Cryptocurrency News

Global Corporate Tax Rate: Crypto Savior Or Killer?


At a meeting in London earlier this month, the G7 finance ministers – the United States, Japan, Britain, Germany, France, Italy and Canada – unanimously agreed Agreed To begin creating the framework for a global corporate tax rate.

The framework set out the “two pillars” principle. The first pillar ensures that companies making a 10% profit margin will be subject to the tax rate. The second pillar ensures that countries will charge a 15% minimum tax rate. Under all this, the new rules will focus on where the profit occurred and not where the company is based – the idea being to discourage companies from moving money around the world, or from one country to another. Providing services is cheaper in tax rate.

Does legal mean ethical?

The concept of a global corporate tax rate is nothing new. With companies like Google, Amazon, Facebook and Apple generating billions of dollars in revenue and paying little or no tax, regulators and governing bodies have attempted to plug the loopholes used by these large multinationals.

The practice of making money in one country and then moving it to another country to pay less taxes or avoid all of that is perfectly legal. However, in practice, this may raise some ethical questions. This practice has only now come into the limelight with a rise in international and digital businesses moving more funds around the world than ever before. Apples, for example, holds More cash in reserves than the gross domestic product (GDP) of many countries. Nevertheless, in most countries, it pays less tax than the average domestic company.

This closure of the loophole could be a sign of a good move for the domestic governments. The United Kingdom, for example, stands to gain an additional £14.7 billion for its economy over the next ten years – a huge help given the huge impact of the global COVID-19 pandemic.

But what about cryptocurrencies?

With the inevitable introduction of these new pillars, we have to ask ourselves: How could this affect crypto companies?

Crypto, at its core, is truly international. It also transfers money around the world and targets an international audience. As a result, purely from its operation, it comes according to many in accordance with the new rules relating to the taxation of international companies. (Note: “International companies” literally means companies that have multiple locations, or do business in, multiple countries.)

The implementation of these new rules is yet to be confirmed, and what it will actually look like, many are still unsure. The sentiment is that crypto companies operating internationally will have to do one of two things: either be prepared to pay a worldwide corporate domestic rate of 15%, or move their physical location to a truly international location. Carry it. To be clear, it should be more than just a registered office.

In fact, we will see the death of companies based in places like the Seychelles or the British Virgin Islands with actual offices in New York (you know who they are). Similarly, a “service company” based in the United States with a “head company” based offshore may also be subject to some variation. In the future, it is possible that we will see companies that are purely out of their location, such as the British Virgin Islands, with the team physically doing business there.

not so universal after all

The flip side is that while the G7 makes up a large part of the global GDP, big players such as India, China and Russia are still not covered by these new rules. He hasn’t even signed up for them. And it is difficult to say whether they will adopt them at all. Similarly, countries like Singapore and Ukraine have excellent tax rules for companies that want to do business there with only minimal presence.

The right to set one’s own tax rules is a broad sovereign right. Countries will not want to leave this too quickly – especially countries that rely heavily on income from corporate structures and companies doing business within their otherwise unsuspecting shores. Additionally, make no mistake that this entire process is US-driven. The US knows it is losing money by allowing companies to move money out of the US in a corporate setting. With more cumbersome tax laws for individuals and corporations, this is something they are desperate to stop. Countries like Russia would not like to see they are being pushed by the US

For now, the best thing all crypto companies can do is to keep an eye on the development and implementation of these taxes. If, when the new rules go into effect, taxes have a wider impact, many people may want to look at new locations and physical offices – especially those that generate more than 10% of their profits and more importantly That is those who do good business in one place. taxes, but their physical offices are in second place. Now no one needs to panic. However, his five- or ten-year plan may want to see some adjustments in a worst-case scenario.

Lastly, it should always be remembered that tax evasion is illegal and should not be done. Tax avoidance, on the other hand, is simply smart planning and is always worth spending time and money to implement properly.

This article is for general information purposes and should not be construed as legal advice.

The views, opinions and opinions expressed here are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Cal Evans is an international technology lawyer from London who studied financial markets at Yale University and has experience working with some of the most renowned companies in Silicon Valley. In 2016, Cal left the top 10 California law firm to start Gresham International, a legal services and compliance firm specializing in the technology sector, which now has offices in the US and the United Kingdom.