1. QUESTION: Will this cause a taxation event?
ANSWER: We are not tax advisors. We cannot take a position in taxable event management. A taxable event happens when you move value. We are not triggering any taxable event by creating a new network. Any taxable event is likely to be triggered by a holder selling a token or opt-ing into the network and is specific to the jurisdiction and their individual circumstances - appropriate advice should be sought from a tax expert in your locale if there is any concern in this regard.
2. QUESTION: Will the new token be taxable upon transfer to Catapult?
ANSWER: In general, a taxable event happens only when you sell. We encourage you to check this with your tax advisor. As we have said, appropriate advice should be sought from a tax expert in your locale if there is any concern in this regard.
3. QUESTION: What value will the new Catapult token be assigned at opt-in (for tax purposes)?
ANSWER: The market will set this. As we have said, appropriate advice should be sought from a tax expert in your locale if there is any concern in this regard. What follows is opinion-only.
The Fair Value of a token will be specific to the jurisdiction, some options (there will be more):
View it similar to a Share Split, where you have two tokens but no change in value at nemesis
View as income
View as zero value due to being technically 0c at nemesis
View as zero taxable value because the total demand over two chains is the same, so no increase in wealth as such (similar to share split above).
View as being some arbitrary or average of the price between time of distribution and time of tax declaration, effectively unrealized capital gains
View as airdrop and “free money” but would probably require prices at parity at or near XEM price at the time of launch which is unlikely
There are several ways that it can be assessed (as with other chains that have done similar things). It will be essential and necessary for those with concerns to take individual tax advice to ensure they are both legal and optimized for their personal situation. Where possible, we will also share advice as we can get it, it should be noted as always that any advice on tax is only as good as the legislation in the jurisdiction at the time and there have been several instances of tax authorities retrospectively applying legislation. I would advise approaching it conservatively risk wise to avoid problems years down the line.
Opt-in does allow you to select to timing that works best for you, though, and doesn’t force a taxable event, so the tools are available to manage it. If you are in any way concerned, appropriate advice should be sought from a tax expert in your locale if there is any concern in this regard.
4. QUESTION: How anonymous is this token swap? I guess it's done by a script, but what records are they keeping?
ANSWER: The migration is all on-chain, no need for KYC.
5. QUESTION: So, no IP information is collected then?
6. QUESTION: How about Token Swap (and Burn) - tax assumptions?
ANSWER: It is incorrect to assume Swap and Burn have no tax implications, there are jurisdictions where it almost certainly does and interpretations in others where it could. Tax implications exist with all the solutions, and most Crypto trading scenarios, anyone who thinks otherwise should ask their local tax authority if they agree. The opt-in ones allow the holder to decide when the taxable event takes place for them personally - opting in pre or post-launch. As we have said, appropriate advice should be sought from a tax expert in your locale if there is any concern in this regard.
7. QUESTION: Will there be any kind of filter for claiming the new token from (known) bad addresses? E.g., CoinCheck tagged addresses, etc.
ANSWER: No filtering will occur in order to support true decentralization.
8. QUESTION: What the legal implications are of Token Swap, the non-preferred option?
ANSWER: Basically, as someone who bought XEM, either an original stakeholder or afterward, it is reasonable to have an expectation the team who created it, write the code, build the brand, etc. will not perform an action that is to the detriment of the project. By performing a swap (burn) effectively, they would be saying…we want to take value off NIS1 from a legal perspective. However, with an allocation, it is a new chain, that you can participate if you like, you are invited, and we encourage you to, but we are not disrupting the tokenomics on NIS1, you don’t have to; the market will then decide how to value NIS1. As we have said, appropriate advice should be sought from a legal and tax expert in your locale if there is any concern in this regard.