Many ask these questions: How can I pay my taxes? Should I pay taxes for crypto? Explore how countries around the world deal with cryptocurrency taxes.
Cryptocurrencies have really come out of their way and showed the world that digital currencies are the future. They are used in Bitcoin casinos, sports betting, eSports betting, shopping, etc. However, governments are not really happy with these new assets that they have to control now. The Internal Revenue Service (IRS) is constantly putting out tax guidance and warning crypto investors to pay their taxes connected to their digital asset ownership.
People keep asking the most important questions: how can I pay my taxes? Should I pay taxes for crypto?
Crypto Taxes in US
Keep in mind that the IRS is treating BTC and other fellow cryptocurrencies as property (like gold, real-estate, stocks, etc.) All of those properties are required to be reported on capital gains and losses in trading, and so should cryptocurrencies be.
If you don’t consider this as important, then it is seen as a simple tax fraud.
There are a couple of steps to understanding crypto-related taxes: calculating capital gains and losses, taxable and non-taxable events, completing forms and filing them to the IRS.
First off, we start with calculating gains and losses and the aforementioned events that come with them.
In short, a taxable event is an action that results in a capital gain or loss and needs tax reporting. Let’s check them all out.
Taxable events include:
- Trading digital assets to fiat ones
- Trading digital assets to digital assets
- Using digital assets for services or goods
- Digital assets as part of your income
- Fiat income from mining crypto
- Selling or trading mined cryptocurrencies
- Staking or mining rewards
- Crypto loaning
Non-taxable events include:
- Giving digital assets as a gift
- Transferring digital assets between wallets or exchanges
- Buying digital assets with fiat ones
There are some exceptions to the rule like cryptocurrencies as a gift or charities. If you receive cryptocurrencies as a gift, you don’t have to pay taxes until you do something with them.
If you give cryptocurrencies, you can only do that as a non-taxable event for up to $15,000 per person per year.
When it comes to charities, you can give cryptocurrencies and claim charitable deduction that should be equal to the fair market value of the cryptos.
You may encounter a bigger tax deduction with receiving the whole value of your charitable contributions.
Moreover, you have to calculate your capital gains and losses by reviewing each of your transactions and their cost basis.
It is highly advisable to have a tax consultant by your side at all times because here we are briefly touching on some important topics. Paying taxes is much more complex and it takes for an experienced individual to explain it all.
Next step is to prepare forms and here is a list of all forms that are needed. After you complete them, it’s time to file those taxes.
So, what could potentially happen if you don’t pay your taxes?
We have gone on and on how Blockchain has decentralized ways and people get convinced that no one can track how they are handling their money in terms of cryptocurrencies.
The IRS have recently picked up on those beliefs and asked Coinbase (a massive exchange platform) to give them records of people who possess $20,000+ in transactions.
Let’s not forget that Blockchain is a public ledger which means that anyone who has suspicions for another person’s activity, can track them down to their name and wallet address.
Keep in mind that not paying taxes can lead to a number of justice-inclined actions or a simple fine of $250,000.
There is a lot more to just these crypto tax basics but you can go over to your country’s IRS website and learn more. Remember, we are not giving any tax advice but just general common knowledge.
Crypto Taxes in Singapore
Nice example on how countries stands towards the crypto taxing is Singapore. IIRAS (Inland Revenue Authority of Singapore) has tax documents that concern any crypto consumers or businesses that have STOs/ICO. These guidelines provide a bit of clarity when it comes to crypto innovation on the new markets.
There are three categories that go over the different token types and where they stand when it comes to regulating taxes.
Security tokens owners do not pay capital gain taxes because STOs income is not considered taxable when it’s not a revenue asset. In this way, IRAS is making startup owners raise money without paying big amounts of tax.
On the other hand, utility tokens owners go under the deferred revenue which is highly taxable. It’s a good thing that new regulations for such tokens state that they represent access to services and goods. This way they become a deductible event for investors which is fantastic.
And to finish off, the payment tokens are considered non-taxable during transactions, unlike services and goods. To the IRAS buying stuff with BTC is similar to barter.
On a positive note, IRAS does not require taxes on funds or airdrops gotten from hard forks. Such funds go under winnings and become taxable only on transactions.
Initially, Singapore is determined to create a crypto and Blockchain economy that will kick off all startups and introduce business to new ways of handling finance.
Crypto Taxes in the World
When it comes to the world, most countries have not yet started to regulate cryptos but there are some that straight up banned cryptos usage within their borders. Countries like Bolivia, Venezuela (for cryptocurrencies different than Petro cryptocurrency), Macedonia, Russia, Algeria, Bahrain, Egypt, Iraq, Morocco, United Arab Emirates, Bangladesh, Nepal, etc.
Other countries’ crypto regulation statuses are so different. Canada for example regulates cryptocurrencies with the occasional partial banking ban. The Canadian dollar is recognized as the only official currency and even though cryptos get taxes upon them, purchasing with them is considered as a barter. On the other hand, in the European Union cryptocurrencies are not regulated and member of the EU must enforce AML/KYC rules for digital currencies. Other countries that don’t regulate cryptocurrencies are Croatia, Cyprus, Czech Republic, Denmark, and many, many more.
Other examples are Finland, France, and Georgia which don’t regulate cryptocurrencies but in Finland they are taxed as capital gains, France is currently in the process of creating new regulations, and Georgia doesn’t recognize cryptos as legal.
In Iceland, for example regulations are unclear to this day.
On another note, in Switzerland and Italy cryptocurrencies are heavily regulated. In Italy taxes are paid if cryptocurrencies are used for personal use only. In Switzerland all taxes apply to cryptocurrencies without exceptions.
To sum up, we live in very strange times right now. The crisis that came upon us leads to beautiful new opportunities and cryptocurrencies are one of them. Of course, we should all be considerate citizens and be responsible for our taxes. We hope we helped out a little bit in those confusing times.
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