Cryptocurrency taxation 2023

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Cryptocurrency taxation 2023

Reading time: 3 min.

Taxation of cryptocurrency in different countries can differ significantly. We will consider examples of some countries below.

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But in general, some general approaches to taxes can be distinguished:

  • Tax on income derived from cryptocurrency transactions.
  • Capital investment tax
  • Mining tax
  • Exchange tax

First, let’s consider the situation in Ukraine

It is far from a secret that transactions with cryptocurrencies are not prohibited in Ukraine. Cryptocurrency is not considered money, electronic money or a means of payment, meaning that no taxes are currently payable on cryptocurrency.

So far, this sphere of relations remains outside of legal regulation, accordingly, judicial practice in Ukraine has not yet been formed either.

Although a draft law was recently registered (which is highly likely to be adopted), it provides for an 18% personal income tax and a 1.5% military levy on investment income.

Some countries have outright banned the use of cryptocurrency, so there is no need to talk about taxation there at all. These are mostly Latin American (Bolivia, Ecuador) and Asian countries (Saudi Arabia, Vietnam, Nepal).

Now let’s turn to the example of Germany.

Here are some key points regarding cryptocurrency taxation in Germany:

Profits from cryptocurrency transactions, such as buying and selling, are generally considered taxable income.

If you hold the cryptocurrency for less than one year before selling, the gain is subject to progressive income tax rates.

If held for more than a year, the profit may be exempt from taxation.

Cryptocurrencies are also subject to wealth tax (Solidaritätszuschlag and Kirchensteuer).

Mining: Income earned from cryptocurrency mining is considered taxable.

Note: in Germany, cryptocurrency exchanges are usually exempt from VAT. However, if you provide goods or services in exchange for cryptocurrency, VAT may apply to those goods or services.

Losses incurred from cryptocurrency transactions can be used to offset capital gains, reducing overall tax liability.

Reporting requirements: When filing a tax return, individuals and businesses are required to disclose information about their cryptocurrency activities.

Great Britain also has its own peculiarities.

Profits from cryptocurrency transactions, including buying and selling, are generally subject to income tax. The tax rate depends on a person’s total income and can range from 20% to 45%.

Capital Gains Tax (CGT): Capital Gains Tax applies to profits made from the sale of cryptocurrency.

There is an annual tax-free allowance and earnings above this allowance are subject to CGT. The rates are usually 10% for basic rate taxpayers and 20% for higher and additional rate taxpayers.

Income earned from cryptocurrency mining and staking may be subject to income tax or corporate tax, depending on whether the activity is considered personal or commercial.

Inheritance Tax: Cryptocurrency assets may be subject to inheritance tax when they are passed on to heirs.

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In the USA, the situation is similar, so we will mention only some interesting points.

  • If you hold a cryptocurrency for more than one year, it is considered a long-term capital gain and may qualify for preferential tax rates.
  • The IRS has included a special question on Form 1040 regarding cryptocurrency transactions.
  • If you receive a new cryptocurrency through a fork or airdrop, it is considered taxable income at the fair market value at the time it was received.

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