Transcript
Legal and compliance analysis of the TradeQoin currency
in the Netherlands
Authors: Rob van Hilten, Gert Meeder & Hugo Vlam
Organisation: Stichting Points
Introduction
This guidance document describes the impact of relevant laws and regulations in the
Netherlands on the TradeQoin community currency. Legal and compliance issues with regard
to the relevant in-country laws and regulations are analyzed so that future currency projects
can benefit from this knowledge and avoid risks at implementation.
This document is part of a wider package of legal and compliance documents that can be
found on the Community Currency Knowledge Gateway at http://communitycurrency.info/en/find/cc-toolkits/legal-and-compliance/
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Disclaimer
This document only offers an overview of the legal landscape that this
complementary currency operates within and nothing contained in this document
should be considered legal advice.
This report has been compiled and verified by Qoin as part of the Community
Currencies in Action (CCIA) collaboration project.
CCIA is a transnational partnership project designing, developing and
implementing community currencies across northwest Europe. The partnership
provides a rigorously tested package of support structures to facilitate the
development of currency initiatives across NWE, promoting them as credible
policy vehicles.
Running from May 2012 to June 2015, CCIA is part-funded through the
INTERREG IVB North West Europe Programme, a financial instrument of the
European Union’s Cohesion Policy ‒ Investing in Opportunities.
Find out more about CCIA on our website:
www.communitycurrenciesinaction.eu
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Introduction
This guidance document describes the impact of relevant laws and regulations in the
Netherlands on the TradeQoin community currency. Legal and compliance issues with regard
to the relevant in-country laws and regulations are analyzed so that future currency projects
can benefit from this knowledge and avoid risks at implementation.
Each chapter is divided in main and sub legal topics. An explanation is given for each main
and sub topic. For each legal topic a description is given about how its relevant to the
TradeQoin currency project.
Legal Topics
1. Taxation
Tax authorities and regulators can consider community currencies to be a means by which
individuals and companies can more easily escape the tax implications of the transactions
that they engage in. It is therefore vital that any community currency seeks to mitigate these
legitimate concerns by addressing the impact on VAT, Corporation tax and Income tax of
individuals and companies using the scheme.
For example, in the Netherlands a ruling has been obtained from the tax authorities that
currency earned through social currency schemes are not taxed up to the equivalent of a
maximum annual remuneration of volunteers up to €1500. However the situation varies in
the different NWE countries and for some similar policies are yet to be. A further challenge is
designing a calculation model which allows for computing equivalent legal tenders for
currencies that are circulated on a completely different basis such as ‘hours’.
To maintain the integrity of the community currency programs CCIA will do an in-depth risk
analysis to understand how to mitigate the possibility of users avoiding paying all the tax due
to the authorities. An initial assessment is, that social currencies (e.g. Timebanking, loyalty
schemes etc.), due to their relatively limited scale in terms of individual balances and
individual earnings, and spending opportunities, in general have a low risk of tax avoidance
by users. For currencies in the professional/b2b mutual credit and legal backed tender, where
the potential risks are higher, measures have already been implemented to verify the identity
of participants when they enter the scheme.
1.1 Value Added Tax (VAT)
All transactions in TradeQoin are part of the formal economy and thus VAT applicable.
Participants are instructed that they should send normal invoices in which they state the
applicable VAT rate.
Link to Dutch VAT regulations for businesses:
http://www.belastingdienst.nl/wps/wcm/connect/bldcontentnl/belastingdienst/zakelijk/btw/bt
w
1.2 Corporation tax
All transactions in TradeQoin are part of the formal economy and need to be included in the
companies administration. As corporation tax is calculated over the full profit a company
makes, this tax also is paid over TradeQoin transactions (in Euro's).
Link to Dutch corporation tax regulations:
http://www.belastingdienst.nl/wps/wcm/connect/bldcontentnl/belastingdienst/zakelijk/winst/
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1.3 Income tax
If a member of staff, or when the owner of a company uses TradeQoin for private
expenditure income tax is supposed to be paid. Like all other taxes this income tax has to be
paid in Euro.
Link to Dutch regulations on incometax:
http://www.belastingdienst.nl/wps/wcm/connect/bldcontentnl/belastingdienst/prive/inkomste
nbelasting/inkomstenbelasting
2. Insurance
Under this topic there are 2 sub-topics that will be investigated. Firstly the impact on
volunteers engaging in work on behalf of the currency operator and related need for
insurance. Secondly how the governance board will be indemnified against major risks.
In some cities/municipalities citizens engaging in volunteer work are covered by a municipal
(accident/disability) insurance policy. There are, however, many municipalities where this not
the case. The CCIA partnership assessed this for all programs we develop, and, where
necessary, negotiate favorable terms with insurance companies to provide coverage in the
event no city-wide volunteer insurance exists.
