FISO rewards and tax

Recently, there has been an analysis on the tax implications from FISO rewards. As such, we would like to open this discussion, hear the voices from our community and find the best way to minimize the tax burden for our community residing in countries that tax airdrop rewards as personal income tax.

Before we begin, I would like to clarify a few questions:

When is FISO end date?

November 26th.

When is Minswap DEX launch?

Late Nov or early Dec.

Are the rewards send to my wallet automatically?

No, users have to claim the rewards manually, thus users can choose when to claim rewards or to not claim at all. (users still get all ADA rewards, so there is 0 financial cost)

When are MINt tokens from FISO reward claimable?

10 epochs after FISO ended, which is from Nov 26th to Jan 15th.

When are MIN tokens from FISO reward claimable?

Since FISO MIN tokens have 45 days lock-up and 45 days of linear vesting period, the soonest users can claim MIN tokens is Jan 10th. After that, users have 10 epochs to claim MIN tokens, the claimable amount will vest linearly from Jan 10th until Feb 24th (45 days).

Can MINt be tradeable?

Yes, MINt is a Cardano native token with its own policy ID and asset name, hence it is tradeable on any DEX like any other token.

Can a dump happen at the end of this year because people are selling rewards to cover for tax?

Yes, but it is only applicable to MINt, since only MINt can be claimed this year.

What is MINt value for tax purposes?

Currently, there’re 2 interpretations:

  1. MINt is a native token that can have its own price on DEX, and thus its value is based on market price.
  2. MINt can be converted 1:1 to MIN after locking liquidity for 90 days, with a yield farm booster, hence its value is based on MIN’s price with some premium (due to booster) or discount (due to LP locking).

What can we do to minimize personal income tax on FISO rewards?

Because MIN can only be claimed starting from 2022, which is after DEX launches, the MIN tokens are going to have value anyways (i.e. from team seeding ADA/MIN liquidity pair on DEXes). As such, we could only minimize tax for MINt rewards.

There are many ideas floating around and we would like to list the most popular ones, as well as looking for more ideas from our community here:

  • Decouple MINt role from MIN so its value won’t be MIN value with some premium/discount.
  • Give some time between FISO ended and DEX launch, so MINt can be claimed before it is listed.
  • Extend the claim period, so people can have more time to consider/consult next year.
  • Put a notice/disclaimer when users claim tokens, so users won’t incur a tax burden unknowingly.
  • Do a second public sale to “reset the market price”
4 Likes

Non-binding voting

  • Keep the status quo and put a notice/disclaimer on claim site
  • Decouple MINt functionality from MIN
  • Give some time between FISO end and DEX launch
  • Extend the claim period
  • Do a second public sale to “reset the market price”

0 voters

1 Like

The idle option is “Keep the status quo and put a notice/disclaimer on claim site”, non of the project fundamentals should be change for external factors which is not relevant to the project.

5 Likes

Summary: I advise only voting for “Keep the status quo and put a notice/disclaimer on claim site” and maybe also for “extending the claim period” (but in general I’m not in favour of changing the path set out).

First of all, the personal income tax can be minimised completely by not claiming the MIN and MINt from the FISO rewards. In other words, none of the options to vote is necessary if someone does not wat to pay any personal income taxes on MIN/MINt.

Next, I am against artificially delaying the DEX launch. Shipping early will be important to gain tractions versus competitors and getting as much liquidity as possible. (In other words, I am against: “Give some time between FISO ended and DEX launch”.

Next, an additional public sale is absolutely awful in my opinion. Firstly, I think MinSwap will lose much of its credibility by trying a pure accounting tick. Secondly, I doubt that tax authorities will fall for this. Thirdly, this introduces a risk for people who participated in the first sale because their tokens will suddenly be valued at practically 0. Note that these are the people that have put their capital at risk, while FISO rewards are a risk-free airdrop (again, there is also no personal income tax risk because you can simply not claim).

Further, changing what MINt means (i.e. “decouple MINt role from MIN”) is weird in my opinion. Firstly, note that this whole discussion started because people argued that the public sale “changed the rules set out at the start of FISO”. Then why do this again by changing what MINt means? Secondly, MINt is already complex enough, let’s not change it even more. Thirdly, MINt was designed to have people interacting with the protocol, which is smart! We are here because we want the project to survive long-term, so giving people an incentive to use the platform is great and will contribute to MinSwap succeeding. Let’s not get rid of this. Hence, I am also against this option.

I think adding the disclaimer is a good idea. I feel it is a good outcome of this discussion if in that way we can ensure people make more informed decisions.

I see no massive harm in extending the claim period, but please comment if I’m missing something. I lean towards not supporting it, simply because I like to stick to the path set out.

Please, let’s not change the great path this project is on. I see a huge risk of MinSwap losing credibility by falling for the claim from a what seems to be very small part of the community, which also seems to only impact people from very specific jurisdictions.

