A few days ago a new law was passed in Venezuela that dictates up to a 15% tax on every cryptocurrency transaction. The law also says that owners of the cryptocurrency “Petro” cannot spend more than 10 units per month (about $600 USD). This may not seem important to people who are not living in Venezuela, but it is. The whole point of cryptocurrency is to decentralize the control of wealth and put power in the hands of the lay people in order to raise accessibility of money and reduce the oligopolistic power of banks. Venezuela is showing that cryptocurrency lives and dies by the regulations and laws that governments enact in regards to cryptocurrency use.
In Europe, the taxation of cryptocurrency varies widely by country. For example in Germany, there are no capital gains taxes in the first year on cryptocurrency, however, if the coin is held for less than a year, then the sale is treated like income and the owner must pay income tax. This income tax can get up to 45%. After a year, there are capital gains taxes on holdings over 600 euros, so there are substantial taxes levied. Even in Switzerland, cryptocurrency can be treated as a foreign currency and owners have to pay multiple kinds of taxes, like income tax, profit tax, and wealth tax. Miners are subject to different laws.
Japan is one of the countries that has harsh but clear laws in the cryptocurrency tax space. They classify cryptocurrency earnings as miscellaneous income and tax gains when sold or traded anywhere from 15% to 55%, which is high. Like in the USA, in Japan the government is worried about its citizens who own crypto actually following through and filing their taxes. In Japan, a survey was done on 549 investors who generated a non-working income of over 1 million USD and it was found that only 331 were in the crypto space. According to a CNN reporter, this number is too low and means that many Japanese residents could be hiding their earnings from crypto. Countries will need to crack down on residents over the next few years to makes sure that all residents are complying with the tax laws of the country.
Even in the US, cryptocurrency taxation laws are complicated and legislation is slow moving to create a better structure for the use of crypto. The laws surrounding crypto taxes are confusing and involve tedious amounts of work in order to accurately file one’s taxes. This is a big problem because it makes users shy away from working with the government to make cryptocurrency flourish. In the short term, it may seem okay because cryptocurrency can still be traded and used by anyone who has the know-how and access, however in the long term a different outcome arises. Think about the long term implications of having confusing and rigid tax structures, as well as a user base of forward thinking and adventurous people. This will leave owners of crypto and the US government at odds until one or the other decides to withdraw and acquiesce to the other’s wishes.
Here at Get Crypto Tax we firmly believe that the only way forward in this dilemma is to cooperate in order to achieve maximum efficient progress. The tax laws may be tricky but as you now know, they are the laws and the government is ultimately in control of the use of cryptocurrency. The future of cryptocurrency is unclear and will largely depend on governments but for now we have a good understanding of what is needed to stay within the confines of the law while also feeling at ease while trading, buying, and spending cryptocurrency. Figuring out your crypto tax information can be hard, but we can help even if you don’t have a cryptocurrency accountant! Countries are going to be getting more and more strict with their residents, so learning how to file your taxes now instead of later is going to be a huge asset to you moving forward.