CryptoCurrencies Taxes in the USA
The crypto market has been witnessing the snowball effect in the burgeoning of cryptocurrencies for over a decade.
This growing pace has put a thinking cap on government and taxation authorities across the globe to derive their attention towards establishing the guidelines for the cryptocurrencies taxes policy.
Cryptocurrency is a Property
Back in the year 2014, Internal Revenue System (IRS) for the first time issued a notice justifying and demonstrating the cryptocurrencies as a property to be considered for Federal Income Tax purposes, not as a currency or securities. This applies to all the cryptocurrencies such as Bitcoin, Ethereum, Litecoin, XRP, etc.
As per the New 1040 Schedule 1 Form, the reporting of capital gains and losses generated through cryptocurrency trading is mandatory, with due consideration to the deductibility of capital losses too.
Else it would contribute to tax fraudulence as per the IRS guidelines. It clearly demands the taxpayers to state whether or not they own virtual currencies so that it creates a parallel stream in the implementation of a transparent taxation policy.
As capital assets, crypto can bear short-term or long-term capital gain. A profit is said to be a short-term gain.
If the crypto taxes the USA has been held for a year or less whereas if the position is held for more than a year then it is said to bear long-term capital gain on it.
Simultaneously, if the coin is held for-profit, not for amusement, then such a loss arising out of its inactiveness attracts loss which is a deductible capital loss.
How to calculate Crypto Capital Gains/capital losses?
The calculation of capital gain and losses has become comparatively simpler to walk through the mechanism of the process. The calculation is based on the understanding of taxable and non-taxable events.
Taxable Events for Cryptocurrency
It is the series of financial events or transactions which trigger the tax liability for further calculation, considering the prevalent tax rates with the help of a cryptocurrency tax calculator.
The following events get contemplated as the taxable events in the crypto ecosystem as per the IRS guidelines.
- The trading of cryptocurrency to a fiat currency (US dollar) is a taxable event.
- Trading cryptocurrency against the cryptocurrency is taxable for which calculation of fair market value in USD is necessary at the time of the trade.
- The use of cryptocurrency for goods and services at a fair market value is a taxable event.
- Any form of income generated from cryptocurrency through mining or another form of earning mode is a taxable one.
- Giving cryptocurrency as a gift amounts to a non-taxable event.
- Transfer of cryptocurrency i.e. transfers between crypto exchanges or wallets without realization of any capital gain/loss are not taxable.
- Purchase of cryptocurrency with USD is not taxable unless it is traded, used, or sold.
Other significant Event
- The tax code’s wash sale rule is not applied here as this rule forbids the claim of loss on the sale of a security, if that security is bought within 30 days before or after.
- Therefore, cryptocurrency is a property, not security allows one to go out at loss and then immediately claim the loss.
- As per the US-based coin exchanges, 1099-K is one of the mandatory forms for a customer who in one calendar year does 200 transactions aggregating to $20,000 as proceeds.
- This cut-off remains the same as other intermediaries handling properties transactions like eBay.
- As per the guidelines of the IRS, forks create ordinary income. In the blockchain, the splitting up of coins forks the creation of two chains.
- This phenomenon of splitting creates a windfall equivalent to the initial value of the newly created coin and this windfall is compulsory to be taxed ordinary income taxes.
- Airdrop, which refers to the random distribution of coins in the crypto market justifies that it has taxing forks, which makes marketing giveaways to be ordinary income here too.
- The gift of crypto to charity, friends, and relatives get treated as gifts of stock up to a point. The donation of the appreciated property after holding for less than a year attracts deductions based on a cost basis.
- In the case of the depreciated property giving away fetches capital loss.
- The Bitcoin that are traded on Chicago Mercantile Exchange upholds different tax treatment as per commodity futures:
- Positions are “Marked to Market”, recognized with paper gains and losses as a future position that was sold and immediately bought back.
- Here, the arising gains and losses are assumed to be 60% long-term and 40% short-term, irrespective of its holding period.
- One who is aggressively engaged in crypto mining is required to file two types of reports: the first one stating the fair value of the coins that have been earned and the second one stating the gains or losses arising after trading on crypto to fiat.
