From the US to Switzerland: tax status for cryptocurrencies in different countries

On June 25, Japanese Finance Minister and Senator Fujimaki suggested that Japan’s current cryptocurrency transaction tax rate (up to 55%) could be replaced by a 20% flat rate similar to stock or foreign exchange transactions.

Although Japan is not sure whether the current tax framework should lose its progressive scale – using “tax equity” as one of the arguments for supporting the old model – there are no clear guidelines for how to tax Bitcoin and altcoin in some major markets. .

The following are some of the ways in which countries levy cryptocurrency taxes.

United Kingdom

Tax status of cryptocurrencies: investment (small scale holdings); working capital (if the country is frequently used)

Profits tax: less than 11,850 euros free, higher than 45%

The UK Customs and Excise Department is a tax agency responsible for taxation in the UK. In 2014, the company introduced the Tax Guide for Bitcoin and Other Currencies. Therefore, the income earned by the individual – and the cost of activities related to the cryptocurrency – is subject to corporate tax, income tax or capital gains tax on a case-by-case basis. As a representative of the UK Customs and Excise Department explained to the British media:

We must study whether any profit or gain is charged on a case-by-case basis, or whether any loss is allowed.

However, cryptocurrencies are usually classified as capital gains tax for ordinary users in the UK and are considered an investment. However, some traders may have to pay income tax, depending on their frequency of transactions and the number of operations. According to the UK Customs and Excise Department:

If an asset (including Bitcoin) is held as an investment and not as a working capital in a trading activity, then any profit or benefit in the course of its processing is assumed to be counted. Capital gains tax.

Similarly, currency transactions are also taxable events. However, as the UK Customs and Excise Department has pointed out, each situation may vary from case to case.

Importantly, every citizen of the working age has a tax-free allowance. For example, in the tax year of 2018~2019, the taxpayer has a quota of 11,850 euros. If the taxpayer exceeds this amount, he should pay a 20% tax between 11,851 euros and 46,350 euros, at 46,531 euros to 150,000 euros. 40% of the taxes will be paid, and 45% of the taxes will be paid for more than 150,000 euros.

United States

Encrypted tax status: property

Profits tax: calculated based on the value of the currency on the day of the transaction

The US Internal Revenue Service (IRS) is a US government agency that collects taxes and enforces tax laws that treat cryptocurrencies as property. Therefore, if you sell your currency and make a profit, you will pay a capital gains tax.

The agency issued a general guide on how to tax cryptocurrencies in 2014. According to Circular 2014-21, the cryptocurrency obtained by receiving or mining must calculate its total income at fair value from the date of receipt of the virtual currency, and the corresponding tax is calculated based on this value. Therefore, gifts, mining and currency transactions are taxable and are estimated based on the value of the currency in those days.

Importantly, cryptocurrency brokers do not need to issue a 1099 disclosure statement—the IRS used to report income other than wages, salaries, and gratuities—that makes it more difficult for encrypted users to report revenue. However, it is reported that Coinbase has sent this form to some customers.

In the past few years, the US Internal Revenue Service has shown strong interest in cryptocurrencies as a source of income. For example, in February 2018, Coinbase issued a formal notice to approximately 13,000 customers, informing them that the data would be handed over to the IRS as required. In addition, the US Internal Revenue Service uses software to track and alert cryptocurrency holders to pay taxes through memos, which highlights the “inherent pseudo-anonymity feature” of cryptocurrency transactions.


Tax status of cryptocurrency: statutory payment method

Profits tax: based on the amount of money held, between 15 and 55%

At present, Japan’s main tax agency, the National Tax Agency, said that in Japan, the benefits of virtual currency (which is considered a legal payment method) are classified as “miscellaneous income”.

In essence, this means that Japanese cryptocurrency holders must pay 15% to 55% of their annual tax returns. The maximum amount of taxes and fees applies to individuals whose annual income exceeds 40 million yen ($365,000).

According to Bloomberg, such regulation has prompted some cryptocurrency investors to move to countries such as Singapore that do not impose capital gains tax on long-term investments in virtual currency. The media also interviewed Hiroyuki Komiya, who operates a blockchain consulting firm in Tokyo. He used the “overall average line” instead of the “moving average” to estimate the taxable income by “millions of yen”.

Komiya explained that he is still not sure about some of the nuances in declaring the benefits of encryption, because there are no clear official guidelines on this issue:

The government has not clarified certain details, so you are not sure if you are doing this right.

However, tax laws for Japanese cryptocurrency users may change in the future. The Japanese Finance Minister discussed the possibility of modifying the progressive tax rate on June 25. Senate Fujimaki asked whether Japanese Deputy Prime Minister Taro Aso should levy a cryptocurrency through a “single settlement tax” instead of taxing it according to the current classification. This means that Japan’s current tax framework for cryptocurrencies can be replaced by a 20% flat rate similar to stock or foreign exchange transactions. Despite this, Taro Aso said that he did not believe that the public would respond positively to this change on the grounds of “tax equity”.

