Bitcoin Forum

As crypto currency trading often use overseas exchanges, it seems to be a problem for the nation that difficult to catch taxation and to be unable to collect tax. Then, at what timing should be collected tax about the crypto currency?
I do not know whether it is technically possible, but I consider about it.

①At the time of filing tax returns
･Calculate income by myself and pay tax.
･To calculate profits is very complexity.
･This is the way of my country, Japan.

②At the time of purchasing of crypto currency
･For example, we withhold 10% tax at the time of purchase at exchange, and settle tax at the time of realization of profit orloss by real tax return.
･Collecting tax collects at the entrance, tax leakage are reduced.
･Difficult to catch the profit and loss on overseas exchanges.
･Tax collected at the time of purchase, the purchase amount will be less than the invested funds.

③At the time of sending crypto currency from exchange
･For example, we withhold 10% tax at the time of send crypto currency to foreign exchange or wallet from domestic exchanges, and settle tax at the time of realization of profit orloss by real tax return.
･Nation can reduce the risk of being unable to catch taxation by using overseas exchanges. At least it will not be taxable at all.
･Funds for trading on overseas exchanges will be less.

④At the time of sold
･For example, if we get profits at the sale at the exchange,we will withhold 10% tax, and settle tax at the time of realization of profit orloss by real tax return.
･Difficult to catch the profit and loss on overseas exchanges.

⑤At the time of change to fiat
･Tax the difference between the amount of fiat at the time of purchase and the amount of fiat at the time of sale.
･Easy to calculate tax and can ensure the fund to pay tax.

What do you think about this?
I think No② or ④ is better.

In any case, I think it is necessary to have an international cooperation system.
What kind of method is adopted to collect tax,in your country?

I don't think having an international uniform method is necessary. I assume most countries currently fall under number 1, which is basically the default option outside special regulations.

I'm not sure about withholding taxes. Wouldn't they make things more complicated just because crypto is so volatile? Time of purchase is probably the most ideal time to apply it though.

By cooperation, do you mean sharing taxpayer info between countries? I personally wouldn't be very comfortable with that.

I mean shareing trade history report, and that make me uncomfortable as well. But even now Japanese government seeks the submission of reports to domestic exchanges and strengthens regulations on foreign exchanges.
If government can not grasp the transaction history on foreign exchanges, people will use foreign exchanges to escape tax, and crypto become a hotbed of tax evasion. I think it's not good for the future development of crypto.

If you read through the TOS of nearly every regulated and semi regulated exchange or service, you'll see that they will share potentially all data with the government in case there is a request to do so.

I don't think it matters much if the exchange is foreign or not, especially when you take into consideration that except from a few select countries, pretty much everyone can use an exchange.

It's not for nothing that various exchanges have decided not to allow US registrants anymore, because the US government doesn't care where you're exchange is located. If they want something from you, they'll get it.

Bitfinex and BitMEX both don't allow US registrants, but you can bet on it that the US government will jump in if they feel it's time to do so.

Indeed, the collection of taxes on profits in the crypto currency for each state will be very difficult, considering that exchanges and exchangers mostly citizens will use those outside the state where they must provide a tax report. Therefore, this activity will mainly be laid on citizens in the light of their good faith. Only if the state tax services becomes aware of individual facts of citizens' activities, from which the need to pay taxes follows, they will be able to verify such information. And this tax should be moderate, so as not to drive the activity on the use of crypto currency in the shadow.

Usually countries tax the profits once a year and your profits are based on the crypto -fiat transactions. If you have $100 and buy crypto, then sell it later that year for $200 your profit is $100. If you're supposed to pay 10% tax, it will be $10. This is the most uniform rule. Some countries are trying to make people declare their crypto holdings and pay taxes even if no conversion to fiat money takes place. IMO this is dumb, unjust and impossible to enforce.

In my country you only are obligated to pay 18% tax from your income, whether it was from cryptocurrencies or anything else. This tax is to high though in my opinion and makes a lot of people move out.