- Ideally, Offshore Crypto is not subjected to FBAR (Foreign Bank & Financial Accounts form) and Fatca (Foreign account tax compliance Act) reporting compliances.
- This is so because the norms do not apply to property that is not cash or securities. Yet the FBAR kicks in if an offshore property tops $10,000 at any point in a year or commands electronic filing then on.
- Accordingly, Fatca gets on thresholds that start at $50,000 and can be filed in accordance to form 8398.
How to file CryptoCurrencies Taxes?
- The report of the crypto transaction is furnished in the IRS form 8949 and 1040 Schedule D. The process begins with a listing of cryptocurrency trading details such as acquisition date, sold and traded date, proceeds, etc. in Form 8949.
- After the completion of the listing process, each element is summed up at the bottom and transferred to 1040 schedule D which is further included in the yearly tax return.
- There are few applications that let us import transaction details, file income reports, and do calculations.
- The software named CryptoTraderTax is built for cryptocurrency traders to solve the reporting issues. It allows users to integrate the history of trading data with the 20 exchanges and ensures the accumulation of data at one platform.
- This tax engine generates all the necessary reports to file like Form 8949. Additionally, its DIY tool provides taxation experts with a full-fledged tax professional software suite.
- Token Tax, being the mainstream crypto exchange, creates all the necessary forms required for tax filing. It is considered the best alternative for Bitcoin and crypto taxes.
- Bear Tax has also extended its functionality and supports over 25 crypto exchanges, including DEXs.
- In January 2018, the CryptoTrader.Tax got into partnership with Intuit’s TurboTax to ensure a seamless and quick filing process.
- Thus, the users can simply upload their generated reports in the tax software like Turbo Tax or Tax Act too.
In the US as per IRS guidelines, one can be penalized up to $ 2,50,000 and imprisonment as well for non-compliance to tax laws. The crypto tax laws are highly unpredictable and can change frequently over time.
Therefore it is mandatory to stay updated with reference to the government’s latest guidelines.
Cryptocurrencies Taxes in Australia
Giving regard to the accelerating revenue mechanism through crypto trading, the Australian Tax Office (ATO) has released official guidelines in reference to the tax treatment of cryptocurrencies too.
Thus, in Australia cryptocurrencies are subjected to treatment in two dimensions-one as the capital gain and another as an ordinary income which wholly depends on the nature of crypto transactions.
Capital gains tax (CGT)
This format of tax calculation comes into the application at the time of disposal of cryptocurrency (sale, purchase, trading of cryptocurrency, etc.)
The capital gain is the difference between AUD values of cryptocurrencies at the time of disposal and acquisition of the same. It is mandatory to keep records of every capital gain aroused in the five years.
According to ATO, the common disposal of cryptocurrency includes the following:
- Selling or gifting of cryptocurrencies.
- Trading or exchanging cryptocurrency which includes disposal of one cryptocurrency against another cryptocurrency.
- Conversion of cryptocurrency to fiat money.
- Using cryptocurrency for obtaining goods and services.
If at any time any of the above-mentioned transactions take place, then it is subjected to computation giving rise to capital gain or loss.
Capital Gain Discount
-If the cryptocurrency is held for more than 12 months, prior to the occurrence of the CGT event (disposal) then one has the option to apply for Capital Gain Tax Discount Method. This option provides the scope of significant tax-saving opportunities for investors.
-In order to apply for a capital gain discount, the first step is the calculation of capital gain, and then subtracts the cost incurred from proceeds, any capital losses.
Thereupon, reduce the capital gain by applying the provided percentage of the discount rate.
The discount percentage is provided at 50% for individuals trusts, and 33.33% for eligible life insurance companies or other super funders,
– If the cryptocurrencies are not held for more than 12 months, then the concept of discounts does not apply.
In case of any confusion regarding the holding period of cryptocurrencies, one can import their transactions to CryptoTrader.Tax to automatically figure out the term of holding.
Tax Treatment for Other Cryptocurrency Transaction Types
The crypto proceeds from mining activity are subjected to taxes depending on the nature of mining, as a hobby or business operations.
- So the first step is the determination of intentions of mining for which the regulatory line of distinction can be drawn as per the ATO guidelines.
