‘Check tax’ on cryptos: Argentine Chamber of Fintech says measure will increase informality

RIO DE JANEIRO, BRAZIL – The Government resolved yesterday to include cryptocurrency purchase and sale transactions among those covered by the Tax on Bank Credits and Debits, commonly known as the Check Tax, through Decree 796/2021 published in the Official Gazette.

Specifically, the decree repeals the exemption from the tax on debits and credits for the movement of funds linked to the purchase, sale, swap, brokerage and/or any other transaction on cryptoassets, cryptocurrencies, digital currencies, or similar instruments, under the terms defined by the applicable regulations.

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This implies that, from now on, when a person wants to buy cryptocurrencies and transfers the funds to an Argentine exchange (platform to buy and sell cryptocurrencies), for example, he/she will have to pay the debit and credit tax.

“The rationale used by Decree 796/2021 to take this measure is that in the draft Budget Law 2022 ‘it is made explicit that the same seeks to be the roadmap for public policies towards a calmer economy, with more opportunities for everyone along with the definition of a sustainable fiscal path in the medium term.’ However, we understand that repealing this exemption by increasing taxes for cryptocurrency operations does not calm the economy and will affect this type of operations”, said accountant and tax consultant Sebastián Domínguez.

According to him, many people who want to protect themselves from the loss of value of the peso and who today operate with Argentine exchanges or fintechs will migrate their operations to foreign exchanges or fintechs and will operate person to person (P2P) to avoid the tax.

According to crypto world referents, the cryptocurrency market in Argentina would be close to US$ 1 billion per year.

For his part, tax lawyer Diego Fraga explained that, although the AFIP regulations are still pending and it remains to be seen how banks will apply it, the decree is only so that some exchanges that wanted to use the exemption for Payment Service Providers (PSP) do not use it. He added that movements within exchanges would not be reached because they are not bank accounts.

“Obviously, what will happen is that those exchanges that had a well or badly used exemption will now have an extra cost and, unless they decide to commercially absorb it, they will pass it on to the consumer,” he said.

In this sense, Norberto Saraceni, partner at Baker Tilly consulting firm, also insisted -like Domínguez- that users will change their way of getting hold of cryptoassets.

“It is clear that the main people affected will be individual contributors or retail investors, who out of fear or ignorance do not buy their cryptoassets in the P2P market, or person-to-person. Because this type of taxpayer uses local or international platforms that saw potential in the Argentine market in the last time and that allow entering and withdrawing funds in pesos. The immediate effect I see is that investors will try to move to the P2P market or will investigate the use of platforms that are not covered by the regulations in Argentina”, he pointed out.

Meanwhile, Ignacio Morales, financial analyst at Wise Capital, considered that the impact of the measure “is very limited” and that “it hurts local exchanges more than investors”, since the latter can choose to carry out P2P transactions and thus not pay taxes.

THE SECTOR’S REACTION

Faced with the novelty, the Argentine Fintech Chamber said that the regulation will have an immediate impact on formal operations, which – seeing their costs increase – will turn to the informal market. “Thus, the State will lose visibility over these transactions, which will not decrease in quantity or volume, considering the boom in which they are,” they added.

Finally, they stated that they want to continue working together with the Government, thus generating the conditions for the development of a sector that could represent strategic opportunities for the country.