Taxes on Bitcoin

[crsdr16]

Hi Everybody,

When getting Satoshi/Bitcoins from the internet in general, could you please tell me whether you have to pay tax to the country you get them from or do you just pay taxes to your own country?

Thanks for your help.

[Shiroslullaby]

This is actually an interesting question.
I doubt that 99.99% of people dealing with Bitcoin are paying any kind of tax.
Unless you are selling a lot of coins and earning a living from it, I wouldn't worry about any taxes.
(I mean serious trading where you are earning tens of thousands of dollars a year.)

[yayayo]

This will depend on the country of origin of the sender and the nature of the transaction. If you are just doing private transactions I doubt that there is anything to tax (however, governments are getting more creative every day). If the Bitcoin transaction is part of a business deal I would assume that the same tax rules apply as would for a transaction with fiat money.

Countries have different taxation laws. But in general I would assume that the location (IP) from where the Bitcoin are sent is not relevant. Relevant is the home location of your business partner. This means if a Japanese sends Bitcoin out of a wallet that is controlled by an European exchange, the deal would fall under the same tax rules as if the Bitcoin were send out of Japan.

ya.ya.yo!

[botany]

Hi Everybody,

When getting Satoshi/Bitcoins from the internet in general, could you please tell me whether you have to pay tax to the country you get them from or do you just pay taxes to your own country?

Thanks for your help.

You have to pay taxes to your country. Sometimes, the sender may have to deduct taxes (Tax deducted at source) before sending you the bitcoins. If you are lucky and your country has a double taxation avoidance agreement with the sender's country, you can claim credit for the taxes deducted by the sender.

[crsdr16]

Thanks everyone for your input! It's greatly appreciated. I've often wondered what people do when they win Bitcoins from a foreign online casino, for example, and whether they owed taxes to the country where those Bitcoins originated, in this case the foreign-owned casino.

[Shiroslullaby]

Even if someone won a lot of bitcoin in one of these casinos, I doubt they would actually declare the winnings and pay taxes on it.
Most people that win money playing poker online for example never pay taxes.
Add the anonymous nature of Bitcoin and I would be surprised if there was one person admitting their winnings.

[gentlemand]

Thanks everyone for your input! It's greatly appreciated. I've often wondered what people do when they win Bitcoins from a foreign online casino, for example, and whether they owed taxes to the country where those Bitcoins originated, in this case the foreign-owned casino.

That depends on where you live. In the UK there are no taxes on gambling winnings at all.

If you live somewhere where you are taxed, you'd pay taxes to the country you live in. It's your windfall therefore your nice problem to have.

[bostiog1]

You have to pay tax in your country, and sometimes a fee from the vendor. Some countries do not charge very high fees or no

[botany]

Thanks everyone for your input! It's greatly appreciated. I've often wondered what people do when they win Bitcoins from a foreign online casino, for example, and whether they owed taxes to the country where those Bitcoins originated, in this case the foreign-owned casino.

Online casinos can be set up anywhere.... and therefore it makes sense for the operators to choose a tax-friendly jurisdiction.
So you can invariably expect that there will be no taxes owed in the country where the casino has been set up.

[Deuceisgood]

Here's a question: US resident comes into some tokens, sends them to Poloniex, exchanges the tokens for btc and then transfers the btc out. Lets say the assets are worth US$500k. So that is US$500k of tokens in, and US$500k of btc out. Is Poloniex reporting these transactions just like a bank, i.e. any transaction over US$10k gets reported? Or any case of potential structuring gets reported? There is no apparent tax gain given nothing has been monetized, i.e. fiat-ized. No fiat has been involved. Yet Poloniex requires all this KYC docs in order to make large transactions like this. Curious ...

[DebitMe]

Here's a question: US resident comes into some tokens, sends them to Poloniex, exchanges the tokens for btc and then transfers the btc out. Lets say the assets are worth US$500k. So that is US$500k of tokens in, and US$500k of btc out. Is Poloniex reporting these transactions just like a bank, i.e. any transaction over US$10k gets reported? Or any case of potential structuring gets reported? There is no apparent tax gain given nothing has been monetized, i.e. fiat-ized. No fiat has been involved. Yet Poloniex requires all this KYC docs in order to make large transactions like this. Curious ...

