Bitcoin and cryptocurrencies, are they taxed? All there is to know

The situation regarding taxation on the use of Bitcoin and cryptocurrencies is quite varied. 

The first thing to keep in mind is that every country has its own rules, and there are even countries or territories where there are no taxes of any kind on the use of these currencies. 

However, if we consider only those countries where they are taxed, we need to make at least another couple of distinctions. 

Specific laws or old regulations

Before delving into this kind of maze, it is worth noting that only a few countries have laws specifically dedicated to cryptocurrencies, while the vast majority still apply old laws designed for other assets. 

Generally, where there are no specific laws, those on foreign currencies apply, rather than those on security. In many countries, the tax treatment of cryptocurrencies is similar to that of foreign currencies. 

Natural and legal persons

The first important distinction to be made is between the regulations that apply to natural persons (citizens) and those that apply to legal persons (companies, bodies, associations, organizations, etc.). 

As far as legal persons are concerned, cryptocurrencies usually have to be recorded in the balance sheet as assets, and their market value should be recalculated each year at the end of the fiscal year. This treatment means that cryptocurrencies are effectively treated as any other asset with a value recorded in the balance sheet on which taxes are payable. 

For legal entities, therefore, there are no particular provisions or problems, except in those countries where specific laws regulate their use. 

The only problem could be in those rare cases where states prohibit the use of cryptocurrencies, or even tax individual transactions, but these are very few cases. 

For individuals, however, taxation follows more complex rules. 

Transactions and capital gains 

There is a second distinction to be made here, namely the taxation of transactions and capital gains. 

In fact, transaction taxes are now only levied in very rare cases. Until recently, some states treated cryptocurrencies as commodities for tax purposes, in some cases even applying taxes on individual transactions. But lately almost all of them are equating cryptocurrencies with currencies, on whose transactions state taxes obviously cannot be applied. 

In most cases, however, any capital gains are taxed. 

However, it is not always clear how these capital gains are to be calculated, although they are usually calculated in the same way as those relating to the buying and selling of other financial assets. Sometimes it can also be very complex to make these calculations, partly because the tax authorities often tend to take into account not only the sale of cryptocurrencies in exchange for fiat currencies, but also when exchanging them for other cryptocurrencies. 

Capital gains taxation only applies when there are gains from sale, and generally has a fixed rate. In some countries, it is also possible to deduct capital losses from capital gains in order to reduce the taxable income. 

For private individuals there is usually a threshold of ownership below which no tax is levied even on capital gains. 

Declaration of ownership 

Finally, a third distinction must be made. 

In many countries, it is necessary to declare the possession of cryptocurrencies to the tax authorities even if no capital gains are made. However, the declaration of ownership does not imply the payment of taxes at all, as these are generally paid only on any capital gains due to sales, and not on mere possession. 

Unfortunately, as there are no uniform regulations in place, every cryptocurrency holder needs to find out which regulations apply in their own country and how they apply. In many cases, private individuals only pay a fixed rate on any capital gains from the sale, but even in these cases it is necessary to at least check what the rate is, and what, if any, ownership threshold is below which tax is not triggered. In addition, it is also necessary to check whether there is anything to declare.