A Useful Guide To Cryptocurrencies And Taxes

Jump to page contents

A Useful Guide To Cryptocurrencies And Taxes

With so much attention on the rising price of Bitcoin and the new, overnight millionaires in the industry, it could be easy to overlook the important topic of taxes. Although blockchain’s decentralisation and anonymity might make you feel as though you can evade paying taxes, the law in various countries is extremely clear on the subject.

Depending on your country of residence, different tax laws apply, and if you think you can keep your transactions a secret you’re forgetting one important feature of blockchain; its transparency. All transactions are recorded on viewable ledgers, with relevant wallet addresses visible. All the taxman needs to do is associate the address with a name.

Cryptocurrency Tax Rules in the United States

The IRS classifies cryptocurrencies as property, so you must calculate your taxes based on this principle. In order to facilitate your tax calculations, keep a record of your transactions, including income from mining and trading. Be sure to also keep a note of your investments in equipment, such as mining rigs, and losses, as these too will affect your total taxes owed.

Simultaneously, the IRS is putting pressure on top US-based exchanges, including Coinbase and Gemini to provide details of their US-based users. Whilst they are requesting that the exchanges fill in what is known as the 1099-K form, there is no room to provide accurate information on capital gains and losses. You can find more information about calculating and paying taxes on crypto in the US via this Coinbase page.

Cryptocurrency Tax Rules in the Rest of the World

Whilst the majority of Europe is made up of the European Union block, individual countries have, so far, taken different approaches to cryptocurrency taxation. In the UK, for example, cryptocurrencies such as Bitcoin and Ethereum are treated as foreign currency and are subject to capital gains tax in case of profits originating from trades.

Their German neighbours treat crypto a little differently. Whilst trading cryptocurrencies do not incur capital gains tax, if the investment is held for less than one year, then income taxes apply. In this case, persons could be taxed up to 45%. A similar approach is taken by the Swiss government, however, residents must also pay profit and wealth taxes for their crypto holdings.

Malta, which in 2018 passed several laws focusing on cryptocurrencies and DLT, takes a more pragmatic approach. In most cases, crypto is treated like fiat currency for tax purposes. In these cases, no income tax or duty is levied, however, capital gains tax do apply for transactions which result in a profit. Whilst these could be as high as 35%, through various structuring options it is possible to reduce this to 5% or even less.

Japan has taken a similar approach to Malta. The country which since 2017 accepts crypto as legal tender taxes crypto as miscellaneous income, with any gains taxed at between 15% to 55%.

Ready to join our tribe?

We respect your email privacy

Subscribe now to recieve exclusive updates and offers!

Recently Similar Guides

Latest Guides

Cryptocurrency

How Does Crypto Lending Work? Full Updated Guide

Since its inception, the crypto market has been growing in leaps and bounds. With hundreds of features, thousands of tokens, millions of investors, and billions of dollars, it is clear that the problems of decentralization, anonymity and cross-border payment it solves are seen as valuable. These questions have quickly arised: what is crypto lending, and […]

13 October, 2021
Cryptocurrency,DogeCoin

How Many Dogecoins Are There?

Dogecoin is a digital currency that started as a form of satire of the cryptocurrency market. It was created by Billy Markus, an IBM software engineer, and Jackson Palmer, an Adobe software engineer. The aim was to create a digital currency with peer-to-peer features that could reach a wider demographic than Bitcoin, which is the […]

8 October, 2021
Coinbase,Crypto Wallets,Cryptocurrency,Exchange Platforms

BlockFi vs Coinbase: What’s the Final Verdict?

The advent of cryptocurrency has brought about quite a number of financial and technological innovations that are shaping the financial investment sector. One of those innovations is cryptocurrency exchange platforms. Crypto exchange platforms combine both financial and technological features to enable you to trade and invest in any digital currency of your choice. These crypto […]

30 September, 2021
Cryptocurrency

Best Crypto Credit Cards List

What Are Crypto Credit Cards? Cryptocurrency has taken the world by storm and it has revolutionalized the financial sector and further laid an argument for cryptocurrency as the future global currency. There are now several things you can do with cryptocurrencies. You can trade, invest and exchange for goods and services. Another innovation that cryptocurrency […]

24 September, 2021
Altcoins,Litecoin

All you need to know about Litecoin ATMs

Litecoin has the reputation for being the second cryptocurrency that was created after Bitcoin, so it makes sense that Litecoin ATMs are on the rise. It can be used as a medium for payment anywhere around the world without any interference from a third party. Litecoin has $11 billion and a maximum supply of 84 […]

1 September, 2021
eToro

Comprehensive Guide For eToro UK Users

eToro is a fintech start-up and is considered among the first pioneers of social trading. It was founded in 2007 in Tel Aviv, Israel. It is headquartered in Greater London, United Kingdom, with offices in Limassol, Cyprus, Sydney, and New Jersey in the US. The fact that it’s headquartered in London makes it appealing to […]

26 August, 2021
Crypto Mining,Cryptocurrency

Make your Own Cryptocurrency

Cryptocurrency is a decentralized digital currency that is not issued by a central financial authority. Cryptocurrencies are also used as a form of exchange for products, services, and also fiat currencies. The majority of these cryptocurrencies are created by tech and financial companies to serve specific purposes. For example, the Ethereum technology is used for […]

19 August, 2021
Bitcoin,token

Crypto Coin Vs Token — Which One To Choose In 2021?

There are so many things to learn about cryptocurrency, the learning never stops. When it comes to Crypto coin Vs Token, there are a few things you need to know to be able to differentiate between these two digital assets. Some of the things you need to know about these crypto-assets include their definitions, functionalities, […]

11 August, 2021