Excuse me sir, from what country are you in?  I haven't heard or read about paying tax in crytpocurrency industry?  What is the process of your country for example you have to pay as a cryptocurrency user?  And what kind of cryptocurrency are you using? Regards.

I think 18% is not high. In my country,Japan tax rate of the profit from stock trading is 20%. And people are also asking to apply a tax rate of 20% for profits from crypto currency trading. Currently, the profit from trading of crypto currency is combined with other profit, such as salary, and be taxed by following tax rate. Very high.

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～1,950,000yen (approximately $ 17,700                  　        　　　　　　      15％
1,950,000yen～3,300,000yen（approximately $ 17,700 to $ 30,000）          20％   
3,300,000yen～6,950,000yen（approximately $ 30,000 - $ 63,200）  　       30％   
6,950,000yen～9,000,000yen（approximately $ 63,200 to $ 81,800）          33％
9,000,000yen～18,000,000yen（approximately $ 81,800 to $ 163,600）      43％   
18,000,000yen～40,000,000yen（approximately $ 163,600 to $ 363,600）   50％   
40,000,000yen～（approximately $ 363,600）                                            55％   

I think these percentages are high in my opinion. Meaning a labourer will spend large portion of his labour gains on just one aspect of his life which is tax, feeding ,shelter plus other life exigencies have not been added. For me, 10% is ok following from at least the biblical guide of giving out 10% of monthly proceed to God's house.

I am fairly glad that my country does not care about bitcoin. Perhaps because bitcoin is not very known in here. There is no law that makes it legal or illegal. But I think if you used it for illegal purposes like buying drugs or weapons, it would be deemed as illegal. Therefore, there are no taxes needed. On the other hand, the government surely will interfere if people get to know about bitcoin and start relying on the blockchain technology.

The same situation as here in my country the government is quite enough on cryptocurrencies not having any law regarding on that. They did not announce whether it is legal or illegal or which is prohibited and tax-free to all citizen here who using bitcoin. Still, people can make illegal activities using bitcoin but so far I never heard somebody who used in illegal or maybe I don't know.
There's no problem with me if my country implements for taxation I think that is a small amount that we can afford to lose, besides, I am happy to know if we can contribute for our economic growth using our small amount in collecting a tax.

No taxes needed?? Is not tax imposed on the profits from trading? I envy you... Which country are you from??

That means turning every human on Earth into a slave.
I will never pay any tax on my BTC profits, just like I've stopped paying income tax in 1997. I suggest you leave your country right away, and never go back. Less money going to governments is more money for you and your family.

It depends on the country that you have ran to. If you have eloped to a country where they don't joke with tax issues, you will still be traced and hooked to pay up your tax and if they also tax on bitcoin, you will be made to pay up.

From the government's point of view, obviously 2 and 4 combined would make the best outcome for them.

However, in reality, this is extremely hard to enforce. Since bitcoin taxes are mostly in the form of CGT, it's difficult if not impossible to calculate or forecast someone's profits or losses just from a purchase alone.

In my country, you simply return any CGT or income tax that you incur from bitcoin trading or employment with your tax return. I'd expect that this would be the case for most other countries as well, unless a GST is also present.

I think setting an international standard is good but the problem I see here is most of the countries have their own version of the taxing system in their country and an international standard will create a lot of concflicts with their local taxing system.

The most logical way is for international exchanges to cooperate locally on countries they have customers by providing trading transaction records set by the customer. This would be enough transparency for them to have a correct audit when needed. This is being done right now by Coinbase as a help for the US government to identify their citizens who are not paying the right taxes.

It is important here that states do not set too high tax rates, otherwise they risk driving the currency into the shadows and the state will not receive the amount in taxes that it could receive when establishing a minimum tax rate.
 So, for example, now in the news section the topic is discussed that in Ukraine can impose a tax of 19.5 percent of profits in the crypto currency. And the government wants to introduce such a tax even before the adoption of the relevant laws on the regulation of the crypto currency. As one of the four draft laws submitted to the legislative body of the country, is the introduction of a five percent tax. I am sure that if this law is adopted, the state will be able to raise much more money than the one that provides a tax of 19.5 percent. If the tax is five percent. there will be no sense in avoiding paying it, it will be easier to pay and not have problems. But a tax of 19.5 percent is unlikely to be paid by many.

