a simple question and answer scheme, let’s analyze the main considerations expressed by the Colombian treasury:

What are crypto assets?

The DIAN defines cryptoassets as intangible assets whose use or ownership is frequently recorded in a blockchain and whose main objective is to carry out transactions quickly, safely and without intermediaries.

In turn, it mentions different types of cryptoassets, such as “tokenized” negotiable securities, security tokens, utility tokens, asset tokens and tokens for payment purposes, among others. For example, they would fall into this definition from bitcoin to a token that represents rights to a work of art.

Is the sale of crypto assets covered by income tax?

Yes, the sale of cryptocurrencies is subject to income tax. And to calculate the “profit” you must consider the sale price of the asset minus its acquisition cost.

In addition, residents in Colombia are taxed according to the worldwide income criterion (that is, on profits from both Colombian and foreign sources); and non-residents only for their Colombian source income.

Thus, for example, someone who resides in Colombia and exchanges cryptocurrencies both in local and foreign exchanges will see all the results obtained covered by the tax. both in Colombia and abroad. On the other hand, someone who does not reside in Colombia may have to pay income tax in Colombia only if he or she obtains profits from trading crypto assets on exchanges located in Colombia.

Where are crypto assets considered located?

Although cryptoassets did not have a specific geographical location, given their characteristic of “decentralization”, for the treasury the exploitation or economic use of the cryptoasset in the country generates that it is understood to be possessed in it; and this can be verified when the crypto asset is monetized in Colombia (that is, exchanged for legal tender or foreign currency), or when it is used as a means of payment (in kind) to acquire goods or services in Colombian territory.

So, the exchange between cryptoassets, that is, the sale of one cryptocurrency for another Is it considered for tax purposes? What if cryptocurrencies are used to pay, for example, for the purchase of a property?

Yes, the exchange between cryptocurrencies is considered a sale and the profit obtained in said operation must be calculated. Even if cryptocurrencies are used to buy a property or any other asset, the result of said operation must be calculated, since it is considered that the cryptocurrencies delivered as a form of payment are being “disposed of”, “sold”. The person must calculate whether they obtained income from the difference between the value of the “disposal” of the cryptocurrency and its tax cost.

Does the simple revaluation of a crypto asset pay income tax?

No, the simple increase in the price of a crypto asset is not taxed. If the asset is sold, taxable income will occur. For example, if someone had bought 1 bitcoin at US$100 years ago and today continues to save it at a price of US$70,000, that is, they did not “sell” it, there is no result achieved by the income tax. But when I finally sell it, At that time you must calculate the profit obtained.

And the airdrops Are they covered by income tax?

For the Colombian treasury, airdrops are tax income, but since they are a reward (not linked to a consideration), they constitute an occasional gain for those who receive them.

What about PoW mining and staking?

Yes, for the Colombian DIAN the income obtained correspond to a payment in kind and subject to income tax. That is, miners and those who stake in Colombia must pay this tax for the benefits they obtain from their activity.

Is the sale of cryptocurrencies subject to VAT?

In this case, the Colombian treasury indicated that the sale of cryptocurrencies is not subject to VAT. However, the provision of services (such as intermediation or cryptocurrency mining) is subject to VAT. That is, a person who is dedicated to trading cryptocurrencies, for example, I would not pay VAT on these operations. However, a company that, for example, provides exchange services, will pay VAT for the service provided. The same thing happens in many countries, where the simple sale of cryptocurrencies is not covered by VAT.

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Disclaimer: The views and opinions expressed in this article belong to its author and do not necessarily reflect those of CriptoNoticias. The author’s opinion is for informational purposes and under no circumstances constitutes an investment recommendation or financial advice.