As cryptocurrencies become more popular, the issue of regulation and taxation of Bitcoin and cryptocurrencies becomes more relevant. There are still no unified rules on how to tax cryptocurrencies.
Different countries have different approaches to solving this problem. It is worth noting that the identification of cryptocurrencies also varies. In some countries, for example, in Japan, cryptocurrencies received legal tender status on a par with other currencies.
In other countries cryptocurrencies are defined as property. And in the UK and Australia, digital assets act as foreign currency.
Representatives of the US Federal Tax Service (IRS) noted that states still have not developed effective mechanisms and procedures for taxing the cryptocurrency market.
Cryptocurrency taxes USA
In 2014, the U.S. Internal Revenue Service identified cryptocurrency as property. Cryptocurrencies should be taxed as property. This applies to both traders and miners.
In early 2018, President Donald Trump signed a bill to amend the U.S. Tax Code, according to which cryptocurrency held by investors for less than a year is taxed on a progressive scale from 10% to 37%.
Amounts withheld for more than one year are taxed on capital gains and can reach 24% of profits.
Cryptocurrency and taxes Japan
In Japan, the bitcoin tax system looks different. Cryptocurrency transactions relate to other income. In other words, Japanese citizens who profit from the sale of cryptocurrencies are forced to pay taxes ranging from 15% to 55%. It depends on the amount of total annual income.
Cryptocurrency taxes Canada
Cryptocurrency transactions are taxed in accordance with a barter agreement. In other words, cryptocurrencies in Canada are equated with goods, so a capital gains tax is paid.
The main factor here is the activity, so the size of the tax will be determined on the basis of how the profit was made. Therefore, individuals are taxed as self-employed and must pay 25% of their income.
Bitcoin tax Europe
By decision of the European Court, cryptocurrencies were exempted from value added tax. In EU countries, digital assets act as currencies, therefore they are subject to standard types of taxes: income tax and capital gains tax.
Cryptocurrency taxes Australia
Individuals using cryptocurrencies for personal purposes, under certain circumstances, may be exempted from taxation. The tax is not paid in cases when goods are purchased through cryptocurrency. Transactions are also bitcoin tax deductible for an amount not exceeding Australian $ 10,000.
Cryptocurrency taxes Belarus
The republic has introduced the most sparing regime for the taxation of cryptocurrencies in the world, and the development of the blockchain and digital economy is a priority for the development of the High Technology Park.
Revenues from mining and cryptocurrency exchanges are not taxed until 2023.
How to calculate cryptocurrency taxes?
Traditionally, unless a different calculation formula is specified, data on profit from the sale or during the conversion of cryptocurrencies are entered in the declaration.
I must say that the difference between the price of an asset at the time of sale and its value when buying is taken into account.The result is either profit or loss.
Legislation does not cover losses. It is also not possible to transfer losses to the next billing period. However, you can reduce the tax burden by subtracting the amount of loss from profit on other transactions.
Cryptocurrency Tax Calculation Example
For example, two assets were purchased: 1 BTC for $ 8,000 and 10 ETH for $ 400. At the time of sale, the value of cryptocurrencies was, respectively, $ 10,000 and $ 300.
Then the profit from the sale of bitcoin amounted to $ 2000, and the loss from the sale of ether – $ 1000. In this case, the losses incurred can be taken into account in the calculations, resulting in a net profit of $ 1,000. From this amount you need to pay tax.
In order to avoid losses and increase profits, it is necessary to correctly compose a cryptocurrency portfolio according to the rules of risk management. The holderlab.io provides services for optimizing and rebalancing the crypto portfolio, will help with this. The service automatically selects the most optimal cryptocurrency weights in the portfolio.
Tax calculation is a complex and time-consuming process, but there are products on the cryptocurrency market that help facilitate this procedure.
Some services allow you to automatically calculate the income and expenses from the sale and exchange of cryptocurrencies using data from cryptocurrency exchanges such as Coinbase, Kraken, Poloniex, Bitstamp and others. With the support of the IRS Tax Service, Ernst & Young consulting company has developed a tool for accounting for taxes on operations with cryptocurrencies EY Crypto-Asset Accounting and Tax (CAAT).
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