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R106 – DeFi Tax Treatment by Country

DeFi transactions may be treated differently depending on your jurisdiction. The table below summarizes common approaches.

Updated over 2 weeks ago

Country

Token Swaps (DEX)

Staking / Validator Rewards

Liquidity Pools

Lending / Borrowing

Notes

United States (IRS)

Taxable disposal

Taxable income when received; IRS has not clarified validator timing

Often treated as disposal on deposit/withdrawal

Borrowing not taxable; rewards taxable

IRS guidance is evolving

United Kingdom (HMRC)

Taxable disposal

Taxable income; case-by-case analysis

LP deposits may be disposals; Bed & Breakfast rules apply

Borrowing non-taxable; rewards taxable

HMRC considers DeFi arrangements individually

Canada (CRA)

Taxable disposal

Taxable income; included in gross income

LP deposits/withdrawals may trigger dispositions

Borrowing not taxable; rewards taxable

CRA treats crypto as commodities

Germany

Taxable disposal

Taxable income; gains may be tax-free if held >1 year

LP tokens treated as assets; disposals taxable

Borrowing not taxable; rewards taxable

Spain

Taxable disposal

Taxable income

LP transactions often disposals

Borrowing not taxable; rewards taxable

Italy

Taxable disposal

Taxable income

LP deposits may be disposals

Borrowing not taxable; rewards taxable

Ireland

Taxable disposal

Taxable income

LP deposits may be disposals

Borrowing not taxable; rewards taxable

India

Taxable disposal

Taxable at 30% flat VDA tax; no offsets

LP activity likely disposals

Borrowing not taxable; rewards taxable

Strict regime

Japan

Taxable disposal

Taxable income; reported as miscellaneous income

LP deposits likely disposals

Borrowing not taxable; rewards taxable

Loss carryover limits apply

South Africa

Taxable disposal

Taxable income

LP tokens often treated as disposals

Borrowing not taxable; rewards taxable

Australia (ATO)

Taxable disposal

Taxable income

LP deposits/withdrawals likely disposals

Borrowing not taxable; rewards taxable

Anti-avoidance provisions may apply

New Zealand

Taxable disposal

Taxable income

LP activity generally treated as disposals

Borrowing not taxable; rewards taxable

IRD applies general CGT principles


✅ Use this reference alongside AT101 – How Netrunner Handles DeFi Transactions.

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