In this scenario you would not owe any taxes since you are exchanging an asset to an asset. The United states has classified bitcoin as property, so it would be like exchangin 50 dollars in silver for 50 dollars in bitcoin. Your basis is still 50 dollars in gold now.

Now you would owe tax if your basis is zero on the tokens, or anything less than 500k.  I don't believe you can defer this gain in this situation, although I really only do corporation taxes, so I may be mistaken. But to my knowledge you would have to pay taxes on the gain of the original tokens, then your basis in the btc would be 500k.

[Deuceisgood]

Here's a question: US resident comes into some tokens, sends them to Poloniex, exchanges the tokens for btc and then transfers the btc out. Lets say the assets are worth US$500k. So that is US$500k of tokens in, and US$500k of btc out. Is Poloniex reporting these transactions just like a bank, i.e. any transaction over US$10k gets reported? Or any case of potential structuring gets reported? There is no apparent tax gain given nothing has been monetized, i.e. fiat-ized. No fiat has been involved. Yet Poloniex requires all this KYC docs in order to make large transactions like this. Curious ...

In this scenario you would not owe any taxes since you are exchanging an asset to an asset. The United states has classified bitcoin as property, so it would be like exchangin 50 dollars in silver for 50 dollars in bitcoin. Your basis is still 50 dollars in gold now.

Now you would owe tax if your basis is zero on the tokens, or anything less than 500k.  I don't believe you can defer this gain in this situation, although I really only do corporation taxes, so I may be mistaken. But to my knowledge you would have to pay taxes on the gain of the original tokens, then your basis in the btc would be 500k.

Gains on the tokens would be capital gains? I've got lots of short-term capital loss carry-forwards .... basically stock losses. I could offset the two?

[DebitMe]

Here's a question: US resident comes into some tokens, sends them to Poloniex, exchanges the tokens for btc and then transfers the btc out. Lets say the assets are worth US$500k. So that is US$500k of tokens in, and US$500k of btc out. Is Poloniex reporting these transactions just like a bank, i.e. any transaction over US$10k gets reported? Or any case of potential structuring gets reported? There is no apparent tax gain given nothing has been monetized, i.e. fiat-ized. No fiat has been involved. Yet Poloniex requires all this KYC docs in order to make large transactions like this. Curious ...

In this scenario you would not owe any taxes since you are exchanging an asset to an asset. The United states has classified bitcoin as property, so it would be like exchangin 50 dollars in silver for 50 dollars in bitcoin. Your basis is still 50 dollars in gold now.

Now you would owe tax if your basis is zero on the tokens, or anything less than 500k.  I don't believe you can defer this gain in this situation, although I really only do corporation taxes, so I may be mistaken. But to my knowledge you would have to pay taxes on the gain of the original tokens, then your basis in the btc would be 500k.

Gains on the tokens would be capital gains? I've got lots of short-term capital loss carry-forwards .... basically stock losses. I could offset the two?

It would either be short term or long term depending on how long you held the assets, but yes.  And yes, you could use the losses to offset the gains.

[botany]

Here's a question: US resident comes into some tokens, sends them to Poloniex, exchanges the tokens for btc and then transfers the btc out. Lets say the assets are worth US$500k. So that is US$500k of tokens in, and US$500k of btc out. Is Poloniex reporting these transactions just like a bank, i.e. any transaction over US$10k gets reported? Or any case of potential structuring gets reported? There is no apparent tax gain given nothing has been monetized, i.e. fiat-ized. No fiat has been involved. Yet Poloniex requires all this KYC docs in order to make large transactions like this. Curious ...

The point of reporting is not just to track tax evasion. It is also to check money laundering.
Plus if there is illegal money (say drug earnings) involved, the government may sniff it out from reports like these.

[gentlemand]

Is Poloniex reporting these transactions just like a bank, i.e. any transaction over US$10k gets reported?

If they're not doing this now, I certainly think they're gearing up to do it. At the very least I assume they're keeping records in case they're hit with retrospective requests in the future. Who's to say the definition of Bitcoin in the eyes of US law won't change?

Poloniex does have USDT on there. I'm not sure whether that qualifies as just another alt legally or not. They're also rejecting NY residents so they're looking to be compliant.

