As you know, the last few months, state governments talk a lot about cryptocurrency. Especially a lot of controversy and reasoning began after the presentation of the Libra stablecoin from Facebook, which caused a wave of negative reviews in the United States Senate. After cryptocurrencies became part of high-profile discussions among financial regulators, a new item appeared in the legislation of many countries – taxes on cryptocurrency.
What is a cryptocurrency asset tax
By and large, the tax on working with cryptocurrencies differs little from the classic business tax. So, taxation applies only to the percentage of profit from trading or mining, but does not involve the storage of digital money. Cryptocurrency taxation, if we turn to experience in the United States, also does not apply to transactions between wallets outside the exchange.
In the declaration for collecting a tax on cryptocurrency, it is necessary to enter data on the purposeful sale of assets or trade in one cryptocurrency to another. For example, consider the classic scheme for calculating income (loss) for a trader. The total number will be the sum from which the tax percentage will be deducted.
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Cryptocurrency taxes: how to calculate
In order to calculate the required amount for the tax on digital money, you first need to calculate the income (loss) of the cryptocurrency business (mining, trading). First you need to determine the current value of the asset, which is quite difficult in the conditions of high volatility of the crypto-market. If the coin was too volatile, then it is customary to take the moving average for the last week. For popular coins, the price at the time of the sale of the coin is also used (according to the laws of the US Internal Revenue Service).
So the formula for the calculation is as follows:
The value of the asset now ($ current, sale) – initial price ($ purchase) = profit or loss.
$ current – the value of the coin at the time of paying taxes, the average price of cryptocurrency or (the most common) value of cryptocurrency at the time of its sale, exchange.
$ initial – the original value of the asset at the time of its purchase by the trader, the price indicated in the order before receiving the coin.
Trader Elena bought 6 coins of X. at $500, paying $3,000. X.'s price fell to $300, and Elena decided to sell 3 X (half her wallet) for $900.
$ current = (3X. × 300)
$ current = $ 900
$ initial = (3Х.× 500)
$ initial = $1500
It follows that:
$ 900 - $ 1,500 = -$600 (loss)
If you specify data on loss-making transactions in your tax return, you can avoid undesirable consequences in the taxation process. as unprofitable transactions are not taxed. As for transactions, where Elena would sell her X tokens more profitably, then the percentage that would result in the percentage would be taken away from the amount that would result. The amount of interest is established at the legislative level.
Moreover, if the trader Elena decides to sell the remaining 3X. after raising the course, she will also have to pay tax. But, if this happens in a few years, then all the time until the sale of the assets will not be taxed. If Elena decides to change the crypto-wallet, or give her 3X friends Anna for a birthday, then the tax system will not work.
Crypto taxes: market impact
According to experts, cryptocurrency taxation, if it occurs within a reasonable framework, will not affect the development of the industry. But many financial regulators suspect that by legitimizing crypto (with the principles of anonymity and decentralization), it will be unrealistic to track real profits from trading or mining. Since, corresponding documents on all transactions are not supposed.
There are also many suspicions that cryptocurrencies can be used for money laundering, terrorist financing, or on the black market. As a result: financial regulators around the world are tightening tax and legal requirements for digital money every day.
For example, in December 2018, Japanese regulators initiated amendments to legislation that would allow the National Tax Agency to require cryptocurrency exchanges to provide information about clients who are suspected of tax evasion.
Editor: Yulia Krasnaya