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February 09, 2014, 12:26:05 PM |
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I believe it differs from country to country. In the USA and UK I believe Capital Gains Tax is the main thing to worry about. It seems some countries (ie Russia) are trying to ban use of cryptocurrencies full stop.
In the UK and USA, you're meant to declare if/when profits on a cryptocurrency are realized, so that means either when you sell your BTC for legal tender, or exchange BTC for goods/services.
In the UK there is a £10,900 threshold for CGT, any profits over that are liable for tax.
So, say I bought 100 BTC @ £10 each (total spent £1000) and later sold 100 BTC @ £1000 (total profit 100,000-1000= £99,000). I would declare £88,100 of the profit taxable. This is currently 20% in the UK I think, so I would pay £17,620 in Capital Gains. EDIT: The same amount of tax would be due if I had bought a £100k car for BTC, as this is still realizing profit.
After speaking to HMRC a couple of times, I'm pretty sure this is the current situation in the UK. I heard Germany won't charge CGT to it's citizens, that would be sweet if you're German.
You're meant to declare ALL capital gains each year, even if they fall under the threshold. (But most people don't do this, I know a few people who went on holiday, saved some of the leftover foreign currency, and used it the following year when it's value happened to have doubled. Technically you should declare this gain, but no-one does unless you're talking large amounts [probably tens of thousands GBP])
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