Lativa has come around to allowing cryptocurrencies in the country, however, the catch being that they will be taxed. According to the Finance Ministry, 20% tax will be imposed on any gains from deals with cryptocurrencies. This was announced during a meeting with deputies from the Parliamentary Budget and Taxation Committee on Wednesday.
While a few skeptical lawmakers maintained their stance that cryptocurrencies are not considered a legal tender in the Baltic state and that they come with speculative bubbles and financial pyramids. Members of the Financial and Capital Markets Committee, however, noted that cryptos like bitcoin can “function as a means of exchange”.
In the same meeting, discussions regarding the regulatory mechanism of cryptocurrency also occurred.
Policy makers have often criticized cryptocurrencies for failing to perform one or more of the functions of fiat money – means of payment, medium of exchange, unit of account, and store of value. However, they are now being seen as money due to budgetary reasons. The “means of exchange” labeling now gives Latvian authorities an opportunity to tax cryptocurrency transactions. Maybe if they think about VAT, a “means of payment” status will also be attributed. No tax is currently due on crypto purchases of goods and services in Latvia.
Cryptocurrencies are not covered by any Latvian law but authorities in Riga say revenues from crypto trading are subject to personal and corporate income tax. The country has a flat income tax rate of 23%. Incomes from dividends and interest are taxed at 10%. 15% tax is due on capital gains from shares, real estate, and intellectual property. The standard rate of Value Added Tax is 21%. Financial transactions are exempt from VAT. Tax returns in Latvia are filed between March 1 and June 1 of the year following the taxation year.