Mining as a business:
In the case of trading cryptocurrencies as a business one can recognize income equivalent to the fair market value in AUD at the time of receiving them.
- The AUD value of business mining rewards is reported within the income report while calculating through CryptoTrader.Tax. Here, capital gain or loss arises at the time of disposition of crypto.
Mining as a hobby:
If the mining is done as a hobby then income is not recognized on the day of receiving mining rewards. In fact, the cost basis in such cryptos is $50 and capital gain tax events occur at the time of its disposition.
Interest from Defi, Lending, or Staking
As per the clear guidelines of ATO crypto proceeds from lending, staking or another type of crypto-based interest, are subject to tax slabs.
Thus, the interest (staking rewards) received is the ordinary income, the same as the fair market value of tokens at the time of receiving.
How to Report Crypto Capital Gains?
The process for recording crypto gains is quite simple and straightforward. For each “disposal” event the basic step is the calculation of associated gain or loss from the provided transactions as per the AUD guidelines.
After the calculation of each element of the crypto capital gain head, sum up all the transactions to reach the net capital gain or loss for the complete taxation period.
Thereupon, this net figure is transferred to Section 18 of the Australian Tax Reforms Form. Alternatively, the Crypto Trader.
Tax software can also be used for the calculation of net gain or loss without the requirement of any manual efforts as one can generate capital gain reports just in a click.
Note: As per the AUD norms the net loss can only be set off against future capital gains. No net capital loss arising from investing activities can be used to reduce the income tax liability of the current year.
Therefore, such loss can only be set off against capital gains of the future assessment year.
Accordingly, the income so generated in cryptocurrency is to be reported on Question 2 of the Australian Tax Form including all the standard withholdings (such as tips) and excluding salary or wages.
The Challenge for Traders
-The crypto traders have been trading cryptocurrencies for several months and years but still fail to keep the track of their Fair market value in AUD terms at the time they traded it.
As traders find it complex to track the AUD values as they are quoted in other cryptocurrency values instead of fiat currencies.
– In order to accurately file the taxes and avoid complexity with ATO, the traders need to take into consideration both the cost basis and Fair market value of the element.
Therefore, the traders need to give regard to historical values for each and every trade they made in AUD terms to ensure accuracy.
-Depending on the size of trades and transactions, the recording keeping becomes extremely tedious at times which requires the machine to do so.
Therefore, Australian Cryptocurrency investors are stepping towards the adoption of cryptocurrency tax software to automate the tax filing mechanism.
The Australian government has aggressively cracked down on tax filing protocols by making them strict and applicable to all eligible investors.
Recently the ATO issued more than 3,50,000 warning letters to suspected investors to alert them regarding their tax filing obligations.
Accordingly, ATO launched an online portal for crypto traders as a Data Matching Protocol for validation and reporting of crypto gains and losses.
Thus, ATO keeps the track of each investor’s crypto sale, purchase, and trade which provokes investors to timely file their tax reports.
Cryptocurrency Taxes in Japan
Initially, as per the National Tax Agency of Japan, any income arising out of virtual currency is taxable.
Cryptocurrency is treated as the mode of payment and has intellectual value attached to it. Hence, cryptocurrencies are exempted from consumption tax.
1 The Fund Settlement Act has recently been revised which originally established rules for e-money and gift certificates only.
The revised definition of the elements under the law also includes cryptocurrency, its registration, exchanges, business scope, and restrictions. This inclusion made crypto trading subjected to tax.
1 In Japan crypto-related activities like trading, lending, mining are subjected to tax under the head “miscellaneous income.” Compared to Japan’s stock profits which attract a flat 20% tax, cryptos are highly taxed up to 55%.
For crypto transactions, the tax slabs vary depending on the previous year’s earning. The below-mentioned tax brackets do not include 10% inhabitant’s flat tax rate which is additionally paid with crypto tax.
|Tax Bracket (JPY)||Income Tax Rate|
|Less than 1.95m||5%|
|40m and above||45%|
1 As per the instructions of Japan’s National Tax Agency (NTA) the relevant form for reporting crypto tax is currently Section 6.
