Japan’s Finance Minister Senator Fujimaki suggested that the current tax rate for cryptocurrency transactions in the country, which can reach a maximum of 55 percent, could be exchanged with a flat tax of 20 percent, percent similar to stocks or currency trading.
While Japan is not sure if the current tax framework should lose its progressive scale – mentioning “tax equity” as one of the arguments in favor of maintaining the old model – some major markets do not have clear guidelines on how to tax Bitcoin and the alternative currencies at all. This is how cryptocurrencies are currently collected from the United States to Switzerland.
The United Kingdom
Tax status of cryptocurrencies: investments (small-scale holding); working capital (if used regularly)
Taxes on earnings: Free, if it is below £ 11 850, then up to 45 percent
His Majesty’s Revenue and Customs (HMRC), an agency responsible for collecting taxes in the United Kingdom, introduced its guidance on the taxation of Bitcoin and other currencies in 2014. Therefore, income received – and charges related to activities which involve cryptocurrencies – are subject to corporation tax, income tax or capital gains tax, depending on the details. As a representative of HMRC explained to the British media Alphr, “if any profit or gain is attributable or if any loss is allowed, it will be analyzed on a case-by-case basis”.
However, cryptocurrencies usually fall into the category of capital gains tax for occasional users in the United Kingdom, which are considered investments. However, some merchants may be subject to income tax, depending on how often they operate and the volume of those operations. According to HMRC:
“When an asset (including Bitcoin) remains an investment – instead of being working capital in a trading activity – the presumption is that any gain in its disposition will be charged to capital gains tax.”
In the same way, crypto to crypto transactions are also events subject to taxes. However, as the HMRC points out, each situation may vary, depending on the circumstances.
It is important to note that there is a tax free allowance for every UK citizen of working age. For fiscal year 2018/2019, for example, it amounts to £ 11 850 per person. If the taxpayer exceeds that amount, he or she is required to pay 20 percent tax on anything earned between £ 11,851 and £ 46,350, 40 percent on earnings of £ 46,351- £ 150,000 and 45 percent on earnings greater than £ 150,000.
The United States
Tax status of cryptocurrencies: property
Income tax: calculated based on the value of the currency from the date it was negotiated
The Internal Revenue Service (IRS), an agency of the US government that collects taxes and enforces tax laws, considers cryptocurrencies as properties. Therefore, if you sell your coins for a profit, you will be responsible for paying a tax on capital gains.
In 2014, the agency issued a general guide on how cryptocurrencies are taxed. According to Notice 2014-21, cryptocurrencies received or mined must be included in the calculation of gross revenues with the fair market value of the virtual currency from the date it was received. Taxes are calculated based on that value. Therefore, gifts, mining and crypto to crypto swaps are all taxable events, estimated by the value of the coins on the day these events occurred.
It is important to note that cryptographers are not required to issue 1099 disclosure forms – those used by the IRS to report income other than salaries, wages and tips – which makes the reporting process more difficult for users. of cryptocurrencies. However, according to reports, the US-based cryptobag and wallet service. UU., Coinbase, sent the form to some of its clients.
The IRS has shown great interest in cryptocurrencies as a source of income in recent years. For example, in February 2018, Coinbase sent an official notice to approximately 13,000 of its customers, informing them that their data is delivered to the IRS at their request. In addition, the IRS supposedly uses software for tracking purposes and reminds owners of cryptocurrencies to pay their taxes through memos, highlighting the “intrinsically pseudo-anonymous aspect” of cryptocurrency transactions.
Japan
Tax status of cryptocurrencies: Legal method of payment
Income tax: 15-55 percent, based on volume
At present, the profits obtained with virtual money -which are classified as a legal method of payment- in Japan are classified as “diverse income”, according to the Japanese National Tax Agency, the country’s main tax agency.
Basically, that means that Japanese cryptocurrency holders have to pay between 15 and 55 percent of their declared profits on their annual tax returns. The maximum amount applies to people who earn more than 40 million yen ($ 365,000) annually.
According to Bloomberg, this regulation caused some crypto-investors to move to countries where no tax is levied on capital gains on long-term investments in virtual money, such as Singapore. The media also spoke with Hiroyuki Komiya, who runs a consulting firm of Blockchain in Tokyo, who said he managed to reduce his taxable income by “a few million yen” by using a “general average” instead of an “average”. mobile “to make their estimates Komiya explained that he is still not sure of some nuances in terms of declaring cryptocurrency earnings, since there are no clear official guidelines in this regard:
“The government has not clarified certain details, so one is not sure if you have done well or not.”
However, the tax laws for users of crypts in Japan could change in the future. On June 25, the Japanese Finance Minister discussed the possibility of changing the progressive tax rate. Sen. Fujimaki asked the Deputy Prime Minister of Japan, Taro Aso, if cryptocurrency transactions should be taxed through a “separate liquidation tax”, instead of its current classification. That means that the current tax framework would be exchanged with a fixed tax of 20 percent similar to shares or currency trading. However, Aso expressed his disbelief that the public would react positively to the change, citing “tax impartiality.”
The current tax rate for crypto-transactions has a maximum of 55 percent, and changing its category would take it to the fixed tax of 20 percent applied to shares or currency exchanges.