[Deuceisgood]

Now you would owe tax if your basis is zero on the tokens, or anything less than 500k.  I don't believe you can defer this gain in this situation, although I really only do corporation taxes, so I may be mistaken. But to my knowledge you would have to pay taxes on the gain of the original tokens, then your basis in the btc would be 500k.

If I trade my tokens for Bitcoin ... how is it that I would owe tax? Neither of these are money ... it is like trading one piece of art for another: my Gauguin for your Matisse. And by making the trade we've established that they are of ~ equal value. A like-kind exchange with no fiat involved. I think Poloniex owes tax on trading fees, and has to comply with anti-money laundering requirements. As someone mentioned I don't think this is a tax issue until I ultimately convert to fiat ... which could be a very long time.

I'm looking at this reference - it says proceeds from crowdfunding are taxable - see #10 near bottom of article - but then in item #11 says cryptocurrencies are taxable when converted to fiat:

http://www.thefiscaltimes.com/Articles/2013/04/08/11-Surprising-Things-You-Have-to-Pay-Taxes-On

So Ethereum, the DAO, and all the rest paid taxes on their proceeds?? I'm a bit skeptical ...

Meanwhile. I'm not going to worry about taxes until I convert to fiat, or until there is better clarity.

[DebitMe]

Now you would owe tax if your basis is zero on the tokens, or anything less than 500k.  I don't believe you can defer this gain in this situation, although I really only do corporation taxes, so I may be mistaken. But to my knowledge you would have to pay taxes on the gain of the original tokens, then your basis in the btc would be 500k.

If I trade my tokens for Bitcoin ... how is it that I would owe tax? Neither of these are money ... it is like trading one piece of art for another: my Gauguin for your Matisse. And by making the trade we've established that they are of ~ equal value. A like-kind exchange with no fiat involved. I think Poloniex owes tax on trading fees, and has to comply with anti-money laundering requirements. As someone mentioned I don't think this is a tax issue until I ultimately convert to fiat ... which could be a very long time.

I'm looking at this reference - it says proceeds from crowdfunding are taxable - see #10 near bottom of article - but then in item #11 says cryptocurrencies are taxable when converted to fiat:

http://www.thefiscaltimes.com/Articles/2013/04/08/11-Surprising-Things-You-Have-to-Pay-Taxes-On

So Ethereum, the DAO, and all the rest paid taxes on their proceeds?? I'm a bit skeptical ...

Meanwhile. I'm not going to worry about taxes until I convert to fiat, or until there is better clarity.

You didn't mention how you came about the tokens.  But yes, you would still owe taxes on them.  Consider this...

You are walking down the street, you find a $100 bill on the ground, you pick it up and put it in your pocket.  You now owe taxes on that $100.  Same thing if you were to find gold/silver/a private key with bitcoins on it/etc. 

If you mined the coins/tokens, yes you still owe tax on them, but depending on how you have it set up, you may be able to take some deductions for cost of the machines, electricity, and other expenses.  That is only if you have it set up as a business though.

Your example was the same as mine with trading silver for gold.  You owe tax on the event.  Your right that 50k of silver is of equal value as 50k of gold, but if you bought that 50k of silver for 30k, you owe 20k of gains in taxes because your base is 30k, but now you have a base in the gold of 50k.  Does that make sense?

[JITENDERPAR3]

i think tax depend upon the platform that is uses by the bitcoiners .
since i am from India i am using paytm wallet ( online wallet) which is free of tax to exchange money person to person and i am using that money directly for shoping and recharge .
if anyone is big trader than we can say he is paying tax to his own country .

[Deuceisgood]

You didn't mention how you came about the tokens.  But yes, you would still owe taxes on them.  Consider this...

Your example was the same as mine with trading silver for gold.  You owe tax on the event.  Your right that 50k of silver is of equal value as 50k of gold, but if you bought that 50k of silver for 30k, you owe 20k of gains in taxes because your base is 30k, but now you have a base in the gold of 50k.  Does that make sense?

Ok ... I think I got.

Anyways, I hate taxes. Lol ...

[Deuceisgood]

i think tax depend upon the platform that is uses by the bitcoiners .
since i am from India i am using paytm wallet ( online wallet) which is free of tax to exchange money person to person and i am using that money directly for shoping and recharge .
if anyone is big trader than we can say he is paying tax to his own country .

Yes, American tax laws are f*cked up like you wouldn't believe.  You have it much easier I'm sure ...