crypto taxation

Foreign Crypto Exchanges Like Paxful, Binance to Pay 1.5% Tax Under Kenya’s New Regulations

16/10/2020 by Idelto Editor

The Kenya Revenue Authority (KRA) has clarified that its planned digital service tax (DST) will be applicable to cryptocurrencies at a rate of 1.5% on gross transaction value, local media reported.

In August, the agency announced new rules for the taxation of what it calls “digital marketplaces.”

However, with oblique definitions on such key terms, it has not been clear who exactly will be taxed under the new regulations that come into force on Jan 1, 2020.

Now, KRA tax expert Nixon Omondi has appeared to set the record straight.

“As the law is, any person who will be offering a digital service – crypto is digital, the platform is digital, the acquisition process is digital, the process of payment is digital – in that respect, DST will be applicable on cryptocurrencies,” he explained, in a report by Bitcoinke.

The clarification means that platforms dealing with virtual currencies will be required to pay the 1.5% tax to the Kenyan government. The situation is rather tricky for foreign peer-to-peer exchanges like Paxful and Binance P2P, which have operations in the East African country – they will have to remit the tax each month.

Kenyan crypto businesses will make similar payments, too. However, local firms “have the option of claiming back their digital service tax at the end of the year since they also pay other taxes within the Kenyan jurisdiction,” said the report.

In its original communication, the Kenya Revenue Authority stated that the digital service tax is to be paid “by a person who derives or accrues income from services through a digital marketplace.” But the term “digital marketplace” proved a source of much consternation because of it being legally and technically ambiguous.

Kenya’s Finance Act offered a rather broad definition of the phrase, describing digital marketplaces “as a platform that enables the direct interaction between buyers and sellers of goods and services through electronic means.” Kenya is Africa’s third-biggest bitcoin market after Nigeria and South Africa.

What do you think about Kenya’s digital service tax? Let us know in the comments section below.

The post Foreign Crypto Exchanges Like Paxful, Binance to Pay 1.5% Tax Under Kenya’s New Regulations appeared first on Bitcoin News.

Ernst & Young Launches Application to Help US Crypto Investors With Tax Filings

20/06/2020 by Idelto Editor

Ernst & Young (EY) has introduced a new application that helps U.S. cryptocurrency traders calculate and file their taxes with ease.

The EY Cryptoprep app, a Software as a Service (SaaS) web-based crypto tax engine, helps users calculate crypto-related gains and losses that have to be reported on Form 8949, a form used to report sales and exchanges of capital assets.

According to a June 18 statement from EY, one of the four largest accounting companies in the world, the engine offers step-by-step guidance through the crypto tax process. Users of the application, which supports major digital assets, can connect it to various exchanges to collect data about all their transactions.

EY Cryptoprep will then aggregate and reconcile the data before applying the relevant tax rules to produce an account of crypto capital gains or losses. Afterward, a completed Form 8949 for all applicable years is issued. The app also enables users to submit amended returns for past tax liabilities, not only the current year.

Ernst & Young vice-chairperson for tax services Marna Ricker claimed the firm is responding to increasing demand.

“Our clients increasingly hold and trade crypto assets, creating the need for an innovative solution to address the evolving complexity around filing crypto taxes. The EY Foundry, our internal corporate venturing unit, created EY Cryptoprep to modernize the crypto tax accounting process,” said Ricker.

This is not the first offering from EY targeting digital financial assets. The firm unveiled an auditing software for cryptocurrencies called EY Blockchain in April 2018. EY Crypto-Asset Accounting and Tax, a tool that facilitates accounting and tax calculations for crypto transactions, targeted at both institutional and retail investors, was launched last year.

“EY Cryptoprep expands our innovative portfolio of successful new digital businesses,” said Chirag Patel, Ernst & Young foundry leader, in the statement.

The Internal Revenue Service deadline for tax returns is July 15, 2020.

What do you think about the EY crypto tax calculation tool? Let us know in the comments section below.

The post Ernst & Young Launches Application to Help US Crypto Investors With Tax Filings appeared first on Bitcoin News.

Poles Hit With Backdated Tax on Crypto Trades

16/12/2019 by Idelto Editor

Poles Surprised With a Tax on Crypto Trades Before July 2018

Crypto traders in Poland have been unpleasantly surprised with a controversial tax they thought they wouldn’t have to pay. The Civil Law Transactions Tax (PCC) is applicable to digital asset trades conducted before the introduction of last year’s moratorium on its collection, the Polish tax administration recently clarified. The matter has been discussed on European level as well.

