Days after the Reserve Bank of India (RBI) barred banks from dealing in cryptocurrency, many bitcoin exchanges, including Unocoin, ZebPay, CoinSecure, BuyUcoin and BTCX India, are looking to move their head offices to jurisdictions outside India. Many bitcoin exchanges have already approached their advisers and are working on various tax structures.
Most of the exchanges are exploring whether they could shift base to countries like Singapore, Delaware or Belarus. On Friday, the banking regulator asked banks to refrain from providing any services to individuals or business entities dealing with or settling virtual currencies.
The announcement has already led to many investors flocking to sell their cryptocurrencies. Most cryptocurrency exchanges now fear that the RBI’s announcement could be a death nail for the business and they would find it difficult to operate in the country.
“We have to move our company to some foreign country where regulations allow opening of bank accounts plus we won’t be dealing with fiat currency. It will become a global operation rather than an India centric operation,” said Shivam Thakral, CEO, BuyUcoin, a cryptocurrency wallet, and exchange.
These exchanges are looking to settle the accounts of their existing customers before they shut down operations in the country. The exchanges hope that if they move their headquarters elsewhere, some of the Indian laws won’t apply to them. A permanent establishment is a concept in taxation that determines which jurisdiction has the right to tax the company.
Tax experts say the exchanges may have only two options — either shut down the business or move to any other jurisdiction. “Even after such a move, Indian investors may be able to continue to invest in the platforms through innovative structures. Volumes from India will surely go down but profits from business originating from India may escape tax in India as the exchanges would not have a permanent establishment in India after the move,” said Riaz Thingna, director, Grant Thornton Advisory.
For the exchanges not only the RBI but even enforcement directorate, income-tax department and the indirect tax authorities have been causing troubles. The I-T department has issued notices to about 5 lakh investors. In December that the indirect tax department had launched an investigation into Bitcoin exchanges in India to ascertain the GST rate that can be levied on them. The sales tax department and VAT authorities launched an investigation on the taxability of Bitcoins in the last financial year.
India Cryptocurrency exchanges look to shift base abroad