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Author Topic: Tax when buying bitcoins in an exchange  (Read 5489 times)
adamstgBit
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December 18, 2011, 05:32:51 AM
 #21

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As for BTC buyers - tax paid from capital gains?


wait a minute what about capital loss?
can i claim that on my taxes!?




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malevolent
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December 18, 2011, 04:05:42 PM
 #22

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As for BTC buyers - tax paid from capital gains?
wait a minute what about capital loss?
can i claim that on my taxes!?

Yeah, you should?
But we would really need someone more competent to comment on this.
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January 10, 2012, 04:40:44 AM
 #23

First the disclaimer: I am not a lawyer

The question here is whether Bitcoin is subject to the Good and Services Tax (GST) in Canada. The GST is the Canadian version of a value added tax.  The relevant legislation is the Excise Tax Act http://laws-lois.justice.gc.ca/eng/acts/E-15/page-94.html#h-71. It may come down to whether Bitocin is considered "money" which is defined in the act as follows:

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“money”
« argent »

“money” includes any currency, cheque, promissory note, letter of credit, draft, traveller’s cheque, bill of exchange, postal note, money order, postal remittance and other similar instrument, whether Canadian or foreign, but does not include currency the fair market value of which exceeds its stated value as legal tender in the country of issuance or currency that is supplied or held for its numismatic value;

There is probably a good case here under "and other similar instrument" for the position that Bitcoin is "money" and therefore not subject to the GST, given that its purpose is its use a medium of exchange in trade.


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January 11, 2012, 01:10:10 PM
 #24

I'm quite confident that it will not qualify as an official financial instrument. At least in Finland it doesn't. I verified this from the financial regulators of Finland. It then applies to VAT because everything applies to VAT except the exceptions and at least in Finland it doesn't qualify for any of the exceptions.

So if you're not sure about it, simply ask the financial regulators in your country and find out.

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January 11, 2012, 05:27:04 PM
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Interesting topic.

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January 11, 2012, 09:22:08 PM
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I prefer to read the actual legislation which is why I posted the link to Canadian Excise Tax Act that applies to the GST. There is a critical difference between "money" and "currency" here as Bitcoin clearly qualifies as "money" but is not "currency".

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January 23, 2012, 02:29:58 PM
 #27

Interesting thread.
I am writing to the tax authorities of France to ask them if bitcoins can be treated as "digital gold", i.e just like gold for tax purposes.
The argument I am making is that bitcoins cannot be treated as a security nor as a currency since there is no issuer.
I cite the 1998 European Directive that states that gold as a store of value is exempt of VAT so I have the benefits of two options to chose from:

1/ 8% on the amount of the sale (for instance when selling bitcoins that I mined)

2/ 31.3% on capital gains when I sell if I can document my prior purchase. In this case I get a 10% discount for each year of the holding period starting with the third year (i.e. no more taxes after a 12 year hoolding period). If I cannot document the purchase then I am going with the 8% rate on the total amount of the sale.

I'll keep you posted on the answer I get from the administration.

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February 10, 2012, 03:13:49 PM
 #28

I'll keep you posted on the answer I get from the administration.

Did you get the answer?
sunnankar
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February 17, 2012, 07:51:19 AM
 #29

First the disclaimer: I am not a lawyer

A CA lawyer has written a guide A Lawyer's Take On Bitcoins And Taxes. From a US perspective but some of the principles or arguments may be applicable to those in other jurisdictions like Europe or Canada.

lonelyminer (Peter Šurda)
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February 17, 2012, 11:14:25 AM
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A CA lawyer has written a guide A Lawyer's Take On Bitcoins And Taxes. From a US perspective but some of the principles or arguments may be applicable to those in other jurisdictions like Europe or Canada.
A lot of the arguments he made are applicable to EU and Canada, I agree, but some are not. Here are some that I found out:
- EU has a directive for e-money, however it most likely does not apply to Bitcoin, because it makes the assumption that e-money is a debt instrument
- he claims that forex losses are not deductible in the US, whereas a google search shows that in many other countries, they are (also my own experience supports this)
- in countries with a general sales tax (e.g. VAT in the EU, GST in Canada), if Bitcoin trades are barter goods, it looks like this sales tax is to be levied when sold. US does not have this
Meni Rosenfeld
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February 21, 2012, 07:19:44 PM
 #31