Also read: European AML Directive Pushes Crypto Startup Bottle Pay Out of Business

PCC Tax Applies to Crypto Transactions

In Poland, the PCC tax (Podatek od czynności cywilnoprawnych) is a 1 or 2% tax levied on sales of assets outside the scope of Europe’s widely implemented value added tax (VAT). The transfer tax on civil law transactions is usually due when the seller is not a business entity or the sale is of a movable property, real estate or various rights. The tax is payable by the buyer and is calculated on the value of the purchased asset.

According to an interpretation of the tax code issued in April last year, a 1% PCC tax should in principle apply to cryptocurrency transactions after digital coins were recognized as property rights. Following protests from the country’s crypto community and an online petition, however, the Ministry of Finance imposed a temporary hold on its collection in the summer of 2018, which was extended in July this year until June 30, 2020.

Since then, the issue has been hanging in the air, with the government in Warsaw taking time to consider its long-term policy regarding crypto taxation while also hoping for а pan-European solution. Polish media reported that the matter has been discussed during the Dec. 5 meeting of EU’s Economic and Financial Affairs Council (Ecofin). A decision on that level will certainly influence the taxation of cryptocurrencies in all member states, including Poland.

Controversial and Irrational Taxation

“In July, it seemed the case would be resolved once and for all and cryptocurrencies would be permanently exempted from this tax,” the Kryptowaluty news outlet noted in a recent post. However, the regulation adopted by Ministerstwo Finansów was only an interim measure. What’s more, a new clarification issued by the Polish National Tax Administration (KAS) states that persons who carried out cryptocurrency trading transactions before July 13, 2018 are liable for PCC.

The agency’s information service emphasized that last year’s regulation does not mean crypto trading from previous periods is not taxable. The clarification is bad news for Polish taxpayers who have carried out such transactions. First of all, reporting hundreds or thousands of transfers would be extremely complicated. Besides, the amount of the accumulated PCC can potentially exceed the profits from trading. The “irrational effect of the PCC tax on cryptocurrencies” was acknowledged by Poland’s deputy finance minister Pawel Gruza in an interview published last year.

Applied to crypto trades, the civil law transactions tax also creates a certain controversy. Transactions that are VAT-exempt, as is the case with buying and selling cryptocurrencies in the EU, are usually exempt from PCC as well. On the other hand, there are exceptions, as the professional services network KPMG explains on its website. In Poland, the tax is due on transfers of land and buildings, for example. In the case of crypto sales, the tax should be levied on each transaction over 1,000 Polish zloty, which is less than €235.

What do you think about the rationale behind the PCC tax? Share your thoughts on the subject in the comments section below.

Images courtesy of Shutterstock.

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Data Shows Short-Term Crypto Tax Filers Increase, But Lots of Investors Still Won’t File

03/04/2019 by Idelto Editor

According to personal finance firm Credit Karma Tax, filers who reported short-term capital losses for cryptocurrencies in the first month of 2019 jumped fivefold year-over-year. After the incredibly bearish crypto markets of 2018, data from early tax filers highlights the fact that more investors are claiming losses this tax season. However, a survey the company recorded back in November found that the number of people deciding not to file crypto taxes has increased.

Also read: Bitcoin Cash Markets and Network Gather Strong Momentum in Q1

Tax Filers Reporting Short-Term Crypto Gains and Losses Spike Considerably

Last April, as tax season approached, news.Bitcoin.com reported on how many cryptocurrency holders didn’t really care. At the time, the general manager of Credit Karma Tax, Jagjit Chawla, explained that out of 250,000 cryptocurrency holders, less than 100 people (0.0004%) reported their gains to the IRS. The tax season in 2019, however, has seen an increase of individuals reporting short-term capital losses. Sharing the data with our newsdesk, the company said that filers who reported short-term capital losses for bitcoin in the first month of 2019 jumped 521 percent in comparison to the first month of 2018. Moreover, short-term BTC losses averaged $3,405, which is a 322 percent increase since last year’s tax season.

“Short-term bitcoin gains declined during the first month of the 2019 filing season, with a net 7% decrease in the average amount of gains,” the report reads. “However, 33% more early filers reported short-term gains year-over-year.” The document’s author notes:

Investors with long-term gains are the winners so far this tax season, with early filers reporting an average gain of $15,352 during the first month of the 2019 filing season — up 103% from the same period last year.

Despite Increase in Short-Term Filings, Survey Reveals 47% of U.S. Investors Still Plan to Skip Paying Crypto Taxes

The methodology Credit Karma Tax used stems from data from members who filed their 2018 federal income taxes with the company between January 28 and February 22, 2019. This is in comparison to tax filers who submitted their 2017 taxes with the firm between January 29 and February 22, 2018. So year after year, data shows that people are claiming gains and losses more so than 2018 and 2017. However, the amount of people paying taxes on crypto assets is still incredibly small compared to the number of investors. In November of 2017, a Lendedu survey of 1,000 U.S. residents showed that 35.87 percent of the survey participants responded, “No, I do not plan on reporting gains or losses on my tax return.”

