Bitcoin Forum

If businesses start to accept it as a form of payment, and people start getting paid with crypto, how are they going to tax it or regulate it?

I don't think the question can be answered in general. Within the EU alone, there are already many different regulations regarding crypto-taxation. In France, for example, you only pay taxes when exchanging crypto for fiat, in Germany every single trade is taxable, but all assets are tax-free after one year of holding.

As soon as companies start to pay their employees in cryptos, a tax clarification will be necessary here as well, the state will definitely not miss out on any taxes. At least in the EU, there is still a long way to go before salaries can actually be (partially) paid in BTC and co.

I think in my country, they will probably impose a really high percentage of tax if they plan to make crypto a legal thing here because they are still on the fence regarding cryptocurrencies and their taxation. But given that they are going to be used by businesses, I am pretty sure that taxes will get a little bit complicated.

Inflation controlled by community, not the government. Maybe faster transactions, lower operation fees.

And in the same blockchain will continue to exist the free part. They will call it "dark chain" or something like that.

Taxing is part of regulations and in any nation, you have to pay taxes for stocks, real estates, etc. because they are part of old and traditional financial markets, not as crypto market.

Soon, you will see and have to accept new or adjusted tax policies in your nations. The more years pass, and the more mainstream crypto market reaches, you will see more tax policies and stricter ones definitely.

Companies, employers, employees have to follow rules in your nation. It depends on the laws and tax policies in specific nations. In some nations, there is no tax for crypto tradings as of now

The chances are you are going to use a middle man like bitpay and you are going to get USD from the payment processor, not the coins. So accounting-wise nothing is going to change for you.

Are you going to put a fixed price tag in bitcoins on your products? (I don't mean the dollar value) You probably won't.

It shouldn't differ much from what we have right now, just that there's a middle man to handle the taxes. Price-wise it shouldn't change much, even if we take into account volatility. The middle man would probably handle all the adjustments and whatnot, probably a bit of an increase to pay for the fees and volatility handling issues. Still, it is kind of a new area since it's crypto-related taxes, so it would probably go testing and whatnot, especially if the government would fully accept it, they wouldn't really half-heartedly attack the issue.

That will depend on the country. If your country allows crypto to be used as the payment method, maybe your government will apply a tax for business owners who use crypto. But I do not know how they will calculate the tax since the crypto has volatility every minute. The best thing that you can do is visit your authorities and ask them to explain more details so you can know what you need to do and know how much the tax you should pay to the country. If the government does not create regulation for crypto, I think you do not have to pay the tax.

Before the Government allows businesses to legally accept crypto as payments, a law must have been passed recognizing BTC and other crypto as legal tender. I'm pretty sure part of that law is an attached policy on taxing crypto gains/losses.

If you are planning to accept BTC as payment when no tax policy has been approved yet, follow what @mindrust said just to be safe. You don't want to be subject to investigation and accused of illicit activities like money laundering.

Because Crypto is linked to Fiat and most people exchange Crypto for Fiat,   governments will always impose regulations on it. Here in the UK if I exchange  Crypto for Fiat it is taxable If I exchange amounts which go over £12,300 I have to pay capital gains. From the Government website  "Anyone in the UK who holds crypto assets as a personal investment will be taxed on any profits made on these assets. Saying that you only have to pay capital gains tax on overall gains above the annual exempt amount. ... According to HMRC, the capital losses from cryptocurrency can be considered for the tax liability"  So Crypto is not as anonymous and free from government interference as people like to think if you are exchanging for Fiat.

This is a bit tricky. Let me answer this from India perspective.

If a business or service provider receives any goods in lieu of sale consideration, then the fair market value of the goods as on that date would be the consideration for the goods or services. Now, if one were to receive cryptocurrency, irrespective of whether it is considered as currency or as goods, the fair value (probably taken as average rate at an exchange) as on the date of receipt of that cryptocurrency would be the consideration for sale of goods or services and taxed accordingly.

Now, when this cryptocurrency is further sold in the market, any difference in the sale value of cryptocurrency in the market from the fair value at which it was taxed earlier would be considered as gain or loss on the sale of cryptocurrency. In such cases there could be confusion if it is a capital gain/loss or business gain/loss. But it can be taxed as one of these.