In my opinion, taxes from activities in the crypto currency will be more calculated on the consciousness of the citizens themselves than on compulsory collection. I can not imagine how the state will be able to collect information about the country's crypto-currency transactions around the world to calculate the amount of tax payable. This will practically be impossible to do.

No, sir. I will never pay income tax anymore. I'm not running, and no country can hook up with me for any reason. It hasn't been easy, but it's legal. I've been doing it for 20 years, so I know it works.

For some reason I have to agree with you. I also have been not paying my taxes for the last 5 years. They have not traced anything. Lucky, my country's government doesnt have any solid decision on whether Bitcoin could be legal or illegal to use, but the central bank recognizes Bitcoin a year ago, so I guess its considered legal then. But, there has no plan for taxation yet.

I don't think we have a problem here in calculating tax amount for the crypto earnings one made. Every government has compelled its citizens to hold a identity card to record the income and expense per day /month/ quarter or year. We do have a system to record the income. Though each citizen is bound to follow paying tax to their income, they either skip or omit paying taxes. Its the citizen's responsibility to obey and pay the tax to the income they are opt to.

Same with me here my country also has no desired preference with Bitcoin as legally being associated as currency. But the most important thing for me now was, because of it's decentralized type as digital currency it remained to be untouchable. Even with countries who banned bitcoin, they had their anonymous involvement with cryptocurrency and transactions wise it can be done discreetly.

I think you are beginning to see the benefits of crypto. censorship resistant, secure and borderless exchange of value.
This idea of using foreign exchanges to stay off the radar of local criminal mobs in government is a major benefit and will not slow down crypto development at all, the exact opposite really. It is the whole reason behind the crypto movement.
To give people control over their wealth again and protection from being extorted by criminals wearing suits.
If centralised exchanges bow to the will of local authorities then decentralised exchanges will rise to fill the void.
The sooner people wake up and realise that taxation is nothing more than legitimised theft the better.

How do you think about CRS(Common Reporting Standard)?
At present, crypto currency transactions are not covered by this system, but I think it will be covered in a few years.
Application of this system will allow governments to get a information from  foreign governments automatically to disclose transactions of residents, and it make Crypto World more uncomfortable.
The following are the main members of CRS. America is not a member.
https://i.imgur.com/i59sEhQ.png

Still there is no tax for crypto in many countries but it will be applicable in few countries. Bitcoin is legal without any restrictions at the same time it is illegal without any refulations. But day by day crypto become more famous in  many countries governments are planned to put tax for crypto. If tax is announced means then the economic growth of the country would be great.

Depend on the countries and who accepted bitcoin. I would like to pay tax for crypto earnings to my country if it accepts bitcoin. If it's not yet legalised then you can obviously think on it.  And I love countries to adapt and have facilities to earn bitcoins and other crypto currencies to pay tax.

For  the countries that  legalized bitcoin it is very helpful for the economy, because bitcoin is always involved transaction specially if you used it in some commodities, services or  goods, even though it is anonymous but use infrastructure and other facilities,  in these cases the government can collect taxes. The more  the their citizens spend bitcoins the more taxes the government can collect.

And for me, if a country is organized and utilizes it revenues including taxes, I don't have a reason not to remit my own because it will also be well utilized. But I don't blame people who have not seen a reason to pay, maybe it could be because of experience.

If you think you have that free choice, then you're obviously wrong. It doesn't matter whether Bitcoin is legalized or not, there is no way you can escape from your legal obligation to pay tax.

No wonder that the number of people paying tax over their gains hasn't been growing throughout the years. People falsely assume that Bitcoin is anonymous and for that reason can skip taxation, or that it isn't legalized.