The data from Credit Karma Tax published on April 3 reveals that these numbers could be climbing higher. In November 2018, the company surveyed 1,000 bitcoin investors aged 18 and older and discovered 47 percent of U.S. based investors did not plan on reporting crypto gains or losses. “More than a third of those surveyed were unaware they could be required to report the same on their tax returns,” the firm’s report reveals. Last year a few bitcoin proponents got extremely salty with the previous year’s survey which showed lots of crypto holders were not paying taxes, so the increase last year may infuriate them.

In fact, for many people in the bitcoin world, the idea of crypto and taxes is like mixing oil with water. Only recently, bitcoiners have been discussing how crypto taxation is actually the biggest hindrance to digital currency adoption. So the steady increase of bitcoin holders that do not plan to report losses and gains to the IRS suggests that people may be thinking twice about paying into a blatantly corrupt and immoral system.

What do you think about the increase of short-term capital losses filed year-over-year? What do you think about the November 2018 survey showing 47% of investors do not plan to file crypto gains and losses? Let us know what you think about this story in the comments section below.

Image credits: Shutterstock, Pixabay, and Wiki Commons.

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What UK Bitcoin Investors Should Know as Tax Deadline Approaches

16/01/2019 by Idelto Editor

The deadline for submitting tax returns in the UK is Jan. 31, 2019. If you hold investments in bitcoin or any other cryptocurrency it is important to be aware you may owe corporation tax, income tax, or capital gains tax depending on your activities. The U.K.’s HM Revenue and Customs (HMRC) has shared its most recent guidelines.

Also read: Cryptocurrency and Taxes: How to Use 2018’s Losses to Your Advantage

Get Ready, Set, File

The last 18 months have been quite a rollercoaster ride for cryptocurrency investors. There could be another dip ahead as the taxman will want his share of any profits made during the past tax year. Recently, there have been numerous reports emerging of tax authorities clamping down and going after cryptocurrency traders.

In the U.K., self-assessment is a system the HMRC uses to collect tax. So if you’re a sole trader or in a business partnership based in Britain and have made any gains investing in cryptocurrencies or have been sold an investment giving you exposure to digital assets, you may owe tax. Failure to report crypto gains could amount to tax evasion.

HMRC’s Guidelines on Crypto

Calculating taxes can be a complex and stressful process. Over the last couple of years, there has been a lack of clarity when it comes to bitcoin taxation. The latest taxation guidelines around cryptocurrencies from the HMRC aim to simplify the process of reporting taxable crypto assets.

A spokesperson from HMRC explained: “Where an asset including bitcoin is held as an investment as opposed to being working capital in a trading activity – the presumption is that any profit or gain on its disposal will be charged to capital gains tax.”

According to HMRC, a calculation is made for each “disposal” or transaction to establish where the disposal gave rise to a gain or a loss. At the end of the tax year, which runs from April 5, 2017 to April 5, 2018, the taxpayer must add together all of their chargeable gains and then subtract any in-year allowable losses. Any losses will be looked at on a case-by-case basis.

According to HMRC:

Whether any profit or gain is chargeable or any loss is allowable will be looked at on a case-by-case basis taking into account the specific facts. Each case will be considered on the basis of its own individual facts and circumstances.

Keep Records of Every Single Transaction

HMRC has explained that “if the overall result is a gain then capital gains tax will be due on this, after deducting any allowable losses brought forward from previous tax years and deduction of the annual exempt amount. If the overall result is an allowable loss then this can be carried forward to future tax years to set against chargeable gains.”

Another issue which arises is what happens if an individual has sold from one cryptocurrency to another, say from BCH to ETH. Would they only be taxed once they convert this crypto into pounds?

A HMRC spokesperson explained: “The tax treatment would depend on the particular circumstances, but where capital gains tax is in point the chargeable gain or allowable loss will arise when a cryptocurrency is sold or otherwise disposed of (example by exchange) for money or money’s worth … swapping bitcoin for ethereum or indeed sterling will involve a disposal of the bitcoin and any gain or loss on the bitcoin will accrue.”

HMRC has published a guide aimed at bitcoin miners, traders, exchanges, payment processors and service providers, to help shed light on the crypto taxation process.

Disclaimer: This editorial is intended for informational purposes only. Bitcoin.com and the author are not experts on taxes and cannot be held responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by following the information in this article.

What do you think of HMRC’s guidelines as detailed above? Let us know in the comments section below.

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