I would like to separately write an article on how best it should be taxed.

Actually, if regulations have been formed by the government who wants to collect taxes, they can do it in various ways, the most important thing is that if there are clear regulations, as a good citizen, they will follow the rules that have been determined, to advance the government itself.

it is possible that every exchange to fiat or crypto trade must go through an exchange that is authorized by the government and there the government can collect taxes from every transaction made. although it is possible for crypto trading there will be obstacles but not for exchanging to fiat.

As good citizens, we will certainly support the government and we as crypto actors are also happy because there is a legal umbrella that can be given to us.

it depends on the policy of each country in implementing the tax system that will be imposed on crypto users.
and so far, in the country where I live, the rules have not been fully enforced, so they are still waiting for an agreement from the government and need extra comprehensive implementation.

As for the business system, they usually use crypto tax rules by applying tax payments like when they still accept payments with paper money. it's just that the difference is using the benchmark from the latest price according to the current crypto price on the market.

Income tax gains.

Just as the same as the normal employee and workforce getting taxed. And just as the same as a business being taxed. That's the process of how it should be when the government is also going to tax crypto gains.

There's no easy explanation to your question. The regulation and taxes will be different for different countries. But first the government will have to declare it as a legal tender. Then they will have to classify it whether it will be considered as a currency or an asset. Based in that classification, different taxes will be applied. So there's no straightforward answer available.

If you are interested, you can study Japan's crypto regulations because Japan is the first country to make bitcoin a legal tender. You can also search for the "law library of Congress - regulations of cryptocurrency in selected jurisdictions". This guide will really help if you want to have in depth knowledge.

The way fiat is taxed but in general, there may be categories which can be determined once governments study as to how many sources are available to gain/lose crypto and how can the users benefit if they show up their earnings/losses in such categories! I believe that everything truly depends on how the end customers (us) will take it. I mean, some are ready for regulations but not taxes, some want both but some are ready for taxes but no regulations, while a majority of people don't want almost anything from both of that.

Actually there are two different questions relating to taxability in bitcoin. One is the capital gain tax which will be on the fiat gain that you make. How will that be taxable? Secondly, if you pay someone in form of bitcoin when you buy a service/good then how will his income be accounted for?
 
EL Salvador pretty much solved the first problem, they declared no capital gains tax on bitcoin which means that there is no issue even if you make thousands of dollars in form of capital gains, there won't be any tax as it's a legal tender.

The second problem is the bigger one and I don't know how El Salvador would solve it. Initially, they might rely on self-declaration from the people but eventually, people could make it a big tax evasion loophole. I think this might ultimately make this country a Tax Heaven for everyone. One reason is to tether every Bitcoin address with a person through KYC but then, still, people could make a new address anytime and it ultimately defeats the purpose of making it a legal tender if you can't decide the place you want to keep it.

Taxes are usually imposed based on the definition of the thing, for example, is Bitcoin a legal currency or a commodity? From it, the tax framework to which it will be subject will be determined, or a special tax law for cryptocurrencies will be established.

Many countries that impose taxes on Bitcoin are due to the fact that they classify it as a commodity that is subject to capital gains, and therefore any gain that is achieved must be subject to taxes.

It's so simple that nobody has to do anything more complicated than a simple conversion.

You have a work contract with the company, right? It stipulates you should be paid 2000$ a month, you or the company depending on the country will pay taxes to that amount. Your employer or contractor decides to pay you in bitcoin, you will still be taxed for those 2000$.
Once the rules are in place the situation is pretty simple, there are thousands of people who are paid for outsourcing work, they earn USD or GBP or Euros and in their countries, they are taxed on that amount, nothing changes!

As for the payment part, let's look at the VAT here in the EU, you go to the cashier with 1 bottle of cola, that's 2 euros, you pay and you go out, in most cases not even caring that 20 cents of that were VAT. Same for payment in BTC you will pay the equivalent of 2 euros, 20 cents in taxes and that's all.
If I'm going to Japan for example and use my Visa card that is in Euros I would still instantly pay taxes when the purchase is done, the state and the merchants don't care what I exchanged to pay for that!


