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R109 – Cross-Chain & L2 Tax Treatment by Country

Moving assets across blockchains or into Layer-2 networks can create different tax implications depending on the jurisdiction.

Updated over 2 weeks ago

Country

Cross-Chain Bridges

Layer-2 Deposits/Withdrawals

Wrapped Assets

Notes

United States (IRS)

Generally treated as a disposal + reacquisition; IRS has not issued explicit guidance

Same as bridges — usually disposal events

Considered swaps → taxable disposals

Conservative approach: all “token in/token out” = taxable

United Kingdom (HMRC)

Often treated as disposals; case-by-case analysis

Deposits/withdrawals may trigger capital disposals

Wrapped assets considered swaps

HMRC: if token identity changes → disposal

Canada (CRA)

Treated as disposals; gains/losses realized

L2 transfers taxable if considered dispositions

Wrapped tokens treated as new property

CRA applies commodity rules

Germany

May be treated as disposals unless identical asset continuity can be proven

Same as bridges

Wrapped tokens = taxable swap

1-year exemption may still apply if held long enough

Spain

Treated as disposals

Same as bridges

Wrapped assets = taxable swaps

Italy

Treated as disposals

Same as bridges

Wrapped assets = taxable swaps

Ireland

Disposals unless continuity proven

Same as bridges

Wrapped tokens = taxable swaps

India

All cross-chain and L2 activity taxed at 30% flat VDA rate

Same

Same

No offsets allowed

Japan

Considered disposals (income or CGT depending on activity)

Same

Wrapped = swaps

Strict reporting regime

South Africa

Treated as disposals

Same

Wrapped = swaps

SARS enforces case-by-case

Australia (ATO)

Likely treated as disposals; ATO may allow transfers in limited cases

Same

Wrapped tokens = disposals

Anti-avoidance provisions may apply

New Zealand

Intent-based test; usually taxable if done for resale

Same

Wrapped = swaps

Depends on intent of acquisition


✅ Use this guide alongside AT104 – How Netrunner Handles Cross-Chain & Layer-2 Tracking to ensure you classify cross-chain and L2 activity correctly for your jurisdiction.

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