Seven Developed Countries and Their Taxation Policies on Cryptocurrency

Tuesday November 20, 2018

The market of cryptocurrency is growing at exponential rate as per the latest data by the CNBC; the present market value of digital currency is over $ 600 billion, where Bitcoin is superior to all in term of market cap and circulating and by the end of 2018 cryptocurrencies could be worth $1 trillion. As per the latest data now more than 1600 cryptocurrencies are in the market and in future this number may double. Here notable thing is that with the passage of time Cryptocurrency became very popular and people are using it not only for payment but also as investment. If we see use of Cryptocurrency globally where one side some country is against it, the same at the other end of the spectrum Cryptocurrencies are legal in some country with certain tax policy. In this blog, we will focus on seven developed countries and their taxation policies on Cryptocurrency.

The United State:

 

  • In USA Bitcoin is treated as property than currency. Internal Revenue Service is the main agency in the country who monitor all transaction related to cryptocurrency. People who trade and invest in Cryptocurrency they have to pay certain tax under Federal tax policies.
  • People who sell goods or services in exchange of Cryptocurrency, they are obliged to include the value of the received Bitcoin in their annual tax returns. And the value of Cryptocurrency will be calculated as per international on the basis of the fair market value of Bitcoin in USD on the date when the virtual currency was received by the taxpayer.
  • When it comes to Bitcoin mining, then miners have to certain tax under tax policy of the country. If the mining becomes successful then miner has to include the fair market value of the mined Bitcoin to his/her annual gross income.
  • People who failed to pay tax on digital currencies may become subjects to penalties.

The European Union:

 

Definitely Cryptocurrencies and Initial coin offering are extremely popular in Europe, but when it comes to taxation policy on Cryptocurrency then different country has different approaches. Recent G-20 summit failed to bring global consensus on Cryptocurrency.

  • In 2015, the European Court of Justice declared that Bitcoin is a currency, not a property. And ruled out that Bitcoin transaction are exempt from VAT (Value Added Tax).
  • Trading Bitcoin does not incur VAT and it subject to other tax like capital gain or income tax.

The United Kingdom:

 

Cryptocurrencies consider as foreign currency in the United Kingdom and due to its volatility there is not any special tax on trading cryptocurrency. According to the UK tax authority Her Majesty’s Revenue and Customs the tax on Bitcoin will depend on individual facts and circumstances.

Germany:

 

In Germany, Government considers cryptocurrency as private money. However capital gain tax of 25% is applicable, if buyer gain profit within one year. So people who hold Bitcoin for more than one year they don’t need to pay any tax. The treatment of Bitcoin in Germany is similar to the treatment of other investment instruments, such as stocks or shares.

Japan:

 

Japan is known as tax- friendly crypto nation. Bitcoin is the most popular and officially recognized as payment method in the country. People in Japan don’t need to pay tax on selling Bitcoin. Cryptocurrencies are considered asset in the country and people are using it to buy product. Thus, in Japan, profits gained from Bitcoin trading are considered to be business income and treated accordingly for income and capital gains tax purposes.

Australia:

 

In Australia Cryptocurrency considered as an asset for capital gain purposes. People in Australia who engage in Cryptocurrency should properly document, record, and date the transactions. Besides, business that is receiving payment in Bitcoin for certain services has to declare their value in AUD as ordinary income. If we talk about Bitcoin transaction for personal purpose, then people are exempted from taxation under two conditions. 1- Bitcoin was used as payment for goods and services for personal use and 2- the value of the transaction is lower than AUD 10,000.