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Bitcoin, Cryptocurrencies and Taxation

06 Aug 2019 - Bitcoin & Cryptocurrency

Taxes - it is one of the few topics that unite across the political spectrum.  Interestingly, although citizens’ despise for non-requisite taxes is common across the globe, the taxation of Bitcoin is one area where we can see the vast differences in the mindset of national governments.

In Europe, the engine behind growth is the German economy.  Recently, the Federal Ministry of Finance indicated that it would treat Bitcoin as a currency.  This is big news for the development of cryptocurrencies.  With Germany moving slowly on regulation, including not taxing Bitcoin as a form of payment and excluding miner rewards from taxation, Germany is attempting to encourage innovation in the budding field of finance.  Even when converting Bitcoin to euros, Bitcoin profits will be exempt from the Germans’ federal income tax (if held more than a year).  Profits from Bitcoin is also exempt for yearly profits of less than € 600.

In Slovenia, Bitcoin investors avoid capital gains taxation altogether.  However, if wages are paid in cryptocurrencies, individuals report that income as regular income and pay income tax thereon.  

In Denmark, cryptocurrency companies pay taxes just like any other company.  Individual investors are treated similar to the way Slovenia treats cryptocurrency investors - no capital gains tax.

Belarus is a recent addition to the cryptocurrency universe.  In March, the government legalized it and went further than just legalizing the budding financial asset - by presidential decree, cryptocurrency activities like mining, issuing, and trading are exempt for five years.

South Korea
The tax situation is South Korea seems to be in a never-ending state of flux.  As of writing, Bitcoin is still exempt from taxation in the small, but very influential Asian country.  South Korea also has tax credits for the blockchain industry, in an attempt to promote further research on this fledgling technology.

In the biotechnology-rich country of Singapore, digital coins are neither commodities nor currencies.  Individuals are therefore free from any sort of gain on cryptocurrency investments.  Unfortunately for businesses trading cryptocurrencies, businesses must pay taxes on their profits.

In the Eurasian Economic Union, Belarus leaves cryptocurrency transactions free from concern about taxes.

In Russia, cryptocurrencies are taxed at a 13% rate on cryptocurrency incomes and at a 24% rate on corporate profits from cryptocurrency.

Unsurprisingly, how countries treat Bitcoin and other cryptocurrencies on taxes is a game of careful forethought.  Some countries see cryptocurrencies as an asset independent of a currency or commodity asset, and thereby leave cryptocurrency ownership free from tax liability.  Others see cryptocurrency as a currency, with no tax on profits from currency trading.  Still other countries try to get their hands on the gains from cryptocurrency profits, imposing small to large tax rates on cryptocurrency gains.  Investors should think carefully about where they headquarter their profits when it comes to Bitcoin and other cryptocurrency investing.

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