If governments start forcing exchanges to transfer user data once a year for taxation purposes (which is only a matter of time in my opinion), I'm sure that a lot people will be surprised when the taxman shows up.

Governments don't even need to wait for a report from the crypto exchanges. Govts are now using big data one by one and will be very good to make a report itself without the exchange. The good news is data centers have a bright future coming.
I pay my due, I don't want to be considered as a frauder for a transaction 2-3 years old. Frauding taxes can cost a lot of money

To avoid confusion and to provide evidence I think the best way possible is recording all your transactions including both profit and losses in a notebook or put it where you can physically present it. With this way you will have a detailed view on what is your real capital gains are. I think with this technique it will save you a lot of time doing unnecessary things as filing a tax report supposed to be a one time thing and deducting your total capital gains is easy because it will just be based on your tax income group/bracket.

It will be really very difficult for the state to collect citizens' tax on profits in cryptocurrency. This currency is virtual and it can exchange on any exchange of the world. It will be very difficult for the state to trace it. It seems that when collecting this tax, the state will rely only on the good faith and law-abidingness of its citizens. In countries like Japan, it can and will work. However, in my own, where the state periodically actually robs people with its laws, monetary and other reforms, the state is unlikely to rely on the law-abiding people. I even wonder how it will be in practice. While in my country there are no laws on cryptocurrency and taxation.

Mind explaining why and how big data will help governments avoid dealing with exchanges when it comes to taxation of users? Big data is nothing more than an additional form of collecting data, not the main one.

Big data doesn't show how I trade on an exchange. The government needs to have the exchange provide them that data, otherwise people will be able to cheat in every possible way to avoid being taxed in full.

People could even artificially lower their holdings on paper by pretending they lost half of their crypto holdings due to bad trades and whatnot, and that while they might have doubled their holdings in reality.

That would be a great way of evading taxes, but I’m guessing that many others have already thought of that and are probably already doing it avoid taxes. I’m sure that most would want to avoid paying taxes or appearing on the radar esp if the government still has no established stand on crypto. While tax compliance on crypto shouldn’t be so strict for the moment, users may easily wiggle themselves out but should be wary of tax collectors getting back at them.

It is possible that it will be so. Various exchanges will provide information about their customers at the request of states. However, one can imagine what kind of information this will need to be sent to almost every state. Probably the exchanges will be unprofitable to work or they refuse to do it. In most cases, tax authorities will manage information from local exchanges and exchangers. In general, it will be very difficult for states to collect tax on profits from cryptocurrency.

Only exchangers and other similar services would be the only medium on where government could settle in when it comes to tax matters.Yet this is the only thing that can able to tally out users transactions and would be the one to impose KYC procedure to know where those users located from. This is really a hassle thing for the exchanger itself on they do give out or dissect each users and make specific reports.
This is possible but it would still takes time.

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I don't think it really matters what governments think about crypto right now. People need to understand how taxation works within their jurisdiction and understand that it doesn't matter what you sell for a higher price; taxation is inevitable. Ignorance makes bad tax evaders, and they may (probably will) pay the price for it eventually.

Government input on crypto taxation only matters in the way that they eventually will categorize crypto currencies and tokens. Positive aspect is that Bitcoin is pretty easy to categorize for most governments (some have already done so), which can't really be said about a wide variety of tokens. I'm pretty sure that even those issuing these tokens don't know what purpose it really serves. If they don't know, how is the government supposed to know? :D

In US taxes're collected when crypto's converted into fiat.

What a tough process of collecting Bitcoin tax in your countries but here in my country the tax was simply collected thru our local exchanges that everytime we convert our Bitcoin to fiat then the total fiat receive is already tax and blockchain transactions deducted so i hope this process will be applied in your country too.

Yes, most likely it will be. The tax authorities will receive information from local exchanges located in the territory of this state, but most likely, the tax will automatically be charged and collected from each transaction at the exchange itself. This is the best option for practical taxation. Well, if citizens will go to the exchanges located on the territory of other states, decentralized exchangers? Is it really possible to avoid taxation?