Does Crypto Mining Pose Double Taxation Risks?

Increased crypto adoption has directly resulted in more demand for digital assets. Cryptocurrency mining has, in turn, been on the up over the years. Crypto legislation has been trying to catch up in light of its increased popularity and therein lies the issue. While crypto mining has been associated with tax evasion, is double taxation on crypto mining a possibility? Read on to find out. Double Taxation and How It Occurs Double taxation refers to a taxing principle where taxes are paid twice on the same income source. Its occurrence may be legal, and it does occur for some actors. A taxing authority may impose taxes twice during the same taxing period, on the same income source, for the same purpose, and within the same jurisdiction. Such an occurrence raises illegality concerns. The Susceptibility of Crypto Mining to Double Taxation Crypto mining may incur several possibilities of double taxation. They include the following. 1. Income Tax on Mining and Capital Tax Crypto mining activities generate returns to the miner through mining rewards. In most jurisdictions, the rewards represent a taxable income and are subject to an income tax. Tax obligations don’t end there on paying the income tax as per the rates stated by the jurisdiction a miner is based in. The miner is obligated to pay a capital or wealth tax. It is especially applicable in instances where the mining process is done by a registered venture. Such a tax is levi...