2 All the individuals have to file tax for the previous year ending 31st December by the 15th March of the next year.
Cryptocurrency Taxes in Europe
UNITED KINGDOM (UK)
The United Kingdom’s taxation authority HMRC that stands for Her Majesty’s Revenue and Customs has initiated to enforce of crypto tax regulation across the country aggressively.
The authority has come to the realization that the growing popularity of Bitcoin with vibrant trading and investing on it provides the high scope of income generation for people.
In the UK as per the Crypto rules, such incomes are considered as capital gain and are subjected to tax norms under this head.
According to the policy paper of HMRC, crypto assets are the digital representation of value or rights that can be transferred, stored & traded electronically.
There are various forms of cryptocurrencies such as tokens, utility tokens & security tokens but HMRC considers none as currency or money.
Prominent Taxation rules in the UK
The rules are devised to prevent the scenario of wash sales where traders sell off the assets when the value of the assets drop-down & buy them back during the boom period.
This behavior of investors provides them with an opportunity of maximizing tax benefits & minimizing capital gains (tax liabilities).
Same Day Rule
The rule says that in case, if one cryptocurrency is sold and on the same day another is bought, then the cost of the sold cryptocurrency will be determined on the basis of the acquisition cost of the cryptocurrency that is bought.
This fundamental rule also applies in the case where the acquisition of the cryptocurrency is made before the sale of another cryptocurrency considering both the transactions take place on the same day.
The Bed & Breakfast Rule
This is also known as the 30-day Rule because here the cost of sold cryptocurrency is determined on the basis of any cryptocurrency that is acquired within 30 days of sale.
Crypto Tax Scenario in the UK
The capital gains are to be reported through Capital Gain Summary Form i.e. SA100 Tax Return. The tax liability arises only if the annual CGT allowance is more than £12,300 for the tax year 2020-2021.
The form defines the number of disposals, profit, and loss arising out of crypto trading and then other capital gains too.
- Cryptocurrencies are assumed to be assets like stocks, bonds & real- estate from a tax perspective, investing in cryptocurrency is very similar to investing in other assets like stocks, bonds, and real estate.
- The cryptocurrencies also attract the disposal rule. HMRC also explains disposals considering the following scenarios:
- Sell cryptocurrency against money.
- Exchanging cryptocurrency for different forms of cryptocurrency.
- Making the use of cryptocurrency for the payment of goods & services.
- Giving away cryptocurrencies to another person.
Note: (The acquisition and holding of cryptocurrency do not attract any tax liability in the UK, yet is advised to always keep the record of the transactions for further applicable deductions).
- Cryptocurrency mining constitutes a hobby or full-fledged business depending on the degree of activity, organization, risk, and commerciality.
- Mining as a hobby: In this case income is declared separately under the head “Miscellaneous Income” for the purpose of the tax return.
- The income, in this case, is determined based on the fair market value, by appropriating expenses as a deduction. Once these cryptos are disposed they attract capital gains.
- Mining as a business: The income arising, in this case, is added to trading profits & is subjected to income tax. During the disposal of such cryptocurrency, one has to pay National Insurance Contribution too.
- The phenomena of airdrop partially attract the income tax forms. During airdrop, if no exchange has taken place and does not involve any trade or business then airdrops are not subjected to tax norms.
- But if the airdrops are provided against any service then the amount is considered as income under the “Miscellaneous income” head or transferred to the trading profits (in case of business firms).
The receipt of an airdrop by any individual amounts to capital gain at the time of disposal whereas any appreciation in the crypto value is considered as trading profits for the business firms. Additionally one has to pay National Insurance Contribution too.
(The staking and hard fork are not subjected to Income tax liability in any case).
- As per the directions of HMRC any individual who is considered a financial trader for the Futures, Contract for Difference, and Margin Trading attracts trading profits if any gain arises out of such investment.
- In the case of ICOs (Initial Coin Offerings) or CEOs (Initial Exchange Offerings), the capital gain is paid on the crypto that is exchanged for the ICO token.
- Here, the proceeds from sales are determined on the basis of the market value of the existing cryptos. Additionally, the same market value is considered as the cost basis for the new token received from ICO which is further used for the calculation of pooled costs.