First the disclaimer: I am not a lawyer
A CA lawyer has written a guide A Lawyer's Take On Bitcoins And Taxes. From a US perspective but some of the principles or arguments may be applicable to those in other jurisdictions like Europe or Canada.
I bought this ebook but got a different ebook instead. I tried contacting the author but got no reply. Anyone able to upload it somewhere?

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lonelyminer (Peter Šurda)
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February 22, 2012, 10:15:07 PM
 #32

Meni,

I had the same problem (wrong book, no replies). Ended up buying the book on amazon (kindle edition).
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e-ducat.fr


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February 23, 2012, 11:52:44 PM
 #33

I'll keep you posted on the answer I get from the administration.

Did you get the answer?

Under French law, the administration may take up to 3 months to respond. If they dont, that means I can apply the treatment I presented until the law changes and it wont be retroactive.
Given the subject matter, I doubt that they will take much LESS than 3 months Shocked

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February 25, 2012, 08:46:38 AM
 #34

A CA lawyer has written a guide A Lawyer's Take On Bitcoins And Taxes. From a US perspective but some of the principles or arguments may be applicable to those in other jurisdictions like Europe or Canada.
A lot of the arguments he made are applicable to EU and Canada, I agree, but some are not. Here are some that I found out:
- EU has a directive for e-money, however it most likely does not apply to Bitcoin, because it makes the assumption that e-money is a debt instrument
- he claims that forex losses are not deductible in the US, whereas a google search shows that in many other countries, they are (also my own experience supports this)
- in countries with a general sales tax (e.g. VAT in the EU, GST in Canada), if Bitcoin trades are barter goods, it looks like this sales tax is to be levied when sold. US does not have this

I was just looking at Swiss and UK VAT:
In Switzerland your revenue has to be at least 100'000 CHF (~100'000 dollars, 70'000GBP), meaning most people would be exempt. In the UK there is a limit of £73'000 for VAT registration. Thus most individuals in those two countries would be exempt. If you go above these limits you have to register for VAT, but I'm not yet sure whether you would be required to charge VAT on bitcoin sales (Gold for example is exempt in both UK and CH if for investment). [On a related note Skype charge VAT when you buy skype credit, i.e. if I buy 5 CHF skype credit I get charged 5.08 CHF since VAT is 8%. But skype credit is quite different to bitcoin.]

With respect to exchange's fees: I'm not fully certain as to what the status is there. Ebay has to charge VAT on their fees, I'm assuming something similar is the case with exchanges based in the EU for EU customers. On the other hand since I'm not an EU resident but use a EU exchange I should then not have VAT charged, which makes things complicated for the exchange -- I would also have to look into whether I need to pay Swiss VAT on online services abroad... When goods are sent by post, if I would have to pay less than 5CHF VAT then the VAT is waived -- with the amounts I buy and since fees are even smaller by comparison, I would be exempt.

// Update: turns out that by offering services in Switzerland you make yourself liable to swiss taxation laws. I.e. by delivering services online to Switzerland you are acting as if you were active in Switzerland as well. This would only affect any business being offered in Switzerland, and I assume that the volume of sale there would be minimal, meaning VAT could be ignored by exchanges offering services in Switzerland.
lonelyminer (Peter Šurda)
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February 26, 2012, 01:21:09 AM
 #35

