Cryptocurrencies and taxes – What do we need to know?
Crypto taxes will definitely come in the world of all things cryptocurrencies. The main bugbear right now is that nobody has the faintest idea what these taxes are going to look like. In the lack of a common groundwork for said cryptocurrency taxes, every country and watchdog may come up with their own version of what owners should pay.
Briefly, nobody really knows what the future of taxing cryptocurrencies would be like, but some tendencies have begun shaping up. So let us take a look at the most pressing questions on our mind.
How come virtual currencies are part of the taxation system?
It is quite simple. They are considered property. In some European countries, such as Austria and France, they are considered gold derivatives. Conversely, they may not influence the value of a foreign currency.
How does it work exactly?
If you are back on your crypto taxes, this may be fairly bad news. In the United States at least, regulators expect you to pay a percentage of your crypto earnings as of the date you received them. In other words, if you have earned cryptocurrencies, such as Bitcoin, at the time their value was the highest, and failed to declare taxes, you may now be in debt. However, the US Internal Revenue Service (IRS) is more interested in making crypto owners known rather than prosecuting them over last and fishy regulations.
But how do we know the actual value of a single token?
Naturally, we need places of exchange. There are many crypto exchanges out there that have been determining the price of Bitcoin and other crypto assets. Many of these exchanges even specialize in offering swaps between FIAT money and crypto tokens. The exchange rate of a crypto token is generally pegged to the US dollar or other major currency backed by a central banking body.
What taxes come with mining Bitcoin and similar cryptocurrencies?
If you are not an employee of a company and have not been instructed to mine cryptocurrencies by a company, as part of a contract, you will be part of the self-employment tax, which is a bit of a hassle to sort out. In other words, you will have to find out about the subtleties of being a self-employed person. Depending on where you are based, there may be exemptions on a certain amount of earnings.
Naturally, that does not exhaust the whole picture of legal issues that crypto owners may have in future. There are many other questions that merit an answer. However, the plain fact is that regulation will vary significantly across countries. And the fact that something is regulated does not meant that banks and central banking bodies will be all too happy to endorse it more than simply introducing the bare minimum in terms of rules.
The future will definitely bring in many new things that will apply exclusively to people who are new to the crypto business or old holders of digital assets. If the above looks like a lot to take in, we recommend that you take a few things:
- All proceedings, crypto or otherwise, are subject of regulation and taxation, unless a tax rebate is offered.
- The self-employment tax will always vary across legislation. If you are moving around countries often and you are moving your crypto assets, you may want to do a number of things, including ensuring that you are not double taxed and that your cryptocurrencies will not be breaking any regulations in the country where you are considered a tax resident. A fair reminder that everyone is subject to tax in the country they are tax resident in. Moreover, that means on all your global earnings, wherever you presently are.
The world of cryptocurrencies is not simple. Moreover, the fact that it affects FIAT money and the global financial system is just another reason why matters are rather more tangled than they appear to be. Regulation and taxation will be a persistent thorn in the sight of anyone who sets out to dabble with cryptocurrencies.
For the most part, you will need to register yourself in the country where you live. Previously, crypto owners did not deem necessary to state their names to the tax authorities, but with the increasing scrutiny, they just might.
When seeking to drive inroads in the world of cryptocurrencies, make sure that you have cover your legal grounds and done your due diligence. You will definitely need to do some reading up, but it is all for the better.