Lithuania Introduces New Cryptocurrency Rules
Lithuania has instituted extensive guidelines for cryptocurrency and initial coin offerings (ICOs), encouraging its presence in markets across the globe.
The Republic of Lithuania’s Ministry of Finance published its guideline entitled “ICO Guidelines” which focus on the following areas: regulations, anti-money laundering and fighting terrorism financing, accounting, and taxation.
“Organizing ICO is not regulated by specific legislation,” the finance ministry explained, adding “taking into account different ICO models and different characteristics of tokens, in some cases, such activity may be subject to the requirements of the legislation of the Republic of Lithuania and supervision of the Bank of Lithuania.”
Moreover, the ministry stated if funds collected during the ICO are earmarked for raising capital of a newly formed financial market participants, “the capital formation requirements applicable to a specific form of financial institution shall apply.”
On the taxation side, the ministry outlined the treatment of cyrptocurrency for various tax purposes, as well as deductions and exemptions.
“[V]irtual currency [for personal and corporate income taxes] is recognized as current assets that can be used as a settlement instrument for goods and services or stored for sale,” it said.
For VAT, it is “considered as the same currency as euros, dollars etc.” For other types of taxes, “other types of instrument, e.g. certain types of tokens, may be recognized as a virtual currency as well,” it added.
“Income received from individual purchases and sales of virtual currencies will be taxed standard 15% fixed income tax rate,” the document noted.
In the case of crypto mining, the ministry stated: “When virtual currency is mined, no goods/services are usually supplied for consideration, therefore, the mining of virtual currency is not subject to VAT,” stressing “the sale of such [crypto] currency in Lithuania is VAT exempt.”
The accounting part of the document indicates rules such as when tokens should be considered as costs in gains and loss statements, 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 finance ministry, adding it depends on the type of tokens to be recorded.
It also shed light on the accounting and assessment of digital currencies utilized as payments based on the Business Accounting Standards (Lithuania GAAP).
The concerned ministries are working on modifying the 5th 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 the financial market,” the ministry explained.
Lithuanian finance minister Vilius Sapoka pointed out that although the country was one of the first countries in the European region to come up with comprehensive cryptocurrency and ICO regulations.
In case new rules only refer to certain parts reviewed by relevant institutions in the event the discrepancy between guidelines and positions of institutions, the latter will be followed.
“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,” Sapoka added.