Lithuania’s Finance Ministry yesterday released a set of guidelines for the cryptocurrencies and the Initial Coin Offering (ICO) space – the guidelines covered regulations, accounting and taxation.
The guidelines were under four major headings; Regulation, Taxation, Accounting and Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT).
Lithuania’s Finance Minister Vilius Sapoka stated that “the guidelines describe only part of the aspects examined by relevant institutions, in case of discrepancy between guidelines and positions of institutions, the latter shall prevail.”
Additionally, he says;
“We acknowledge that the brave new crypto economy world is here to stay, this is why we encourage and invite its participants to innovate and create in Lithuania.”
The ministry of finance acknowledges that different ICO projects are peculiar in their nature as such there is no specific regulation yet. However, depending on project model and characteristic of their tokens, they could be subject to legislation as pertains to the Republic of Lithuania under the supervision of the Bank of Lithuania.
On ICOs, the ministry adds that “if funds collected during ICO are intended for the formation of the capital of a newly established FMP (Financial Market participants) – the capital formation requirements applicable to a specific form of financial institution shall apply.”
Mr. Sapoka says that;
“We are one of the first ones in Europe who prepared comprehensive guidelines on the legal framework for ICO projects covering regulatory as well as taxation and accounting.”
The guidelines set crypto currency taxation apart from regular taxation on fiat with some tax exemption clauses.
When being used for corporate or personal income tax, virtual currencies can be considered as current assets and be used for as settlement instrument goods and services or the can be stored for sale.
Under the VAT premise, it can be regarded similarly to fiat – the document states that;
“Income received from individual purchases and sales of virtual currencies will be taxed standard 15% fixed income rate.”
The finance ministry goes further to touch on mining stating that “when virtual currency is mined, no good/services are usually supplied for consideration, therefore, the mining of virtual currency is not subject to VAT.” It adds further that sale of such mined virtual currencies are also not subject to VAT.
Accounting & AML/CFT;
This section takes care of how tokens should be regarded as costs or profits or losses, in off-balance accounts or accounted at fair value.
“Accounting of tokens circulated by the token promoter depends on whether they are attributed to payment, utility and securities tokens.” The Ministry of Finance the accounting formula to be used on a token depends on the form, type and characteristics of the token. Evaluation of cryptocurrencies that are used as means of payment will be done according to the country’s Business Accounting Standards (Lithuania GAAP).
The document states that relevant ministries are working to amend the country’s 5th Anti-Money Laundering (AML) directive;
“First round of amendments will concentrate on provisions relevant to virtual currency exchanges and wallet services operators, aiming at increasing transparency and clarity of regulation together with stability and security of financial market.”