Most of world’s governments – with the exception of countries like Switzerland, Gibraltar, Bermuda and few others – do not have clear and defined policies on digital assets. There is general consensus to welcome innovation and new technical development from the FinTech industry, but at the same time no clear roadmap for regulatory frameworks, policies and taxation. Tax authorities do not know exactly how to handle tax on crypto and how to handle the decentralization and privacy issues, and in their lack of clear policies, cryptographic currencies are somewhat being criminalized by numerous governments. China and India – until recently – being the most hostile. However, we do see OECD and other bodies undertaking reviews of profit allocation and nexus rules, considering user participation in value creation, the role of Intangibles and where significant economic presence is found. Thus, the current proposal across jurisdictions is for a “top up” tax, which would involve a denial of deductions or additional source-based tax and granting treaty benefits only to payment flows already subject to a minimum rate of tax. E.g. France wants to tax 3% on digital intermediation services (e.g. online market places) The US Gilti rules, established in 2017, are a tax on earnings exceeding a 10% return on a non-US subsidiary’s invested foreign tangible assets. UK 2 percent tax levied on social media platforms, search engines and online market places and so on.