Companies, charities, foundations and other entities (either profit or non-profit) who seek to
introduce a currency scheme will need to consider the issue of potential liability of
governance board members in the case of default, bankruptcy or other eventualities. In some
countries (e.g. NL), insurance products for this type of liability are available (as long as the
liability is not a result of e.g. illicit activities).
For insurance companies the risks involved in running a community currency scheme may not
be straightforward to assess, which means a negotiation can be required to agree upon the
appropriate insurance policy.
2.1 Volunteer insurance (accident/disability)
TradeQoin is not open for rewarding volunteers. If any organization rewards volunteers in
TradeQoin, the same rules apply as in time currencies or LETS systems. We refer the
compliancy knowledge available for those currencies.
Link to tax regulation on income from LETS systems:
http://www.rijksoverheid.nl/documenten-enpublicaties/besluiten/2008/12/17/inkomstenbelasting-resultaat-uit-overigewerkzaamheden.html
2.2 Liability of board
TradeQoin is organized in decentralized communities. Depending on the legal body in which a
TradeQoin community organizes itself, specific measures can be taken to decrease potential
liability of the board. These measures generally include insurances. Qoin advices the
TradeQoin communities to insure the board against liability.
Link to Dutch law on liability of board:
http://www.belastingdienst.nl/wps/wcm/connect/bldcontentnl/belastingdienst/zakelijk/aangift
e_betalen_en_toezicht/aansprakelijkheid/bestuurdersaansprakelijkheid/
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3. Labor law
One of the main target groups for social currencies are vulnerable an excluded strata of
society, such as people with disabilities, the unemployed and people in deprived communities
generally. Many of the people that can be (re)engaged and could participate in a social
currency scheme are recipients of government/municipal welfare or (unemployment)
benefits. For them to safely participate it is important that a dialogue is started and rulings
are obtained on the potential impact of participation in social currency schemes from the
relevant national and local authorities in the countries in which we implement them.
3.1 Social security
TradeQoin is fully focused on the business-to-business domain. We do not expect to have an
issue with social security. In case we do; if we follow Dutch jurisdiction on income when on
social security (more information on social security provided at 3.3).
Link to social security regulation from LETS systems (article 5.3.2):
http://www.rijksoverheid.nl/documenten-enpublicaties/besluiten/2008/12/17/inkomstenbelasting-resultaat-uit-overigewerkzaamheden.html
3.2 Unemployment and disability benefits
TradeQoin is fully focused on the business-to-business domain. We do not expect to have an
issue with unemployment benefits. In case we do; all income a TradeQoin member earns, is
deductible from unemployment benefit or disability benefits. We have different social security
benefit programs in the Netherlands. Each of them is different. All we can say here is that
account holders need to comply to them. Most will have to pay benefits back when receiving
TradeQoin. All TradeQoin income will be handled similar to Euro income.
Link to research on legal framework of complementary currency systems in the Netherlands:
http://www.klamer.nl/index.php/nieuws/402-research-on-complementary-currencies
3.3 Employment Terms
TradeQoin is currently not accessible for employees. However, this could be an option that
will be built in at a later phase so its useful to already look at relevant regulation. If a
member of staff earns TradeQoin for delivered professional services, the issuer (employer) is
obliged to pay social security charges (income tax, insurance, pension etc.) over the
TradeQoin part to the tax autorities (in Euro's).
It is, however, not allowed to force somebody to accept TQ as salary, or as a replacement for
an existing salary arrangement. Only on volentary basis or as a complementary form of
compensation can TradeQoin be used as a means of paying employees.
Link to tax regulation on income from LETS systems (article 5):
http://www.rijksoverheid.nl/documenten-enpublicaties/besluiten/2008/12/17/inkomstenbelasting-resultaat-uit-overigewerkzaamheden.html
4. Privacy and safety
Data protection is an important topic for most network services. Within CCIA project partners
are responsible for formulating and implementing privacy policies to protect sensitive user
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data. The safety protection of individuals is embedded in several legal texts. We show how
these apply to the selected currency types. For example do we deal with registered offenders
who want participate in currency programs? In addition there are specific regulations for
working with the elderly and children.
4.1 Safety/Protection of (vulnerable) CC users
TradeQoin has developed internal processes to secure the privacy of users and applied ethical
standards to avoid misuse of data and harmful consequences of the offered products and
services. Since the TradeQoin concept is oriented towards businesses and professionals we
are of the opinion that TradeQoin is never responsible for having vulnerable users do work
and thus no additional measures in this regard are warranted.