South Korea
State of cryptocurrencies: legal method of payment
Taxes on earnings: none at this time
Currently, there is no tax framework for crypto-investors in South Korea, and no information from local government agencies explicitly states that the profits from cryptocasting should be declared for tax purposes at this time, although there is a 24.2 percent tax for the cryptocurrency bags in the country.
However, in April, the Fuji News Network (FNN) reported that South Korea’s Ministry of Strategy and Finance announced that a general tax framework for cryptocurrencies will be published by the end of June. Therefore, according to the FNN, the crypto-taxation working group of the South Korean government has proposed a “transfer income tax levied on income taxes” obtained from the sale of cryptocurrencies. In addition, “if the income from transactions in virtual currency is considered temporary and irregular, other taxes on income may be imposed”.
While the agency has yet to make any official announcement regarding the policy, local news outlet Chosun reported on June 22 that a 10 percent capital gains tax would be introduced in the future. However, this was soon refuted by the Ministry of Strategy and Finance itself.
Russia
State of cryptocurrencies: not defined
Taxes on profits: 13 percent (personal income tax)
At this point, there is no defined fiscal framework for cryptocurrencies in Russia, although this year several general cryptoprojects have been introduced at the state level.
However, on May 17, the Ministry of Finance published a document that states that citizens must estimate and declare capital gains tax in cryptocurrencies “independently” before an official regulatory framework for the crypto market is introduced. The personal income tax in Russia is collected at 13 percent.
South Africa
State of cryptocurrencies: assets of an intangible nature
Taxes on profits: 18 percent (tax on capital gains); 18-45 percent (normal income tax)
The South African Revenue Service (SARS) -the country’s supervisory body- perceives cryptocurrencies as assets of an intangible nature. In early April 2018, SARS declared that it “will continue to apply the usual cryptocurrency tax regulations.” Basically, the agency anticipates that users of South African crypts will declare their profits or losses as taxable annual income, including virtual currencies acquired through mining.
In the note, SARS also noted that, although there is no regulatory framework for cryptocurrencies at this time and Bitcoin is not legal tender, “there is an existing tax framework that can guide SARS and affected taxpayers about the tax implications. of cryptocurrencies, making a separate Interpretation Note unnecessary for the time being. ”
Therefore, according to Ettiene Retief, President of the National Tax and SARS Committee at SAIPA, normal crypto-monetary earnings generally fall within the “normal income tax”, while long-term investments are normally slapped with a tax. to capital gains. The latter constitutes 18 percent in 2018 and 2019, while the normal income tax is fluid and depends on income.
Canada
State of cryptocurrencies: intangible property
Taxes on profits: 50 percent (tax on capital gains); 25 percent (self-employed)
According to the Government of Canada, “the use of digital currency does not exempt consumers from Canadian tax obligations”, which means that cryptocurrencies are subject to the Income Tax Law.
That means selling cryptocurrencies for profit, mining and making transactions from crypto to crypto – in that case, if, for example, Bitcoin is used to buy Ethereum, it is considered that Bitcoin is sold for its value in Canadian dollars at the time of purchase. the transaction.
Investment taxes, which apply to cryptocurrencies, suggest 50 percent for any gain in Canada. Large-scale merchants will have to declare their taxes with the Canada Revenue Agency as self-employed workers, which is about 25 percent of their income.
Brazil
State of cryptocurrencies: not defined
Taxes on profits: 15 percent (income tax, tax if they are declared more than BRL 35,000)
In 2014, the Central Bank of Brazil declared that cryptocurrencies are not legal tender and, therefore, should not be regulated by law. However, Bitcoin and other currencies are subject to tax regulation. Therefore, Federal Revenue Service (the Federal Tax Service) requires local crypt users to present their earnings.
If you earn more than BRL 35,000 through the sale, the amount earned must be presented in the income tax, and the state collects 15 percent of the benefit value through annual tax returns. In other cases, the tax exemption is applicable.
Germany
State of cryptocurrencies: private money
Income tax: 0 percent (if held for more than one year), 25-28 percent (capital gains tax)
The cryptocurrencies are not legal tender in Germany, but have been recognized as ‘private money’ by the German Ministry of Finance since 2013.
Therefore, any profit obtained through trading, mining or trading Bitcoin or alternative currencies is subject to a tax on capital gains, which is 25-28 percent in Germany, including a solidarity surcharge .
However, according to the German Income Tax Law, if the assets (cryptocurrencies) are maintained for more than one year, they will be exempt from taxes.
Switzerland
State of cryptocurrencies: not defined
Income tax: Tax on equity (determined at the end of the year, based on income)
As Selva Ozelli, an international tax attorney, wrote earlier in Expert Opinion for Cointelegraph, in Switzerland, “cryptocurrencies are neither money nor foreign currency, nor a financial supply for tax goods and services (GST).”
The cryptocurrencies are an asset for the purposes of the capital gains tax (CGT). However, this only applies to citizens who qualify as professional traders depending on the amount / frequency of operations related to the cryptocurrency that they perform annually. However, crypto users are subject to a wealth tax at a rate determined by the tax authorities on December 31 of the fiscal year.
Also published on Medium.