Why would this pose more troubles than a cash-based economy?
Fifty years ago we didn't have any of those payment types that could be traced other than checks, do you think there was 99% tax evasion?
Taxation worked in ancient Rome, it will work with bitcoin in Salvador also!

Various companies, as business structures of various forms of ownership, always report to the tax authorities and I do not see any particular problems for them to tax the receipt of profits in cryptocurrency. Many states have already introduced a tax on activities in the cryptocurrency and there is still no unity here. This is primarily due to the fact that states do not yet have a common opinion regarding the status of the cryptocurrency. Over time, states will develop a more or less unified attitude towards cryptocurrency, but taxation will always be different in them.

Actually yes there was a lot of Tax Evasion through cash routes was much easier in the earlier economy. Take the Indian Economy, for Instance, count of black money transactions was too high 50 years earlier and it has come significantly down with the adoption of banking for most of the payments.

Talking about Ancient Greek, we do not have any data related to that, we don't know what percentage of the money was floating around as black money but I am sure there must have been a lot of it.

Also with the advent of technology and such easy dissemination of knowledge these tricks would be easier to communicate to a lot of people. I am not saying there would be 99% tax evasion but even a 30-50% is enough to hurt any economy around the world.

If indeed all of that has happened, of course the government has prepared many things to respond, as a matter of imposing taxes on ordinary currencies. I don't think it will more bother us or causes more harm related to this case I guess, of course it has become a reasonable provision to advance the country and its people.

In the UK, is tax only chargeable once it is exchanged for fiat. Is there currently any tax on sending/receiving crypto at the moment?

Typical deductions..!

Lets talk first about businesses that do accept crypto then mostly it would be still taxed but in the form of fiat itself since those would be converted in fiat in the end of the day so its the same process.

For those who are working and accepting crypto as a form of payment then if we do talk deductions directly on crypto form at the current price rate on the time on being request or on point.

There are lots of factors which it makes a bit complicated compared when you are simply just receiving fiat and one of it would be volatility.

Taxation might end up on different form but the concept would be just all the same.

The moment crypto is accepted as a means of payment, the authorities will make or create a means of accessing the transactions to calculate the tax dues on them. All cryptocurrency centralised exchanges are paying tax on their profits which are made from crypto trading. If they can access the profits of these exchanges to know their tax dues, they can also access the dues when cryptocurrency is finally recognised as a means of payment.

Efforts are being made to legalize cryptocurrency. Many country countries of the world are designing a framework of rules and regulations to legalize cryptocurrency. In my country, Pakistan many individual, courts and federal Govt is working to legalize it. Especially a person Waqar,s efforts are appreciable. Who went to court to solve the issue about its legalization. Waqar zaka has its own mining farm in Balochistan province. It is hoped that it will be legal in Pakistan in all ways.

Most countries I believe has a self assessment system whereby you are liable to report any of your taxable events.

If you are asking how they will be able to enforce it, I can think of a few ways:

a) If you are using a centralized payment processor, they probably obtain info from them.
b) If you get tipped off to authorities by others who suspect you're not fulfilling your tax liabilities, you could get some undercover tax agent visits.
c) You could get audited.

The one year cutoff is only applicable to privately held assets. So, if a business accepts cryptocurrencies as payment as the OP suggests, holding them for a year might still leave the exchange rate related gains taxable.

that's very interesting, I didn't know that there was a distinction between privately/business held assets. Do you have a source for this? I would like to read the regulations on this carefully.

In Austria, it is already being discussed whether this holding period should be dropped, which would of course be a great pity. I hope, however, that this will not apply retroactively, but only to assets that were acquired from a certain point in time.

In terms of taxation, one of the easiest things for the government to implement, for example: transactions, per %, discounted prices when buying/selling goods can be directly taxed according to local government regulations, not a difficult thing to do.

If the government implements percentage laws on crypto, I guarantee you can't escape the reality of taxes, small and large your transaction taxes, must be deducted.