- The cryptocurrency as a gift also attracts certain tax liabilities depending on the situation. If the crypto is gifted to anyone other than the spouse or civil partner such amount (market value in pound sterling) is considered sale proceeds for the Capital Gain calculation. If the crypto gift has already been taxed earlier, fully or partially, the portion of such an already taxable segment will be reduced.
How to file tax using the software?
The crypto filing becomes much simpler with the introduction of software such as Koinly which has eliminated the manual working.
This helps to fetch data from all the relevant sources to ensure fair tax reporting. The process can be effectively executed in the following steps:
- Connecting to the wallets and exchanges: The majority of exchanges are API compatible that allows Koinly to download transaction history with ease. In the absence of API, such details can be imported in the CSV or excel file too.
- Previewing the capital gains: Koinly performs s of calculations to derive capital gain. The process starts with fetching and studying market rates at the time of the trading and then converting to GBP.
- The value so calculated is then compared with the wallet and exchange amounts to generate the capital gain using shared-pooling.
- One can also use the Dashboard to trade so that the proforma of the tax liability stays insight and does not come as a shock post-trading.
- Downloading the tax reports: After the automated calculation of capital gain, the user can download the tax reports along with the Capital gain summary form.
Under the HMRC rules, in case of non-compliance with the tax rules, one is subjected to the provided interest and penalties up to 200% of the tax due along with 20% capital gain tax.
The HMRC has seen to be quite proactive with the implementation of tax norms, they periodically collect data from exchanges and ensure that the payer is aware of their tax liabilities.
Switzerland, which is considered the financial center of the world, warmly accepted cryptocurrency trading in the country too. Accordingly, the Swiss authorities developed a set of rules for crypto trading and tax execution.
- The Swiss tax authorities consider cryptos equivalent to cash or precious metals held by individuals which make them fall in tax norms. Cryptocurrencies are taxed under the sections of wealth tax as they have a market value that needs to be declared in Swiss Tax Return under the assets and securities head, irrespective of the location where they are traded.
- It is mandatory for Swiss residents to declare the value of their crypto assets in Swiss Francs.
- Ideally, the speculative crypto gains are not subjected to tax which means that gains arising out of trading done through personal accounts is tax-free.
- The cryptocurrencies are subjected to taxes only when there is some professional trading in terms of receiving salary in cryptos, mining activities, etc.
- An individual is considered as a professional trader on the basis of the transaction frequency & volume, ownership, use for foreign funds as well as with respect to the use of derivatives in the crypto spheres. This threshold varies for each canton.
- The incomes so generated through cryptocurrencies are taxed based on the nature of the income it represents.
- The gain arising out of sale transactions through cryptocurrencies is considered as capital gain from movable assets, therefore is entitled to tax exemption as per Swiss taxation laws.
- At the same time, any capital loss arising due to such transactions is typically not deductible from tax.
- The cryptocurrency needs to be clearly stated on 31 December each year to reflect whether the majority currencies include Bitcoin or altcoins. The proof of value must be established for the crypto transactions (say by a screenshot of the crypto wallet).
As per the Estonian laws Cryptos are considered as Virtual Currencies like gain from transfer of property, income from employment, or business income.
Therefore, the cryptos are also taxed like traditional currencies. Any virtual income arising from these virtual currencies is meant to be converted to Euros with the date of receipt of income or the costs.
Generally, the central rates for the virtual currency can be analyzed from Cryptocurrency market sites as the market rate changes depending on the environment where it is traded.
There are certain criteria to define the tax norms of cryptocurrency considering the following:
Purchase or sale of virtual currencies
As per subsection 15(1) of the Income Tax Act, the cryptocurrency being the virtual currency is treated as property. Therefore, any gain from the transfer of virtual currencies is subjected to tax under this section.
- If an individual receives income from trading, purchasing, or sale of a virtual currency against traditional or other virtual currency then it is reported in table 6.3 or 8.3 of the income tax returns.
– Such gain is calculated as the difference of the selling and purchase price, otherwise, in the case of an exchange, the price of the received property is considered against the price of virtual currency.
– Since virtual currency is not considered as security, therefore, any loss suffered on its trading is not subjected to tax as per subsection 39 of the Income Tax Act.
