Blockchain technology is a digital ledger of transactions duplicated and distributed across a network of computer systems. It allows users to verify the integrity of transactions and associated data in a secure and unalterable way. Digital assets are self-contained, uniquely identifiable, and have value or usage. Therefore, with blockchain technology, individuals or entities can provide ownership, authenticity, transaction history, and location without third parties.
The Incentives Code considers digital assets based on blockchain technology eligible for the preferential capital gain treatment provided to resident investor individuals. Furthermore, businesses engaged in the distribution of digital assets in physical form, through the web, cloud computing, or as part of a blockchain network can enjoy specific tax incentives under Chapter 3 of Subchapter B of the Incentives Code.
The DDEC has defined the scope of the terms "blockchain technology," "digital assets based on blockchain technology," and "blockchain validation" under the Incentives Code. It has been established that businesses engaged in generating or developing digital assets based on blockchain network technologies or other similar technologies or investments in such digital assets are eligible for tax benefits subject to the conditions established in the corresponding subchapter.
The DDEC recognizes that the direct beneficiary of blockchain technology is often the network itself, with indirect beneficiaries being users across the globe. The validation of blockchain records is performed by Stakers, who locks up a security guarantee denominated in the blockchain native token. Stakers earn rewards for correctly processing blockchain transactions, which are not a return on investment, but a variable commission based on the quantity of software put to use in the network. Providers of staking services must be aware of the periods in which tokens are committed to the network to elect to stake, unstake, or restake tokens.
In interpreting tax incentives acts, the PRSC has emphasized the need for a fair and reasonable interpretation that will render the legislator's purpose and intention into effect. Tax incentives acts should be interpreted in a manner consistent with their creative purpose of encouraging industry and productive investment.
