Less taxes: this is Costa Rica’s proposal to regulate cryptocurrencies

A bill submitted to the Costa Rican Legislative Assembly proposes to give legal certainty to cryptocurrency transactions and establish a regulation on the exercise of the activities that are developed from the asset that is guarded and transferred virtually.

According to TripleA, a consulting firm based in Singapore, 1.69% of Costa Ricans, equivalent to 88,127 people, own cryptocurrencies.

Currently, Costa Rica has no legal regulations governing activities involving or developed from crypto assets or through blockchain technology.

The closest thing to a regulation was a draft Resolution published for review, issued in 2021, by the Tax Administration.

The proposed Cryptoassets Market Law, with file 23.415, proposed days ago by Congresswoman Johana Obando Bonilla, highlights that, unlike El Salvador, Costa Rica will not adopt bitcoin (XBT) or any other cryptocurrency as legal tender.

However, the project does intend to grant the power to crypto-asset service providers to have access to the payment platform of the Central Bank of Costa Rica’s National Electronic Payments System (SINPE).

In this way, banking interoperability is guaranteed, which allows opening the crypto assets market in Costa Rica, with a framework of legality respectful of the current monetary policy, states the bill that Obando presented together with deputies Eliécer Feinzaig Mintz, Luis Diego Vargas, and Jorge Dengo.

THE PURPOSE OF THE BILL

The purpose of the law is to regulate the uses and taxation of mining, commercialization, intermediation, exchange, transfer, holding, custody, and administration of crypto assets.

To promote the establishment and growth of this industry in the country, generate greater financial inclusion and modernization of the Costa Rican digital economy, and guarantee legal, financial, and tax security for individuals and legal entities, public and private, who want to develop business with and through crypto assets.

The project includes five chapters.

The first includes definitions and the scope of application; the second describes what crypto assets are and their categories; the third refers to their ownership, use, and liability.

The fourth chapter delimits the crypto asset service providers, their registration in money laundering prevention, and the inclusion in the SINPE of the Central Bank.

The fifth chapter refers to the tax regime of crypto assets concerning taxes on profits, value-added, capital gains and losses, and others.

EXEMPTIONS PROPOSED BY THE LAW

According to the bill, airdrops, purchase, mining, storage, custody, holding, and transfer of cryptocurrencies will not be subject to tax on profits or benefits. That is due to the “extraterritorial nature” of the emerging ecosystem.

Purchases of goods and services made with cryptocurrencies will not be taxed with the profit tax either, since they will be understood as an exchange, i.e., delivery of one good in exchange for another, in the eyes of the law.

On the other hand, the acceptance, purchase, general use, and other activities inherent to cryptocurrencies will not be subject to Value Added Tax (VAT) because they do not represent transfers of goods and rendering services in the Costa Rican territory.

Additionally, since it is considered an operation resulting from a service analogous to handling foreign currency, transferring cryptocurrencies to buy Costa Rican colones, other crypto assets, or any good or service will be exempt from VAT.

Operations with cryptocurrencies, such as transfers or disposals, will not have to pay the Capital Gains and Losses Tax (IGyPC) either. That, if the transferred good is owned by a natural person and is not the object of lucrative activity.

CLASSIFICATION OF CRYPTO ASSETS

The bill proposes to classify crypto assets according to their use, whether for payment, utilities, investment, and hybrid, and they will be considered the private property of whoever has sufficient credentials or powers in a digital wallet to execute, unilaterally, or prevent indefinitely, the custody, holding, and transfer of crypto assets.

On the other hand, it is suggested that State entities may receive crypto assets for the payment of taxes, tariffs, and any other type of obligation.

All entities supervised by the different Superintendencies of the Costa Rican financial system will be able to use crypto assets and offer products and services related to them, according to the regulations to be issued for such purposes by the National Council of Supervision of the Financial System (CONASSIF).

“This project is born as one more initiative for these disruptive digital economies to position themselves in the country,” said Deputy Obando to local media.

The legislator assured that this project has been of interest to the Executive.

With information from Bloomberg