Mining & Renting out of Storage Capacity
If any private person is engaged in mining or data processing of virtual currency then any income arising from this shall be declared as business income and are subjected to income tax obligations.
Additionally, any person who permanently mines the cryptocurrency needs to register himself as a sole proprietor to deduct the trading expenses from the income so generated.
On the other hand, any income arising by renting storage capacity is considered as business income as it is a business activity. Such income shall be declared in table 7.3 on Form E.
Wages received in Virtual currency
The remuneration received in Virtual currency is entitled to income tax but only if no income tax has been withheld previously on such amount.
If the employer has already withheld the income tax the amount can be used for purchasing goods and services without any additional liabilities.
Value Added Tax
Alike, traditional currencies, virtual currencies are exempted from Value Addition Tax too. Therefore, there arises no norm for the VAT registration owing to crypto trading.
According to the German Tax Acts, Crypto is not considered as foreign currency, property, or legal tender.
The German Federal Central Tax Office, natively known as or Bundeszentralamt für Steuern (BZSt) assumes cryptocurrencies as private money for the purpose of tax filing.
Additionally, the Federal Ministry of Finance (BMF) has ruled out that any crypto transactions made by an individual, in no case attract Value Added Tax(VAT). Since, in Germany, the calendar year (ending 31st December) is deemed to be a tax year. Therefore, the due date for paying tax is 31st July.
Tax Treatment (Individuals)
- Germany is believed to be the haven for cryptocurrencies, being treated as private money attaches exemptions and relaxation to it.
- All the crypto sales made under 600 Euros provide tax exemption to the individuals as the small transaction like these adheres to the tax law 23 EStG.
- No tax liability is created if the holding period for the crypto is less than 1 year. Any increase in the value of cryptocurrencies over 1 year is completely tax-free.
- According to section 23 of German Income Tax law if cryptos are sold after being held for more than a year, then such transaction is subjected to income tax. Additionally, under this section mining of crypto by individuals is also subjected to tax liabilities.
- Under Section 22 of the German Income Tax act, net profit or loss arising out of crypto sales is taxable irrespective of whether it is traded against another crypto or fiat currency.
- Yet the taxpayers can deduct fees as the cost basis before the calculation of the taxable amount.
- Any goods and services purchased against crypto are treated as taxable transactions. However such tax can be avoided by holding crypto for a year before making any purchases using it.
- The German Tax Act clearly allows one to set off their gains with the previous year’s losses or to carry such losses to offset gains in the future.
- The German income tax ranges from 0% to 45% depending on the scale of individuals income which is as follows:
|German income tax bracket||Tax rate|
|€9,409 – €57,051||14%|
|€57,052 – €270,500||42%|
- The income tax brackets for the married couple are simply double the brackets of individuals as stated above. The crypto earnings for the individuals are reported through the form which defines wages and other sources of income too.
Tax Treatment (Business)
- The German Corporations are taxed based on their legal structure or entity, therefore their crypto holdings are taxed similar to other assets. The rule applies to all the entities whether it’s a retail company (one accepting payments in the form of crypto against goods and services), a crypto mining company, or an exchange platform.
- In case the company is a partnership firm it is subjected to tax norms like individuals whereas limited liability corporations, public companies, and other corporate entities are subjected to corporate taxes on their holdings.
- Therefore, it is advised to consider the tax implications of the entities before having extensive crypto holdings.
- Unlike individuals, the corporate is not entitled to tax exemption for holding cryptos for less than a year.
The French taxation policy for cryptocurrencies can be defined considering the following tax heads.
- The cryptocurrencies are regarded as intangible assets for the purpose of direct tax calculation as a capital gain on any off profit made on Bitcoin typed cryptocurrency.
- The tax so applied is at an aggregate rate of 36.2% which includes 19% basic rate and 17.2% as social contributions.
- Profits made from speculation and mining in the crypto sphere are considered as commercial and industrial gain and attract progressive income tax format at 45% and additional rate of social contributions.
- Although there are no clear guidelines for the VAT treatment of cryptocurrencies yet the French Supreme court considers Cryptocurrency as intangible assets which make them liable to the following norms:
- Any revenue received from the mining activities in the cryptosystem is considered as a supply of services, therefore is subjected to VAT.
