3

Tezos has the unique ability for a software developer to write a piece of code (an extension, a module or a library) for the Tezos protocol and attach an invoice. If the proposal is accepted by the majority of the stakeholders, the developer receives the amount he proposed in the invoice.

This will most likely have very funny tax implications. The money the developer receives is subject to income tax. But who do you specify as the employer? In this new kind of innovation there is no legal entity behind it. How did this "work contract" come to pass? Who paid the money to the developer? Even if this is seen as a form of self-employment, where did the money come from? I believe this is a whole new scenario for our legal system that has not existed yet. Very much like a DAO.

Does anyone have an answer about the legal side of this new form of income?

closed as off-topic by Tom, FFF, Arthur B, Stephen Andrews Mar 26 at 18:27

  • This question does not appear to be about Tezos, within the scope defined in the help center.
If this question can be reworded to fit the rules in the help center, please edit the question.

  • 5
    I'm voting to close this question as off-topic because this is not a place for legal or tax discussions. – Tom Mar 26 at 9:27
4

You are correct there is most likely no precedence in most jurisdictions for how to handle this case. Find a lawyer for your specific jurisdictions and try to navigate 😝

Perhaps reach out to authorities and explain the situation.

I believe a common practice in this type of situation is to request a "principle statement" from authorities how to handle the specific situation. This statement can then be shown if later regulation changes or a tax review etc.

1

On the one hand, this is no different than me making a lemonade stand in a random street and making money from it, giving a made-up invoice for it. Is the "money" taxable? Not really, because it is not a legally recognised business (actually, because of the same reason, street vending without authorisation is in many places illegal).

In fact, the software developer could well declare itself as self-employed. If s/he does so, s/he should not only declare income but also costs (e.g. electricity, a wage, etc), and so the taxable income is lower than merely the income from the invoices.

On the other hand, the main difference between the real world and the crypto world is that the currency of the business is not accepted as valid currency for tax purposes. Thus, it is not possible to validate the income from, say, tezos. The developer would only have costs.

Others might say that, in the anti-government spirit that drive some of the crypto world, government should keep its reach out of the crypto assets. In this sense, it is actually good that the software developer can do business outside the realm of the law.

Regarding the source of the money, this is, of course the electronic supply of tokens available. But, on a more deeper level, ultimately, tokens have value because people agree they have value. As it is plainly evident to anyone familiar with the crypto world, such valuation can dramatically change. This is not the case with official money, which is backed by the State, and can be used to pay taxes.

Not the answer you're looking for? Browse other questions tagged or ask your own question.