At present, Japan has a tax rate of up to 55% on cryptocurrency transactions, and changing its category will reduce its tax rate applicable to stocks or foreign exchange transactions to 20%.


Tax status of cryptocurrency: statutory payment method

Profits tax: no

At present, South Korea does not have a tax framework for cryptocurrency investors, nor does it have information from local government agencies that the proceeds of cryptocurrency should be reported for tax purposes, but the country imposes a 24.2% tax on cryptocurrency transactions. .

However, Fuji News (FNN) reported in April this year that the Korea Ministry of Strategy and Finance announced that it would publish a general tax framework for cryptocurrencies by the end of June. Therefore, according to Fuji News, the Korean government’s cryptocurrency tax working group has proposed a “transfer income tax on profits tax” generated by cryptocurrency sales. In addition, “If income from virtual currency transactions is considered temporary and informal, then other income taxes can be imposed on them.”

Although the agency has not issued any official statements on the policy, the local news agency Chosun Ilbo reported on June 22 that the government will levy a 10% capital gains tax in the future, but the news is soon being strategic and financial itself. Refuted.


Tax status of cryptocurrency: undefined

Profits tax: 13% (personal income tax)

Although a variety of common cryptocurrency bills have been introduced at the national level this year, Russia does not currently have a clear tax framework for cryptocurrencies.

However, on May 17, the Russian Ministry of Finance issued a document stating that Russian citizens should evaluate the “independent” cryptocurrency and declare capital gains tax under the official regulatory framework. In Russia, the rate of personal income tax is 13%.

South Africa

Tax status of cryptocurrencies: intangible assets

Profits tax: 18% (capital gains tax); 18-45% (general income tax)

The South African Taxation Office (SARS), the South African tax regulator, treats cryptocurrencies as intangible assets. In early April 2018, the South African Taxation Office announced that it would “continue to apply normal income tax rules to cryptocurrencies”. The agency expects South African cryptocurrency users to declare their gains or losses as part of their annual taxable income, including virtual currency acquired through mining.

In the memo, the agency also pointed out that although there is no regulatory framework for cryptocurrencies, Bitcoin is not a fiat currency, but “there is an existing tax framework that can guide the tax bureau and influence taxpayers to understand the tax implications of cryptocurrencies. Therefore, no separate explanation is needed for the time being.”

According to Ettiene Retief, SAIPA’s National Tax and Commission Chairman, regular cryptocurrency gains are usually “normal income taxes”, while long-term investments are often subject to capital gains tax. The latter will have a tax of 18% in 2018 and 2019, while normal income taxes are floating and will ultimately depend on the amount of income.


Tax status of cryptocurrencies: intangible property

Profits tax: 50% (capital gains tax); 25% (self-employed)

According to the Canadian government, “Using digital currency does not exempt consumers from Canada’s tax obligations”, which means that cryptocurrencies must comply with Canada’s income tax laws.

This includes selling cryptocurrencies for profit, mining and currency transactions (for example, if Bitcoin is used to purchase Ethereum, then Bitcoin is considered to be denominated in Canadian dollars when trading).

Taxes on investments apply to cryptocurrencies, which means that Canada’s investment income can be taxed at 50%. Large-volume traders will have to file individual taxes with the Canadian Tax Agency, leaving approximately 25% of their income.


Tax status of cryptocurrency: undefined

Profits tax: 15% (income tax; if you declare more than 35,000 Brazilian pirates, you will be taxed)

In 2014, the Brazilian Central Bank announced that cryptocurrency was not a legal currency and was not regulated by law. Despite this, Bitcoin and other currencies are still subject to tax regulation. Therefore, Receita Federal requires the local cryptocurrency users to submit their proceeds.

If it exceeds the sales by more than 35,000 pirates, the amount earned must be recorded in the income tax, and 15% of the profits are levied through the annual tax return, and in other cases can be tax-free.


Tax status of cryptocurrencies: private currency

Profits tax: 0% (if held for more than one year), 25-28% (capital profits tax)

The cryptocurrency is not a legal currency in Germany, but the German Ministry of Finance has been treating it as a “private currency” since 2013.

Therefore, any profits earned through trading, mining or exchange of Bitcoin or Ark currency are subject to capital gains tax, which may be between 25% and 28% in Germany, including the Solidarity Surcharge.

However, according to the German Income Tax Act, if these assets (cryptocurrency) are held for more than one year, they are exempt from tax.


Tax status of cryptocurrency: undefined

Profits tax: wealth tax (determined by income at the end of the year)

As Selva Ozelli, a Swiss international tax attorney, wrote in the column of Cointelegraph’s expert opinion, “cryptocurrency is neither a currency nor a foreign currency, nor is it a financial supply for goods and services tax (VAT) purposes”.

The cryptocurrency is an asset used for capital gains tax (CGT) purposes. However, this only applies to citizens who have professional trader qualifications based on the number/frequency of cryptocurrency-related businesses they perform each year. Despite this, users of the encrypted mutual assessment form are still subject to property tax, which is determined by the tax authorities on December 31 of this fiscal year.

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