crypto incomes

These Countries Won’t Tax Your Bitcoins Too Much

14/04/2018 by Idelto Editor

A growing number of governments can’t resists the temptation to get their hands on some of the bitcoins their citizens are making. Several states, however, think that leaving some breathing space for crypto users and entrepreneurs is a better idea in the long run. Crypto-friendly tax regimes can still be found around the world.

Also read: Tax Paying Americans Owe $25 Billion in Cryptocurrency

Tax Exemptions Offered Here:

Germany, Europe’s economic locomotive, has been quite careful with crypto taxation. Last month the Federal Ministry of Finance issued a notice which treats bitcoin as a currency. The Bundesrepublik is not going to tax cryptos when exchanged with euros. Purchases with bitcoin are subject to VAT, just like any other. No tax will be imposed, however, on long-term investments in cryptocurrency. If a trader sells a bitcoin more than a year after its purchase, the profit is exempt from taxation. The same applies to yearly profits of less than €600.

Capital gains of individual investors trading cryptocurrencies are not taxed in Slovenia. Its residents are not required to report them in their income tax returns. However, private individuals who receive their income in cryptocurrency, are obliged to declare the digital money and pay regular income tax. The country uses a progressive scale and rates vary from 16% on incomes of less than €8,000 a year to 50% on incomes exceeding €70,000.

Tax authorities in Denmark have said that fintech companies should pay taxes just like any other business. On the other hand, individual investors trading cryptos do not owe any tax on their gains.

Belarus has created a friendly environment for crypto investors, both corporate and private. Activities like mining, issuing, and trading coins were legalized in March. A presidential decree introduced tax exemptions for crypto incomes and revenues for a period of five years.

Gains from cryptocurrency transactions are still tax free in South Korea. The Finance Ministry and the tax authorities in Seoul are working on a legislation that is likely to change the situation. The new tax bill should be adopted in the first half of this year, according to officials. No concrete time frame has been set.

Buying bitcoin will save you taxes in Singapore. Digital coins are not considered commodities there and are not recognized as currencies. In the absence of special requirements, gains from crypto investments of private individuals are not taxed. Companies trading cryptocurrencies, however, are expected to pay taxes on their profits.

Incoherent Rules Govern Crypto Taxation

Many jurisdictions have yet to update their tax laws to encompass cryptocurrencies. Rules governing taxation are often incoherent and very different even in countries that are part of a common space. In the European Union, for instance, tax rates in member-states vary between 0 and 50%.

The Eurasian Economic Union is another example, with Belarus exempting crypto transactions from taxation, while Russia is collecting 13% tax on crypto incomes and 24% corporate tax on profits.

The situation in the US is also complicated. Several states have taken steps to become crypto-friendly jurisdictions. Wyoming passed a bill exempting cryptocurrencies from property taxation. Two other states want to legalize bitcoin as a payment option for tax purposes. Arizona has promised to become the first US state to start accepting taxes in cryptocurrency. Georgia may also allow its residents to pay taxes in bitcoin.

What taxes on crypto incomes and profits do you have to pay in your country? Tell us in the comments section below.

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Latvia Recognizes Cryptocurrencies in Order to Tax Them

13/04/2018 by Idelto Editor

Trying to take its share of the profits, the government of Latvia may accept cryptocurrencies as a legal means of exchange. This year’s tax filing campaign is underway and officials don’t have much time. Two parliamentary commissions and the Ministry of Finance have expressed their views on the matter this week. Latvians may very soon owe the state tax on their gains from crypto transactions.

Also read: Poles Protest Unfair Taxation of Crypto Incomes and Profits

Cryptocurrencies Deemed Dangerous but Taxable

According to the Latvian Finance Ministry, 20% tax can be imposed on capital gains from deals with cryptocurrencies. Its representatives announced the proposal during a meeting with deputies from the Parliamentary Budget and Taxation Committee on Wednesday.

Some lawmakers reminded their colleagues and constituents that cryptocurrencies are not considered a legal tender in the Baltic state and come with speculative bubbles and financial pyramids. Members of the Financial and Capital Markets Committee, however, noted that cryptos like bitcoin can “function as a means of exchange”.

The Ministry of Finance also revealed that the Latvian government is mulling over comprehensive cryptocurrency regulations. A working group set up by Prime-Minister Māris Kučinskis has been tasked to prepare the proposals. According to the Baltic Reporter, it will study market risks, but also evaluate potential benefits associated with cryptocurrencies.

Policy makers have often criticized cryptos for failing to perform one or more of the functions of fiat money – means of payment, medium of exchange, unit of account, and store of value. It seems, though, that when budget revenues are in mind, the requirements towards “virtual money” are not that strict. The “means of exchange” labeling now gives Latvian authorities an opportunity to tax cryptocurrency transactions. Maybe if they think about VAT, a “means of payment” status will also be attributed. No tax is currently due on crypto purchases of goods and services in Latvia.

