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Taxation of cryptocurrencies in the world
0 POSTS 0 COMMENTSOver the past year, many countries around the world have made significant progress in the regulation and taxation of cryptocurrency transactions. In this article, you will find out how different countries tax cryptocurrencies. __________________________________________________________________________ Cryptocurrency taxes in different countries __________________________________________________________________________ Cryptocurrencies are not considered a national currency in many countries, and they are mostly unregulated. El Salvador was the first to accept bitcoin as legal money in June 2021. Crypto taxes in Japan are up to 55%, with 27.5-30% for mining in Australia, 0-37% in the USA, and 15-22.5% in Brazil. Whilst China has proclaimed all crypto transactions illegal, in Canada the taxes range from 15-33%, in France they are 19%, and in the UK they stand at 10-20%. __________________________________________________________________________ The regulation of bitcoin is very different, depending on the country. In the USA, the IRS is in charge of overseeing transactions, and the regulator mostly views cryptos as an asset, similar to property. Cryptocurrencies are legal in Japan, defined as crypto assets under the Payment Services Act. According to FinCityTokyo, there are around 3.8 million crypto traders in Japan (as of December 2020). China was a major player in the crypto market, with the largest mining pools being based there. However, the government's regulation prevents Chinese traders and miners from making profit from cryptos. __________________________________________________________________________ In Germany, cryptocurrencies have been recognized as a digital representation of value and a new financial instrument, though not legal money. Cryptocurrencies are mostly uncontrolled in Italy, Singapore, and South Korea. In Switzerland, cryptos are considered property, and the country remains one of the most crypto-friendly in the world. __________________________________________________________________________ In the United Kingdom, there are three groups of cryptocurrencies: e-money tokens, unregulated tokens, and security tokens. E-money tokens are considered a type of digital money, not a financial instrument. Unregulated tokens are utility tokens with a limited use case (usually within their own ecosystem). Security tokens are controlled investments akin to shares. El Salvador is the only country in the world to accept crypto as a legal currency. Products can have prices in BTC or ETH, and you can pay your debts with cryptocurrency. __________________________________________________________________________ Taxation of transactions with cryptocurrencies of individuals __________________________________________________________________________ You can generate income by trading or mining cryptocurrencies. But not all cryptos are mineable or can be found on all exchange platforms. Profits from selling assets are otherwise known as capital gains. There are two types of capital gains taxes. Short-term ones result from selling an asset held up to one year. Otherwise, long-term taxes apply. __________________________________________________________________________ Long-term capital gain taxes can be anywhere from 0% to 20%, depending on your tax bracket in the USA. Short-term capital gains taxes are up to 37%, just like your income. The tax bracket may increase if you are married, the head of the household, or make larger profits. In Germany, everything that is less than €600 profit from crypto trading is tax-free (if held less than a year), and any crypto held for more than one year is tax-free (regardless of the amount you own). Malta, Malaysia, Singapore, and Slovenia, among others, don’t tax cryptocurrencies. __________________________________________________________________________ Cryptocurrency taxes for legal entities __________________________________________________________________________ Depending on the country and its regulations, legal entities have to pay different taxes. For example, in Canada, 100% of business income is taxed. Crypto gains/losses must be included in the balance sheet. All transactions must, as always, be recorded and maintained on file for possible tax office demands for corporations in Germany. __________________________________________________________________________ In the US, cryptos are taxed as property for corporations. For most firms in the United States, GAAP accounting regulations require you to define those investments as intangible assets. All in all, governments can’t keep up with the rapid development of the crypto world. That’s why you are unlikely to find any particular regulations for legal entities dealing with cryptocurrencies. Stick to the current legislation in your country. __________________________________________________________________________ How do different countries calculate crypto taxes? __________________________________________________________________________ We have already discussed the crypto taxes in different countries in the first section, but let’s see more details. __________________________________________________________________________ Australia __________________________________________________________________________ If you are a company trading cryptocurrencies, you will pay 27.5% taxes, and if you are an individual, it depends on your tax bracket (0-45%). In any case, trading is legal, and Australia is crypto-friendly. More than three quarters of Australians made some profit from cryptocurrencies during the last year – around $10,000. __________________________________________________________________________ Brazil __________________________________________________________________________ The country ranks seventh worldwide for the number of people using cryptocurrencies. With a minimum 15% tax on capital gains, it is much cheaper for people to trade or mine cryptocurrency there, especially since electricity is cheaper. __________________________________________________________________________ Canada __________________________________________________________________________ Approximately four million Canadians now use cryptos. Capital gains taxes are 50% in Canada, so essentially, half your profits would go to paying taxes. You either need to be incredibly successful in trading or use tax-avoiding methods. __________________________________________________________________________ China __________________________________________________________________________ Cryptocurrencies are very popular in China, and many people have invested large sums in digital assets. However, China has banned trading and mining cryptos, so it is illegal. This was probably done to shift people to the country’s own central bank cryptocurrency, called the digital yuan. __________________________________________________________________________ USA __________________________________________________________________________ The amount of tax owed on bitcoin transactions is determined by the amount of profit or loss realized. For tax reasons, corporations can offset profits with losses. Net capital gains for corporations are added to ordinary income and taxed at 21%. Cryptocurrency is quite popular in the USA, and how much you will pay in taxes depends on your tax bracket. __________________________________________________________________________ Conclusion __________________________________________________________________________ Taxes vary from country to country. US citizens have to disclose their trading information to the IRS/SEC. However, if you file crypto gains on your balance sheet and have overall losses, you could technically avoid taxes. Governments still need to come up with specific policies regarding crypto taxation – now, the situation around the world is pretty vague. One thing most countries have in common is that cryptocurrencies are still not legal tender.