Over the years cryptocurrencies have grown in popularity and it’s not just Bitcoin and Ethereum. This spike has drawn the attention of authorities all over the world. Even if not all of them are in favour of cryptocurrencies, they sure are keen on taxing it. Failure to do so often results in a hefty fine.
However, the taxation rules vary for each nation.
The U.S. Internal Revenue Service (IRS) issued its first guidance for calculating cryptocurrency taxes last month. The guidance covered various topics like the tax liabilities created by cryptocurrency forks; the acceptable methods for valuing cryptocurrency received as income; and how to calculate taxable gains when selling cryptocurrencies.
Just this week, Brazil’s tax agency, the Department of Federal Revenue (RFB), cracked down on taxpayers who fail to declare crypto transactions when filing their taxes, with a new crypto tax code. In accordance with the rules established by Normative Instruction 1,888 introduced in May 2019, the tax code applies to individuals, companies and brokerages, and includes any crypto-related activities like buying and selling, donations, barters, deposits, withdrawals and others. Taxpayers failing to do so would be subject to penalties ranging from 500 Brazil reals (BRD) to 1500 BRD, or from $120 to $360.
As reported earlier by The Daily Chain, the United Kingdom’s tax, payments, and customs authority, Her Majesty’s Revenue and Customs (HMRC), has also updated its cryptocurrency taxation guidelines. Previously the HRMC considered crypto trading equivalent to gambling but new guidelines state that individuals who make use of cryptocurrencies can be subject to income tax, and capital gains.
Korea is the latest among nations that are going to levy tax on cryptocurrency capital gains. Prior to this, there was no framework to tax capital gains on digital assets, but the Ministry of Economy and Finance is now drafting a tax bill that is set to come into play from 2020. Alongside this, a bill focused on enhancing the transparency of cryptocurrency trading is also awaiting sanction.
If Korean authorities decide to approach cryptocurrency taxation in the same way as they tax capital gains coming from stock trading, this would require Koreans to provide a detailed history of all their trading records from cryptocurrency exchanges. The exchanges would also be required to keep records for each user.
While most countries levy taxes on cryptocurrencies in some way, there are some nations where crypto gains are exempted of tax. Germany doesn’t tax capital gains from digital assets that have been held for more than one year, while Singapore doesn’t tax businesses or individuals who hold cryptocurrencies as a long-term investment.
Even though cryptocurrencies aren’t being regulated yet, taxation laws like this could finally throw some light on where cryptocurrencies stand right now in the eyes of the governments. This could very well be one small step towards mass adoption.