Cryptocurrencies are not covered by any Latvian law but authorities in Riga say revenues from crypto trading are subject to personal and corporate income tax. The country has a flat income tax rate of 23%. Incomes from dividends and interest are taxed at 10%. 15% tax is due on capital gains from shares, real estate, and intellectual property. The standard rate of Value Added Tax is 21%. Financial transactions are exempt from VAT. Tax returns in Latvia are filed between March 1 and June 1 of the year following the taxation year.

Tax Authorities Catching Crypto Fever

Latvia is not the first country in Europe tempted to tax cryptocurrencies before adopting proper regulations. Governments across the continent have decided to tap into crypto incomes and profits, despite their predominantly negative attitude towards the “unguaranteed money”. Tax rates vary significantly in different EU member-states. Income tax and capital gains tax are often imposed on crypto-related revenues. Many tax authorities have stated that the provisions of the current tax codes of their countries are also applicable to the crypto sector.

Neighboring Estonia, for example, has subjected cryptocurrencies to capital gains tax and VAT. Poland has recently clarified its stance on crypto taxation. Taxes on crypto-related income there can reach 32%. A decision to impose 1% tax on every crypto transaction has sparked angry reactions in the local crypto community. New regulations in Russia will be adopted by the summer, but even now Russian citizens are expected to pay 13% tax on their crypto-related incomes.

Belarus is a positive exception. President Lukashenko’s administration legalized crypto activities creating favorable conditions for the development of the industry. His Decree №8, which entered into force on March 28, introduced tax breaks and other incentives until 2023. No taxes will be imposed on companies which mine, issue, or exchange digital coins. Private crypto income from mining and trading cryptocurrencies will not be taxed either.

Do you think crypto incomes and profits should be taxed? Share your thoughts in the comments section below.

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Poles Protest Unfair Taxation of Crypto Incomes and Profits

11/04/2018 by Idelto Editor

A decision by the Polish government to tax crypto transactions, even those that do not return profit, has provoked discontent among traders in the country. The local crypto community has decided to protest against the official stance of the Finance Ministry with an online petition which is gathering support. Taxes on crypto-related income in Poland can reach 32%. Each purchase and sale will be taxed as a transfer of property rights, regardless of the end result for the parties.

Also read: 0 to 50% – Time to Pay Crypto Taxes in the European “Union”

The State Wants a Third of Crypto Incomes over €20,000

The Finance Ministry of Poland has recently published its official position on the taxation of cryptocurrency incomes and profits. The tax returns of Polish citizens should contain information about revenues from trade and exchange for cryptocurrencies like bitcoin, litecoin or ether, the department said.

The turnover from crypto transactions must be reported as personal income and taxed according to the country’s current tax code. Poland has implemented a progressive income tax scale with two brackets – 18% for incomes of up to up to PLN 85,528 zloty (€20,400), and 32% for those that exceed that annual amount.

The ministry insists that the general terms of the Personal Income Tax Act cover income derived from cryptocurrency transactions. Furthermore, it says purchases and sales of cryptocurrencies are considered transfers of property rights. As such, they are subject to 1% tax rate under the rules governing civil law agreements.

According to the ministry’s interpretation of the tax law, all cryptocurrency transactions, regardless of their net results, are subject to taxation. This means Poles are expected to pay taxes even when they haven’t profited from their dealings with cryptocurrency.

“They Want 1% but Won’t Get a Penny”

Protesting the Finance Ministry’s stance, cryptocurrency traders have organized an online petition, Bloomberg reported. They blame the government for effectively restricting access to the growing cryptocurrency market. Tax regulations have been introduced without any consultation with the affected parties.

The authors of the petition are demanding the abolition of all taxes on cryptocurrency trading. They also call for clear rules for the taxation of profits in the industry. The local crypto community says investors will be losing capital which, as their funds can be taxed hundreds of times.

The current interpretation of the tax regulations in regards to cryptocurrencies requires market participants to pay 1% tax on each transaction. After a hundred transactions, regardless of the market situation, investors could have given all their capital to the state. As a cryptocurrency community, with over 250,000 active members, we oppose these obligations.

As a result of “imprudent government actions”, many Polish blockchain companies and programmers now work on foreign projects, claim the people behind stopregulacjom.pl (Stop Regulation) initiative. “They want to take 1% of each transaction but will not get a penny”, the campaign says. The petition has been signed by almost 3,000 people (at the time of writing).

The Finance Ministry has announced that it’s working on a “more convenient” method of taxation for cryptocurrencies, while stressing that current regulations are binding. The deadline for filing the annual tax returns in Poland is April 30.

With the recently published notice, the country joins a growing number of EU member-states that want to tap into crypto-related incomes and profits. Most of them, however, have not yet adopted comprehensive regulations concerning cryptocurrencies like bitcoin.

Taxation policies vary significantly across the continent. Income tax and capital gains tax are often imposed on crypto-related revenues. Most governments have opted for applying their regular tax laws. Tax rates range from 0 to 50% in different EU countries.

Do you think the Polish crypto community will manage to exert enough pressure on authorities to change the taxation regime regarding cryptocurrencies? Share your expectations in the comments section below.

Images courtesy of Shutterstock.

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