Bitcoin and taxes: how much and where will I have to pay?
Cryptocurrency transactions have long been on the radar of the states, which are trying in every possible way to bring them under their control. One of such ways is tax legislation. At the same time, the payment of taxes depends on the status that cryptocurrencies have in the country.
What kind of bitcoin taxes and other cryptocurrencies need to be paid in Russia and other countries?
Tax on bitcoin and digital assets in Russia
As already wrote ForTrader magazine earlier, the bill "On Digital Financial Assets" under consideration in the State Duma envisages a rate of PIT 13% for cryptocurrency transactions.
The tax will be mandatory not only for Russian citizens, but also for foreign citizens who reside in Russia for more than 183 days a year and who become residents if these conditions are met. This category will be obliged to submit to the Federal Tax Service in a timely manner the relevant declarations in which profits derived from mining, buying or selling cryptocurrency must be indicated.
Relevant amendments to the Tax Code are already in preparation, and the law itself is expected to be passed during the summer of 2018.
Despite the fact that, according to many experts, there is no clear understanding of the implementation of a mechanism for tracking profits of this kind, the risk of paying for non-payment of taxes is assessed very high.
Which cryptocurrency transactions will be taxed?
Transactions with cryptocurrencies - is not only mining and buying/selling. Let's look at what you have to pay for, and what you can do without fear of problems with the tax authorities.
Taxed:
- trading on cryptocurrency exchanges in cryptocurrency/fiat currency pairs (for example BTC/USD et al.);
- cryptocurrency payment for goods and various services;
- cryptocurrency mining.
Not taxable:
- gratuitous transfer (gift) of cryptocurrency. If a limit is set by law, tax will have to be paid if it is exceeded.
- Cryptocurrency transactions between wallets.
- Buying cryptocurrency with fiat money, excluding profit. In the long term, it is possible to pay capital gains tax.
Nuances of bitcoin and cryptocurrency tax payment
Don't forget to make your declarations on time
In financial markets, it is common practice for a bank or brokerage company to send the appropriate tax form when you sell assets. Cryptocurrency exchanges do not have such a practice - a number of exchanges, mostly among the top ones, file a statement if you make a profit exceeding a certain limit or a certain number of transactions are made.
What does this mean for the taxpayer? It means that the responsibility for timely and accurate filing of taxable data falls entirely on him.
Pay attention to the status of the cryptocurrency
The form of tax depends on what status the cryptocurrency has. For example, if cryptocurrency has the status of property, as in the United States, then capital gains are taxable.
You need a clear record:
- the date and time of the cryptocurrency purchase;
- the amount of money you spent to buy it;
- the date and time of its sale;
- the result of a trade operation.
For ease of calculation, there are special cryptocurrency tax calculator sites on the web.
Do not hide cryptocurrency transactions
Do not be seduced by the fact that cryptocurrency exchanges do not report your income to the fiscal authorities. If in the short term there is a mechanism in place to make this information available to tax inspectors, you could get into serious trouble - from a huge fine to criminal liability.
Be sure to keep all of your information
When the cryptocurrency tax in Russia officially comes into force (and this will definitely happen, we have no doubt), it may well turn out that some of your cryptocurrency trading information will be lost. To avoid this, you should keep a trading diary in which you record the information given in the previous paragraph.
It is also wise to set aside a portion of the money intended for tax payment from each transaction. This is done so that you do not have to pay more money to the tax office than you have managed to earn by the end of the reporting period.