Many people are not sure about the tax regulation of bitcoin. The reason is apparent because the tax laws for bitcoin and other cryptocurrencies are different in various countries. If you are using or trading bitcoin, you must be aware of your country’s taxation guidelines.
In this article, we will know about the tax regulations of some of the popular bitcoin-friendly countries. The countries are as follows:
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- The United States
- Japan
- Germany
- Australia, and
- The European Union
If you don’t belong to any of these countries, you can directly search it on Google. For bitcoin trading strategies, you can join the bitcoin south african system community. Now let’s explore the fiscal treatment of bitcoin in various countries.
Tax Regulation of Bitcoin
Even though bitcoin is not accepted as a legal tender, many tax authorities and governments have proposed tax laws for the most popular cryptocurrency. Here we will briefly understand the tax treatment of the listed countries above.
1. The United States
Bitcoin is not a legal tender in the US; instead, it is treated as property. The Internal Revenue Service (IRS) of the US has proposed the tax guidelines for bitcoin similar to any property.
Thus the taxpayers of the US should keep all the records of bitcoin transactions with the date for the selling of any goods or services. If someone is trading or investing in bitcoin through an exchange, then the taxpayer must consider the taxable gains and losses. You can learn more about the tax guidelines for Bitcoin on the official website of the IRS.
Bitcoin mining in the US is also taxable. The taxpayer has to include the mined bitcoin into his/her gross income. Wages, payments, and other bitcoin trades such as rental and premiums are taxable in the US. So it’s crucial to keep a record of all the transactions in bitcoin.
2. Japan
Bitcoin is treated as an asset in Japan. So you have to pay tax for the profits you gain on bitcoin earnings according to the income and capital gains tax laws. You can make payments for goods and services in bitcoin. There is a tax exemption on bitcoin payments.
3. Germany
Although bitcoin is not treated as a legal tender, it is treated as private money in Germany since 2013. Bitcoin is taxable under the capital gains tax regulation, but there is a different guideline for it. If the profits earned from bitcoin receipt is within one year, then it is taxable. However, if someone holds bitcoin for more than one year, the income falls under “non-taxable” private sale. The tax treatment for bitcoin and other types of investments is similar in Germany.
4. Australia
If you are from Australia and running a business that accepts bitcoin, you should keep all the transaction records with the date. The Australian government does not consider bitcoin as a currency or property; it considers it a taxable asset. The government imposed the capital gain tax law on bitcoin earnings. That means you have to show your bitcoin earnings as ordinary income in AUD.
For ordinary transactions, you don’t have to pay any taxes, but there are two conditions; (i) if it was used for purchasing personal goods and services, and (ii) the total value should not exceed AUD 10,000. Trading and mining bitcoin is treated as stock trading in Australia.
5. The European Union
The European Court of Justice declared that bitcoin was a currency in 2015. So the transactions made with bitcoin are exempt from Value Added Tax. Although there is no VAT imposed on bitcoin transactions, bitcoin incomes may be subject to capital gains tax. The tax treatment varies in different EU countries. For example, bitcoin is treated as a foreign currency in the UK.
If you are involved in bitcoin transactions, you should clearly understand the fiscal treatment of bitcoin in your country.
Conclusion
The tax regulations of bitcoin vary for different jurisdictions. Some countries treat bitcoin as currency (e.g., The EU), whereas others treat it as a property. There is also a third group of countries that consider bitcoin as an asset. Hopefully, the above article has provided you useful information on the most prominent digital currency tax treatment. Now you can ask your queries and leave your comments below.