I was just looking at Swiss and UK VAT:
In Switzerland your revenue has to be at least 100'000 CHF (~100'000 dollars, 70'000GBP), meaning most people would be exempt. In the UK there is a limit of £73'000 for VAT registration. Thus most individuals in those two countries would be exempt. If you go above these limits you have to register for VAT, but I'm not yet sure whether you would be required to charge VAT on bitcoin sales (Gold for example is exempt in both UK and CH if for investment). [On a related note Skype charge VAT when you buy skype credit, i.e. if I buy 5 CHF skype credit I get charged 5.08 CHF since VAT is 8%. But skype credit is quite different to bitcoin.]
Yes, some EU businesses, particularly those that have low turnover are typically VAT exempt. Also, currency (as in that declared so by states) is VAT exempt. There are some further exceptions, e.g. some gold sales (not all though).

There is the EU VAT for e-services directive, which applies to digital services such as Skype. If you are selling digital services/goods to EU citizens, you have to register for VAT in one of the EU states and charge VAT (unless, obviously, you already are registered for VAT). As far as I know, there is no minimal threshold for this.

My point was more directed towards a situation where there already is a merchant selling some goods and he wants to get into Bitcoin by selling them to his customers. The second issue is imports: normally the customs charges you VAT upon import of goods. Maybe this also applies to Bitcoins, I don't know. The other cases where the VAT comes into play are probably not a big issue.
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February 29, 2012, 08:03:34 PM
 #36

Meni,

I had the same problem (wrong book, no replies). Ended up buying the book on amazon (kindle edition).
After not receiving a response from HowToVanish, I contacted RunToGold. They gave me a direct link to the download and said they corrected the mistake.

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lonelyminer (Peter Šurda)
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February 29, 2012, 08:38:26 PM
 #37

After not receiving a response from HowToVanish, I contacted RunToGold. They gave me a direct link to the download and said they corrected the mistake.
They came back to me just now as well, so I guess I have you to thank. Probably we're the only two people that bought it with Bitcoin :-).
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April 16, 2012, 05:08:25 AM
 #38

Anyone feel like admitting they paid capital gains taxes on their US tax return due April 17, 2012?

I haven't found anyone yet, but I'm sure there's someone out there who made enough money that they are willing to share some with the US govt!

https://bitcointalk.org/index.php?topic=73632.40

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May 11, 2012, 02:00:36 AM
 #39

The exchange I'm using to buy bitcoins charge fees of 0.59% of transaction value. For example, if I buy $100 worth of bitcoins they will charge me $0.59.

If I buy a pair of boots for $100 I need to pay 13.925% in tax or $13.93 (I live in Quebec).

Why are bitcoins different than boot or any other product? Are they different or we are just playing in a gray area? I'm asking this question because I would like to know if it's possible for a brick and mortar shop to offer bitcoins in exchange of money. Customer walk in with fiat money and a smart phone or a qr-code and get out with bitcoins. That service is only possible if the store need to collect tax only on the service fees and not on the total purchase price.


thanks for your inputs

In most countries, VAT (or a similar tax) will be paid by the seller, not the buyer. So you should expect the exchange you are using to be paying the tax if they have to. If they happen to reside in a country where the VAT has to be indicated, you should have received an invoice stating the tax amount, otherwise they'll most likely not have paid the tax.

If you want to run your own exchange, it depends on you local laws. But most countries will have some regulations to prevent double taxation of VAT for the same goods, and to prevent VAT to be added to the purchase price of used goods on their resale. You should look at how your country's tax laws handle these cases, then you'll probably be able to come up with a strategy for having the tax applied to only your service fees. This might well require some record-keeping to be done.

When BTC is accepted as a currency in a country, this issue will most likely be greatly simplified. On the other hand, it might not be advisable to press for such a change as this would cause many interesting new services invented by BTC-enthusiasts to be subject to banking laws.

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June 11, 2012, 08:43:47 PM
 #40

I'll keep you posted on the answer I get from the administration.

Did you get the answer?

The three months have elapsed without any answer: that means I can apply the tax treatment I presented until the law changes and it wont be retroactive.

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