Cryptocurrency Taxes: Countries that Tax Crypto Traders

News / 07.01.2021

Digital currency trading is rapidly receiving significant attention from enthusiastic traders worldwide. Users regularly find unprecedented benefits that make cryptocurrency trading a practical investment strategy. A crypto trader dedicates their time to earn profits from alterations in the crypto market. Most work hard to learn trends within the markets to know the best time to buy or sell.

Despite the risks underlying the art, some individuals take up crypto trading as a full-time job while others are part-time. The increased adoption is palpable, especially during the COVID-19 pandemic. As a result, popular digital currencies like bitcoin have experienced a major price change from $18,099 to $27,259 between November 28 and December 28, 2020. 

However, despite the ongoing digital currency hype, taxing crypto traders’ question arises in a country’s legislative procedures. Today, many nations adopt the use of cryptocurrencies but lack convenient regulatory frameworks to tax crypto. Although some countries with regulatory bodies still have a difficult task ahead of them, they make limitless efforts to implement fair policies surrounding taxing crypto investors. 

Crypto Tax Regulations Across the Globe

The ability to tax crypto traders largely depends on the instances a country deems a cryptocurrency taxable. Some may tax on events such as earnings secured by investors or, to some extent, taxing every transactional operation. 

On normal occasions, governments are the legal entities responsible for enforcing or amending regulations. The government comes up with a special committee of experts who oversee digital currencies’ overall regulatory standards for other nations.

In the long run, the task of taxing crypto traders aims at eradicating illegal money laundering undertakings or mitigate any form of financial crimes. Failure to comply attracts heavy penalties, which often range from jail terms to paying large fines. Below is a highlight of some countries that take part in taxing crypto traders. 

Australia

According to the Australian Taxation Office, cryptocurrencies are regarded as assets bound to endure capital gains and losses. Therefore, investors are urged to keep a detailed record of every transaction that successfully takes place. 

ATO is also on the frontline as it appoints a special task force responsible for handling any crypto evasion cases while ensuring traders make the right tax payments. Furthermore, business entities partaking in selling, buying, or mining cryptocurrencies are taxable by law.

One unique taxing strategy that stands out in Australia’s regime is implementing fringe benefit taxes on companies that remunerate workers using crypto. Looking into the overall business transactions, ATO stipulates that traders should indicate the income secured from goods and services as an ordinary income. 

The U.S.A.

The Internal Revenue Authority, a US-based tax body, recognizes cryptocurrencies as a form of property. I.R.S. further classifies cryptocurrencies as virtual currencies subject to capital gains tax upon receiving income from any crypto transaction. In America, a taxable activity involves any event that generates income for you. 

For instance, if a user decides to sell-off his/her virtual currencies, the tax amount will come from the profits they receive after the sale. Furthermore, the tax values vary when selling cryptocurrencies since long-term capital gains can attract a lower tax rate. 

Miners are also liable to taxation since they participate in the transaction validation exercise in exchange for an income. On top of that, start-up crypto companies conducting I.C.O. events in the U.S. receive similar tax treatments as they gain capital from selling new tokens or currencies to the market. 

Going back to 2019, the I.R.S. distributed letters instructing taxpayers engaging with virtual currency transactions to report their incomes and fulfill all tax payments. Nowadays, penalties such as criminal prosecution or fines are applicable by law for any taxpayer who does not meet the tax obligations formulated by I.R.S.

Russia

After Vladimir Putin signed the digital financial assets regulation into law, Russia’s tax regulations will commence effectively as of January 1, 2021. Basically, Russia recognizes digital currencies but doesn’t view them as a payment mode for goods and services. 

As per Russia’s Ministry of Finance, taxpayers need to submit their report if the annual transaction surpasses 600,000 rubles, equivalent to $7,757. 

Similarly, the upcoming law requires crypto exchanges and miners to produce their virtual currency transactions to the Federal Financial Monitoring Service to combat cryptocurrencies’ illegitimate use.

Severe implications, such as a five year forced labor or maximum imprisonment of three years, are enforceable for undisclosed transactions worth 45 million dollars. Consequently, unreported transactions with lower values receive smaller punishments ranging from fines to a narrow detainment period. 

United Kingdom

Fourth on our list is the U.K., which terms digital currencies as crypto assets representing contractual rights or value. Her Majesty’s Revenue and Customs works with the concept of taxing any form of capital gain with cryptocurrencies. HMRC applies its taxing policies on income-generating occasions such as mining, airdrops, sale of crypto assets, and disposing of airdrop earnings. 

Moreover, employers disbursing crypto assets in the form of earnings also fall under the income tax umbrella, depending on the asset’s approximate value. HMRC establishes that digital currencies can be traded for a certain amount of money instantly only if an employer initiates crypto incomes to employees. 

Self Assessment tax returns are another taxable income category whereby traders need to convert the exchange rates to sterling pounds. The Self Assessment tax works best on those crypto exchanges without the sterling pound option.

Japan

In Japan, activities such as mining, crypto trading, or even lending are widely referred to as miscellaneous incomes liable to a tax amount that could reach 55%. Compared to the regular tax value of the stock, which stands at 20%, the crypto income tax rate is relatively high and may prompt investors to indicate inaccurate crypto gain reports. 

Additionally, the tax value largely varies with the income bracket of a trader. Japanese crypto traders who qualify for digital currency taxations include investors with annual payments going beyond 20,000,000 JPY, traders postponing remuneration taxes through the disaster exemption clause, and investors with a single salary source receiving miscellaneous incomes amounting to 200,000 JPY every year.

Final Word

Taxing crypto traders creates room for a more transparent and fluid ecosystem. Countries impose similar taxing situations from income earners in the form of capital gains or losses. As cryptocurrencies’ value continues to expand, countries ultimately find it necessary to generate revenue from there. 

Asides from revenue collection, most governments taxing crypto traders majorly strive to deal with malicious users who use the platform for personal gain. In the end, traders can account for every past transactional data to compile a comprehensive tax report. Full compliance guarantees uniformity in the digital finance sector, making cryptocurrencies a part of a nation’s government future.

Adam is an outgoing young lad who likes adventures and discovering new things. Despite his boring life, he loves writing about cryptocurrencies and exploring what blockchain technology can do for the coming digital world where all adventures will be virtual.