Missing Word ‘Crypto’ in Law Sets Off Alarms

The new regulation to tax virtual digital assets could create trouble for many multinational and companies due to the broad definition of the framework that doesn’t use the word “cryptocurrency” anywhere, say tax experts.

The broad definition of “virtual digital assets” and “any information, code, or otherwise” in the newly announced framework could cover a large range of intellectual properties and even online assets created by multinationals, as per the experts.

This could eventually mean that taxmen may be able to question certain assets or intellectual properties, and they could eventually be taxed at a higher rate.

Many tax experts are seeking a definitive clarification as was done in the past, taxmen will vie for maximum taxation based on their own interpretations.

“The proposals toward taxation of virtual digital assets seem to have multiple loose ends with the kind of wordings used to define the said assets, such as ‘Information,’ ‘or Otherwise’.

Also, the said assets have specifically been excluded from the definition of Indian or foreign currency,” said Rahul Garg, managing partner of tax and regulatory consultants Asire Consulting.

“With such language used under Section 2(47A), it may trigger multiple issues as the reach of the definition could be beyond the imagination of anyone when anything and everything has started operating in the digital world with new concepts of wallets, platforms, etc. coming in.”

This also comes at a time when many large multinationals are moving toward Blockchain tech for storing their information regarding clients and projects.

Under India’s transfer pricing regulations, the tax department has the right to scrutinies transactions between an Indian arm and its parent located outside India.

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