4.2 Data storage and protection
All data we keep on the members is stored in a highly secure database. All data is owned by
the member and cannot be disclosed by us unless the member gives explicit approval for
that. When a member closes its TradeQoin account, all information will be deleted from the
database. For integrity reasons the only the email address and transaction history will be kept
on file.
5. Financial service regulations
Any organization that prints physical ‘money’, or vouchers, makes electronic monetary units
available, that are convertible into legal tender or is engaged in the provision of payment
services will need to review how the relevant financial services regulations apply to their
currencies and which enforcement bodies (Central Banks, National and international Finance
institutions) need to be engaged with for compliance or exemptions.
All countries have very strict laws restricting who can print money and currency operators will
need to ensure that they do not contravene these rules. The provision of the electronic
money directive and payment services directive only apply to those currencies that are not
able to show that they operate in limited network. But more general rules and laws might
apply, for example for the issuance of paper notes.
5.1 Issuing physical currency
TradeQoin does not issue physical banc notes and fully centers around a digital currency.
Link to Dutch regulations on financial oversight:
Wet op financieel toezicht (wft): http://www.rijksoverheid.nl/onderwerpen/financielesector/toezicht-op-de-financiele-sector/wet-op-het-financieel-toezicht-wft
5.2 Digital currency non-convertible to national currency
TradeQoin is fully compliant to Payment Service Directive. According to article 1 of this
directive, TradeQoin is not money as the currency is closed loop, and not convertible with
Euro. We have a written letter from the DNB (Dutch Central Bank) confirming that the
TradeQoin concept is exempt.
5.3 Digital currency convertible to national currency
Not applicable. TradeQoin is not convertible to national currency.
Link to Dutch regulations on financial oversight:
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Wet op financieel toezicht (wft): http://www.rijksoverheid.nl/onderwerpen/financielesector/toezicht-op-de-financiele-sector/wet-op-het-financieel-toezicht-wft
5.4 Money laundering
When enrolling in TradeQoin:
A member can register for free and do 3 initial transactions. After the 3rd transaction a
member must formally register himself. Up to that moment the member has limited rights (no
credit line, not possible to pay at retail / leisure / entertainment).
After 3rd transaction we do the following:
- request & file ID + company register information (Chambre of commerce)
- During Face to face meeting: check if ID matches person
- Research Chamber of Commerce + additional documents if required, if matching
person indeed is authorized to represent company.
- Establish understanding of UBO (Ultimate Beneficial Owner)
- Establish proper understanding of actual line of industry
- Research (via google) if UBO, company, representative of company are high risk
o Risky industry (jewelery, computers, phone houses, garages (body shop), 2nd
hand cars etc.
o Back ground check: crime, terror, money laundry, PEP (politically Exposed
Persons)
If any of the above point is positive, we classisfy the company as ‘risky’ and initiate a
thorough KYC (Know-Your-Customer) process.
Ongoing monitoring process:
We monitor transactions weekly. Transactions that exceed 5000 are investigated to
understand the nature of the transaction and the buyer and seller.
How does this sub topic impact the 4 CCIA currency types in your country in the broader
sense (Output 2. Country coordinators: Please contact the CCIA partners, observers
(coordinated by nef) and other specialized organisations to coordinate the proper completion
of this section):
This is EU legislation: Money Laundering and the Financing of Terrorism Act (in Dutch:
WWFT)
Link to Dutch legislation on prevention on money laundering:
http://www.afm.nl/nl/professionals/regelgeving/nationaal/wwft.aspx
5.5 Other central bank oversight regulations
As far as TradeQoin knows no other relevant central bank oversight is expected.
Link to Dutch regulations on financial oversight:
Wet op financieel toezicht (wft): http://www.rijksoverheid.nl/onderwerpen/financielesector/toezicht-op-de-financiele-sector/wet-op-het-financieel-toezicht-wft
6. Acceptance of CCs by (local) government
Being accepted in lieu of legal tender particularly by public entities is the goal of many CCs.
Municipalities accepting local currencies for both services (swimming pool, public transport
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etc) and taxes (business rates, local taxes) gives CCs greater use value and credibility.
However, especially in the Eurozone, those who tried to establish such spending possibilities
in different countries encountered barriers of different kind, sometimes of personal nature
(risk averseness) sometimes allegedly due to regional procedure regulations, state law or
even EU law.
6.1 Acceptance of CCs for municipal services and taxes
Has your currency faced any legal challenges to having your CC accepted for municipal
services or taxes? If yes, what were they, and did you verify the validity of the claim?
Not yet relevant for TradeQoin as we have not yet have been working with municipalities.
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