The mainnet launch for the MATIC - POL upgrade occurred on September 4th, meaning your MATIC tokens are now POL tokens, and POL is now the native gas token of the Polygon network.
This token migration has sparked a lot of questions from our users around the potential tax implications. As expected, the IRS and many other tax authorities have yet to release clear guidance on how token migrations like this should be treated.
In response, we’ve turned to some of the leading crypto tax experts we collaborate with to gain insight and help navigate this complex landscape. Here’s how three of Koinly’s top accountant partners are approaching the challenge:
Head CPA at Count on Sheep, Justin, stated “When assessing the tax implications of the MATIC to POL conversion, two questions must be answered: (1) Are the assets substantially the same? (2) Did the upgrade result in old tokens being retained and new tokens being acquired?
Given POL will function in all the same ways as MATIC, MATIC tokens are not being retained, and the conversion is 1:1, I don’t believe this constitutes a taxable event. The cost basis and holding period attached to converted MATIC should be carried over to the POL tokens."
Count DeFi agreed with this position, stating, “It is not a taxable event. The cost basis and holding period should be carried over. The nature here is that of a conversion, not a hard fork that results in receiving new cryptocurrency. See also Q22 (no new cryptocurrency received, the same cryptocurrency with a different ticker) and Q30 (no divergence and no new cryptocurrency received, the same cryptocurrency with a different ticker) here, which further supports the argument that a conversion is not taxable.”
Finally, a crypto tax expert at Aurum FSG, commented, “Under current tax law, exchanging property is taxable if the two properties are “materially different,” meaning they have different legal rights. This rule for tax-free like-kind exchanges doesn’t apply to personal property like cryptocurrency.
For the MATIC-to-POL migration, the situation is unclear due to limited IRS guidance. A 2023 IRS memo on Ethereum’s switch to proof-of-stake didn’t consider it a taxable event, but the explanation was brief. So if we take help from this memo it would not be a taxable event.
In some jurisdictions, this migration could be seen as taxable because MATIC and POL have different contract addresses. In others, it may not be taxable since there was no intent to convert. It’s best to consult a tax professional in your jurisdiction for specific advice.”
As ever, when in doubt, speak to a crypto tax professional in your location for guidance - you can find these easily on our accountants directory.
From a technical perspective, we have an article that you should refer to
MATIC (Polygon) and POL (Polygon Ecosystem Token)