13 Likes

Disclaimer is the only reasonable option in my opinion - you can not create a distribution method that takes into consideration everyone’s tax implications… that is not possible… either you decide certain people are more important then others and bend to their wished (referring to taxes) or you just put out a disclaimer.

4 Likes

i can not see any other reasonable option than “Keep the status quo and put a notice/disclaimer on claim site” here

1 Like

I also advise only voting for “Keep the status quo and put a notice/disclaimer on claim site”.

The core argument here is that no project should have to modify their timeline, planning and development schedule to take in consideration tax impact on the participant. Taxes depend on the participant country and are a personals matter. Anyone that conduct crypto investment activity has the responsibility to deal with their taxes.

People that want to delay their tax implication to next year or even don’t have any (by not claiming their MIN /MINt reward, with no financial cost since they got all their ADA reward) can do so. So everyone can deal with their taxes the way they want to.

The MIN token would have had a value anyway since it will be traded on the DEX with the MIN/ADA pair. I think there is no point in trying to “play” the tax authorities by trying to bend the rule and avoiding the MINt token to have a value, since it will be converted to MIN later. Since MINt are tradable, they could even have a price anyway (decided by the exchange and people that trade it).

Finally, a second sell would be the worst, because it just seem as a way to bend the rule and try to trick the taxes authorities, for a token that will have value anyway (from the DEX). Also, this will hurt the IDO participant, that help to finance the project, by dropping their token value.

Delaying the project could hurt it way more than the taxes impact would. The project has to stay as it is, with a disclaimer to notify people and avoid tax surprises.

2 Likes

“Keep the status quo and put a notice/disclaimer on claim site” - This option is by far the only one I see that is reasonable for the community and the project and the one that should be picked.

“Extend the claim period” - I dont think this option should be choosen either because, even tho its the second best option out of all the options, It`s unfair for those people that have been participating in the fiso(Like me) to have to wait more time to claim our rewards that we have all been waiting for just because of some taxes problems.

“Do a second public sale to “reset the market price” - This option is by far the worst out of all the options and I dont even know how can something like this can even be considered and up for debat. Personally I did manage to get a few tokens on the public sale and this would feel unfair for me and would hurt me and everyone that have helped to finance the project, by dropping our token value. Also, if I would feel hurted even tho I did not bought a really big amount of tokens in the public sale, I cannot stop imagining how even more unfair would be for the people that believed and helped fund this project buy buying the max amount of the public sale (4k ada/160k MIN), because, after all, we were the people that believed in the team and have helped the project before it even launched so yea, we should get rewarded the max for investing and putting our money at risk the most and in no way harmed by a small taxes problems, so yea this option shouldnt even be up for discussion.

“Decouple MINt functionality from MIN” - For this option I dont have alot to say just seems useless to go for this because some people dont wanna pay some taxes. People pay taxes all the time so I dont understand why making such big thing out of this.

“Give some time between FISO end and DEX launch”- About this last option I dont think it should be choosen either, because I dont think the project should suffer any delays and because I feel like delaying the project could hurt the project more than a small taxes problems. Launching the project asap is important to gain attention in the cardano blockchain from all the investors versus the other competitors(other dexs obviously) and to get as much liquidity as possible.

4 Likes

Keep the status quo and put a notice/disclaimer on claim site - Definitely this. Or extend claim period perhaps. This really is a non-issue and its impossible for a DEX who’s primary function is to develop an AMM to anticipate potential tax laws.

Its not the DEX’s responsibility to do some weird accounting tricks to accommodate a specific country’s (Yes some more countries are likely applicable) tax law. Just have US citizens be aware that if they MANUALLY claim their MIN/MINT tokens they are liable for tax. Thats it.

5 Likes

Edit
I changed my mind. Just keep the status quo.
It’s more important for the efforts to be on rolling out a high quality dex.

4 Likes

The voting results are obvious

4 Likes

The main argument seems to refer to the original FISO documents and how there was an expectation distribution would occur AFTER on the DEX launched. So this comes down to moral opinion of adhering to the original FISO documents.

Disclaimer is the obvious solution, Minswap team have every right to conduct the sale of tokens and launch of the DEX at their own discretion. It’s the individuals responsibility to determine if claiming tokens is right for them if it bares a heavy tax.

2 Likes

I gave it a lot of thought today. I think that if it is possible to unbind the price of mint from min in order to help out some member without harming anyone else of the community is something that should be done.
If for any reason,any other part of the community is harmed from this unbinding we should keep things as they are and put a small warning to our people.

I really think that the team should consult with an actual tax attorney before doing anything. The reality is that the rules changed after the FISO started, not before. So I really think the team has a moral and ethical obligation to give those affected an outline of what holding the IDO truly means for FISO participants and give us some concrete options to help us minimize any additional tax liabilities caused by holding the IDO.

ICYMI, there is a document by a law company about FISO tax obligations in the US: Minswap Presentaiton 3.0.pdf - Google Drive

1 Like