It is no longer a secret that cryptocurrency is slowly but steadily going mainstream. It is gaining people’s interest because of the income-earning opportunities and the immense possibility that crypto will be the future of money. As 2021 seems to be a very good year for crypto investors, they need to be aware that their digital holdings are subject to taxes. Here is a simplified look at how some countries are taxing crypto. It’s always best to check with your country’s revenue service for detailed information.
In the USA
Cryptocurrency is classified by the Internal Revenue Service as property and is taxed as such. Buying and holding crypto is not taxable. There needs to be a taxable event such as selling. For instance, you owned $10,000 worth of crypto and you sold it for $20,000. You’ll need to pay taxes for the $10,000 profit you made. Other taxable events are using cryptocurrency to purchase goods and services and trading different types of crypto. Tax rates depend on your income, tax filing status, and the length of time you owned the crypto before selling it. Short-term gains taxes are for crypto which you owned for 365 days or less. Income tax is applicable for short-term gains. If you own crypto for longer than 365 days, then long-term gains taxes will be applied.
The Canada Revenue Agency (CRA) does not consider crypto as legal tender and is taxed as either capital gains or income tax. As a business income, 100% is taxable and 50% if its capital gains. Taxable events in Canada are: selling crypto for fiat, trading crypto for another crypto, using crypto to purchase goods or services, and selling or making a crypto gift.
In the UK
Her Majesty’s Revenue and Customs (HMRC) does not consider crypto to be currency and has grouped them into four categories.
- Exchange tokens-crypto used as payment
- Utility tokens-crypto that allows a holder access to goods or services on a platform
- Security tokens-crypto that has interests in a business such as ownership, repayment, or entitlement to a share in future profits.
- Stablecoins-crypto that is pegged to the value of fiat or other assets.
If you hold crypto as a personal investment, capital gains taxes will apply on any profit made on it. Losses from crypto can be considered as a tax liability and can be deducted from the total capital gains.
The German Federal Central Tax Office treats crypto as private money. It doesn’t consider crypto as foreign currency, legal tender, nor as property. As private money, this means that sales under €600 are tax-exempt. Crypto that’s held for over a year is also tax-exempt. Those that have been sold after being held for less than a year is subject to income taxes.
The International Commercial Court has ruled crypto as intangible property. Individuals and businesses who earn profits from the increased value of their holdings do not pay taxes as there isn’t a capital gains tax in Singapore. If the profit is earned from trading digital assets regularly in the course of normal activity, then this is taxable.
Aside from Germany and Singapore, Switzerland, Estonia, Portugal, Malta, Belarus, Malaysia, Slovenia, Hong Kong, Bermuda, Vanuatu, and Gibraltar are considered crypto-friendly tax havens with no or low taxes applied on crypto holdings. Others, like India and the Philippines are slower to embrace cryptocurrency and have no clear tax regulations as of yet.
As cryptocurrency transactions are made on a decentralized network, it has been very difficult for most governments to confirm and track who are holders of digital assets and how much profit they’ve earned. They are continually trying to institute regulations that will collect personal and financial information of crypto investors. Of course, these have been met with criticism from supporters of cryptocurrency.
Tax is an obligation that individuals and businesses must comply with so that governments will have the funding for public services. As crypto investors, especially those who choose to hold privacy coins such as Monero, it remains your discretion to declare any income you have gained from investing and/or trading in crypto.
Keep your XMR in XMRWallet. It’s a secure online Monero wallet that has a transaction history where you can monitor all your transactions making it easier to keep track of any profit or loss that may have occurred; thus, making it simple for you to report for tax purposes.