- In the case of the exchange of cryptocurrency against fiat currency, no VAT is due.
- Any charges made above the actual value of the cryptocurrency to carry out transactions, apart from Forex transactions are subjected to VAT.
- Additionally, any acquisition of goods and services by payment through cryptocurrency is subjected to French VAT.
- The sale of cryptocurrencies does not attract VAT unless such a sale is with the intention to obtain continuing income in the future.
- The cryptocurrencies are also not subjected to transfer and wealth taxes in France.
The Spanish taxation policy for cryptocurrencies can be defined considering the following tax heads.
- Direct Taxes
- If an individual bears the cryptocurrency as an investment, then such cryptocurrency is considered as an asset and is subjected to Capital gain. The income earned and expenses borne during crypto mining are deductible.
- The companies are subjected to corporate taxes for any profit or loss owing to crypto transaction movement amongst cryptocurrencies and fiat currencies too. Additionally, mining income is entitled to deductions for the corporate too.
- The crypto transactions are either outside the purview of value-added tax or are completely exempted. Therefore, Cryptocurrencies are not subjected to VAT in Spain.
- Additionally, Spain also provides an exemption for cryptocurrencies on transfer taxes.
- As per the Spanish Tax rules, it is necessary to include cryptocurrency as the Taxpayer’s wealth for the determination of the overall tax liability. Yet this rule may vary depending on the autonomous region of the taxpayer.
- Additionally, cryptocurrency obtained as an inheritance or gift is subjected to a tax regime as an asset.
The Swedish taxation policy for cryptocurrencies can be defined considering the following tax heads as they have issued clear guidance for the crypto tax determination.
- Direct Taxes
- The sale or exchange of cryptocurrency attracts the capital gain whereas if the cryptos are held as stock, then any gain arising on the disposal of such stocked cryptos is treated as “income from business operations.”
- The mining activities in the cryptosphere are subjected to tax either as Income from Business operations or Income from Employment depending on the certain threshold limits set by the authorities to fit in the respective slabs.
- According to the guidelines of the Swedish Tax Authority, any exchange of cryptocurrencies against foreign currencies is completely exempted from VAT.
- The revenue arising out of mining is not subjected to VAT as it is beyond its scope. Additionally, there exists no transfer tax with respect to Cryptocurrencies.
The taxation policy of Belgium for cryptocurrencies can be defined considering the following points:
- Any gain arising through the speculative nature of the cryptocurrency is subjected to tax at 33% with additional local surcharges. In the absence of speculative and professional activity on cryptocurrency, any gain arising is ideally exempted and losses are entitled to deduction too.
- In the case of Professional Individual investors, the gain is treated as a professional income and is accordingly subjected to progressive tax rates which vary from 25% to 50% with additional local surcharge and social security contributions.
- The companies are subjected to the corporate tax regime( 25% in 2020) which indicates that any profits owing to the transactional movement of the cryptocurrencies are included in the taxable profit whereas losses are entitled to deductions.
- Apart from direct tax, Cryptocurrencies are not subjected to VAT and transfer taxes so far. Additionally, cryptocurrencies portfolio is also not taxable assets as per the new Belgian tax regime.
Although there are no specific rules on cryptocurrency yet the Italian Tax Authority has provided certain guidelines:
- For an individual, any gain arising out of only speculative activities is taxed at a minimum of 26%. The activity is considered speculative if for 7 consecutive days the ownership threshold of the cryptocurrency exceeds the Euro 51,000.
- For traders the cryptocurrency is subjected to tax on profits, considering it as an income that includes non-resident trading too.
- The companies are subjected to corporation tax owing to the exchange movement of the cryptocurrencies between other cryptocurrencies or fiat currencies too.
- The sale and purchase of the cryptocurrency against Euros or other currencies are regarded as foreign currency transactions which makes it exempt from the purview of Value added tax in Italy.
- If the payment for any goods and services is made using cryptocurrencies then such value of supply is subjected to VAT at the time when the transaction takes place.
- There exist no transfer taxes in Italy for the cryptocurrency; additionally, they are regarded as security for Italian stamp duty purposes.