The Treasury Department of Puerto Rico has published a working document that amends the current “Sales and Usage Tax” to include NFT sales. While this proposal has yet to be approved, experts believe the inclusion of NFTs in this reform brings validation to the asset class, but also that the application of this regulation presents challenges.
Puerto Rico May Soon Tax NFT Sales
The Department of Treasury of Puerto Rico has its eyes on NFT sales. The organization released a newly proposed reform to the Sales and Usage Tax law last month that includes the concept of NFTs as a taxable asset class. This new amendment would include NFTs as part of the Specific Digital Products group. It reads:
Digital audiovisual works transferred or delivered electronically, digital audio works, or other digital products, provided that a digital code gives a purchaser the right to obtain the product will be treated in the same way as a specific digital product, including digital products in token format or medium non-fungible or “NFT”.
The amendment goes on to define the steps taxpayers must follow to report NFT sales, indicating that these details must include the source of income and the addresses of the buyers if available. This is the response of the country’s treasury to the rise of NFTs, which have seen billions in sales worldwide.
A Challenge to Apply
While analysts believe there are benefits to recognizing NFTs and including them in this reform, most of them believe the application of these rules will be a challenge for the treasury department. This is the opinion of CPA Giancarlo Esquilin, who told local media that the current definition of the law project is not adequate. He stated:
As it is written right now, it is a bit difficult to get to the application of the tax because there are several factors of where the person who buys it is located. For NFTs, you don’t see who your buyer is or where the bank account is. It would be uphill in terms of control.
However, Esquilin also recognizes Puerto Rico might be the first U.S. jurisdiction to treat NFTs as taxable products, and this might lead to others doing it, proposing better regulatory frameworks. Juan Pedreira, a tech analyst, also stated that the question remains how the treasury will audit the sale of these assets. Pedreira declared this would not be as simple a process as the current Treasury is trying to make it look.
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