Invoicing & tax guide for contributors
Invoicing and managing taxes can seem daunting, especially when it involves digital rewards. We have received questions regarding how best to handle the crypto rewards from a tax point of view. We'd like to underline that it is less scary than it looks! When you invoice us, remember to include the dollar value of the rewards. Tax is already taken care off as it's "labor tax".
To simplify the invoicing process, we highly recommend authorizing an invoicing mandate with OnlyDust, which we will detail below. We will also provide you comprehensive guides that can help answer your most common questions. Let's take a closer look below.
Invoicing essentials
Whether you're working individually or through a company, invoicing is a critical part of receiving your rewards. If you want to invoice us independently (as in not through mandate) here are the basics you need to know:
- Issue your invoice correctly: Make sure your invoice is issued on the date you complete your contribution. It should detail the services provided, the date of service, and include the dollar value of the rewards at the time they are released.
- Understand your rewards: Rewards might be paid in tokens or stablecoins. Despite the currency of payment, invoices should be denominated in dollars, noting the exchange rate with your local currency for clarity.
- VAT Considerations: If applicable, VAT should be added to your invoice. The total invoice amount, including VAT, will be paid in the reward token.
Tax regimes for rewards
Your tax obligations can vary significantly based on your operational status (individual or corporate) and location. Here's a simplified breakdown:
- For Individuals: If you're working in a non-professional capacity, rewards received in exchange for services are typically taxable income. The exact nature of taxation depends on your country's tax laws regarding cryptocurrencies and tokens.
- For Businesses: If operating within a business structure, you'll need to account for income tax on the rewards. Additionally, how these rewards are treated (as income or assets) can affect your tax obligations.
- VAT and Invoicing: Depending on your jurisdiction, you might need to include VAT in your invoices, especially if you're considered a professional entity.
Simplifying your invoicing process
You have the option to manage your invoicing directly or delegate it to OnlyDust, which can simplify the process by issuing invoices on your behalf.
Accepting an invoicing order mandate means that you give us the authorization to generate an invoice on your behalf, in compliance with all legal and regulatory requirements needed.
Our system makes sure that all your information is correct, up to date and according to the recommended norms.
We take care of calculating the VAT and the total amount to invoice with updated token exchange rates (in dollars), ensuring that all invoices reflect the most accurate and compliant financial data. This is necessary when you file for a tax return, including VAT if applicable.
French tax context
For those particularly interested in the French tax context, we have a detailed PDF guide (in French) offering detailed insights into:
- Tax implications for different types of contributors (individuals, sole proprietors, and corporations).
- Methods for determining the taxable amount for rewards.
- Obligations for declaring and paying taxes on rewards received.
You can download it below.
Nigerian specific tax context
Because there are specificities for Nigerians, we have been collaborating with local lawyer Fred Ogundu-Osondu (fredogundu@gmail.com) to come up with a detailed document to help you out.
You can download it below.
Indian specific tax context
Same as for Nigerians, because there are specificities for those with Indian nationalities, we have been working with local lawyer Purushottam Anand (anand@cryptolegal.in) to provide you with a detailed document to guide you.
You can download it below.