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Kochański & Partners, the authors of the first metaverse report in Poland, published a follow-up tax themed report on 27 October. “Taxation of Cryptocurrencies and NFTs, and Challenges in the Metaverse” is a comprehensive overview of the tax consequences of events and transactions involving cryptocurrencies and NFTs. The publication was coupled with presentation of the report and an expert debate featuring the participation of representatives of business, new technology market practitioners who deal on a daily basis with crypto, NFTs and the Metaverse, and lawyers specialising in digital economics and taxes.
The participants discussed how to make Poland attract and keep cryptocurrency and NFT market players.
The expert debate was opened and moderated by Łukasz Węgrzyn, Partner and Head of Kochański & Partners Technology Practice, originator and co-author of the first metaverse report. Attendees included Paweł Łaskarzewski, Serial Entrepreneur & Web3, Fintech and CBDC Expert, Łukasz Wenskowski, CEO of RQ Wealth Management and dr Tomasz Smus, CEO & Founder of Blockchain Alliance. The report authors were represented by Agata Dziwisz-Moshe, Partner and Head of the Tax Law Practice, and Wojciech Śliż, Counsel in the Tax Law Practice.
In the current Polish legal environment there are more questions than answers. As the Kochański & Partners experts acknowledged, operating in the crypto and NFT industry is associated with a multitude of risks. In such conditions, it is difficult to provide maximum security for clients and assure them that they are properly fulfilling their tax obligations, which is clearly a disincentive for businesses.
They emphasised the need to adapt tax regulations to technological realities and to create a simple and transparent tax system for operating and transacting in the crypto and NFT market, enabling market participants with different levels of business experience to comply with tax regulations.
Another topic of discussion involved what market participants could and in fact should do to see tax legislation that better addresses the problems and peculiarities of cryptocurrency and NFT trading.
The debate participants agreed that the crypto and NFT community needs to designate representatives whose role will be to educate the lawmakers, raising awareness on critical issues of rapidly evolving technology.
“The lawmakers do not have sufficient knowledge of transactions in new, technology markets. The consequences of this are ill-considered regulations and, even more often, controversial interpretations. This definitely discourages businesses. Paradoxically, however, when comparing our system to those of other jurisdictions such as Germany, the UK or the USA, Poland is not in a bad position, and some legal regulations are actually more favourable than those in other countries.
So far, therefore, we are not doing so badly in this field. Nevertheless, there is a need to call for a significant simplification of regulations through dialogue between business and lawmakers. The question, however, is whether such a dialogue will actually take place,” noted Agata Dziwisz-Moshe.
“We should strive to ensure that investors are not forced to flee Poland to crypto tax havens. Rather, we should create a system that will encourage them to stay. This requires the creation of a taxation system for the crypto and NFT market that is simple, coherent and understandable for every trader. Undoubtedly, the first step to achieve this goal is to raise the level of legislators technological knowledge, so that they have a chance to understand the voices coming from the market and allow them to become an equal partner in discussing specific solutions,” – added Wojciech Śliż, Counsel, Kochański & Partners.
“The market situation has largely been determined by the immaturity of businesses, as the market is developing. Meanwhile, the discussion on market regulation needs robust, well-established partners, and is an evolving state, with more and more virtual world players wanting a voice in the public discourse. We are beginning to understand the significance of being able to influence the regulator and it is important that demands for simple and transparent regulation are not formulated too late,” – noted Łukasz Wenskowski.
“In this maturing and growing market, the need for transparent regulations is very clear, as it is critical that we know how to implement regulations. The market is also characterised by great enthusiasm and potential, bringing together young, enterprising and ambitious people, including programmers, who had to move to Poland from Ukraine in order to develop further. The Polish economy has thus found itself in such a unique situation, with a technological, demographical and business opportunity which we will not see again in the coming decades, a chance to emphasise our role in the world of new technologies, changing the patterns of distribution and digital transfer. It is happening now. We have to work actively towards sharpening our competitive edge,” stressed dr Tomasz Smus.
“It is not about changing the world, but about educating and explaining it on a partnership basis, so that the regulator can fulfil its mission, with entrepreneurs and investors not being at a disadvantage, and involves finding a mutually satisfactory compromise,” concluded Paweł Łaskarzewski.
The participants in the debate discussed a number of issues, including the fact that technological expertise is not enough for the regulator to meet market expectations. Specific provisions and analysis of solutions in other jurisdictions will also be necessary to bring certain solutions closer to lawmakers and to identify specific regulatory paths. The intention of the “Taxation of Cryptocurrencies and NFTs, and Tax Challenges in the Metaverse” report and the debate itself was to start dialogue with the crypto community in this regard.
The discussion showed both how great the expectations of business are, but also how much business needs to make the Polish market progressive, competitive and transparent. Such changes urge the need for smart dialogue with lawmakers and official representation of the crypto and NFT communities.
“Taxation of Cryptocurrencies and NFTs, and Tax Challenges in the Metaverse” report
In the latest “Taxation of Cryptocurrencies and NFTs, and Tax Challenges in the Metaverse” report, Kochański & Partners experts summarised not only the current status of Polish regulations and the practices of tax authorities, but also presented the market’s desired regulatory paths corresponding to the dynamic development of the virtual world.
The authors of the report analysed possible solutions adopted in other countries, including those considered to be cryptocurrency tax havens, and EU regulations.
The report is addressed to all those seeking reliable information on taxation in the cryptocurrency market, NFT transactions and tax aspects in connection with the development of the Metaverse, whilst also being a compendium of the most important information that can help lawmakers understand the demands of market participants and the business world, and thus enable them to take a rational direction on the taxation of cryptocurrencies.
The report was authored by Kochański & Partners Tax Practice lawyers: Agata Dziwisz-Moshe, Wojciech Śliż, Aleksandra Pizon-Jaworska, Mirosław Malczeski, Jakub Dittmer, Sławomir Wnuczek, Katarzyna Pustułka and Wiktoria Tracichleb.
Download the report here.
The report was released under the patronage of Forbes and Business Insider.
Kochański & Partners are also the authors of the first Polish report on the metaverse in Poland (published in March this year link). Its publication and the raising of awareness of the legal aspects of virtual reality have earned us a place on the shortlist for The Lawyer European Awards 2022 in the Most Innovative Technology Initiative category.