In AIPA Tomorrow Meetings #53 (12 April 2023), Vircon Legal co-founder Erdem Mümtaz Hacıpaşaoğlu discussed the legal outlook and taxation of crypto-assets, together with Assoc. Prof. Barış Özçelik and Berfu Esen Atak.
Taxation follows characterisation
Almost every difficult crypto tax question is really a characterisation question wearing a tax costume. Before anyone can say what is owed, the asset and the activity have to be placed into categories the tax system already recognises: is the holder an investor or a trader, is the gain a capital gain or business income, is the receipt a payment for services or a windfall. Two people with identical wallets can face very different treatment because one of them is doing this as a business.
The events that create tax, and the ones people forget
Disposal for fiat is the obvious taxable event. The ones that catch people out are the others: crypto-to-crypto swaps, which are disposals even though no fiat moved; spending tokens on goods or services; and receipts that arrive without a purchase — staking rewards, airdrops, liquidity-provision returns and protocol incentives. Each raises the same two sub-questions: at what moment does the receipt become income, and at what value.
Valuation is where the practical difficulty lives. A reward received in a thinly traded token at a volatile moment still needs a number, and that number becomes both the income figure and the cost basis for the eventual disposal. Without contemporaneous records the taxpayer ends up reconstructing a history under audit conditions, which is the worst possible time to be estimating.
The cross-border layer
Crypto activity is natively borderless and tax systems are not. Residence determines the primary claim, so where the individual or company is resident matters more than where the exchange is incorporated. A team operating from Türkiye through an offshore entity can create a permanent establishment without intending to, simply because the people making decisions sit in one place while the paperwork sits in another. Where two jurisdictions both claim the same income, double tax treaties allocate it — but only if the structure is documented well enough to invoke them.
Reporting has also tightened. Exchange-level identification and transfer information obligations mean that the assumption of practical invisibility no longer holds; see the travel rule and MASAK.
What to do about it before it is a problem
The workable approach is unglamorous: keep transaction-level records with timestamps and valuations from the beginning, decide and document whether the activity is investment or business, get the entity structure to match where the work actually happens, and take a position on the uncertain items in writing rather than leaving them to be discovered. Our comparative pieces are here: Crypto Taxes in Different Jurisdictions I and II.
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- Crypto Assets, Web3 & Regulated Digital Markets
- CASP / Crypto Compliance
- Founder & Investor Legal Glossary
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