Perhaps it is the fiscal potential of the cryptocurrency market that is the most powerful argument pushing states to take regulatory measures as quickly as possible.
Indeed, with a total capitalization of $ 300.00 billion as of the end of the first quarter of 2018, from all income earned by crypto entrepreneurs from mining and trading, only a few countries received profit in the form of tax payments to the budget.
How to pay tax on crypto income?
It should be noted right away that in almost all countries there is such a tax rule as personal income tax, and it does not determine the source of income from which the profit was obtained as the basis for taxation.
The starting point for paying income tax is directly in itself the profit received as a result of any economic and investment activity.
Therefore, in most of the court proceedings in which the fiscal authorities bring charges of tax evasion, it is this rule that serves as the basis for building a case.
Taxation of the crypto market in the US
Traders and miners — Americans who receive income from operations in the cryptocurrency market are required to declare an increase in capital to the IRS. Digital currencies are a medium of exchange or store of value that can be exchanged for fiat money. Consequently, transactions with virtual money are taxed. Otherwise, large fines or punishment may be imposed on citizens.
Foreign Accounts Report (FBAR). If US citizens have foreign accounts worth more than $ 10 thousand, it becomes necessary to fill out the FinCEN 114 form. A very broad concept of foreign accounts also includes savings in bitcoins.
Report on compliance with the Foreign Accounts Tax Compliance Act (FATCA). This type of reporting imposes obligations to deduct 30% tax from US citizens, foreign legal entities. The tax base is dividends, interest, or insurance received from foreign financial institutions. Foreign bank accounts in virtual currency and deposits on cryptocurrency non-US exchanges fall into this category.
Country Report (CbCR). Applicable to US multinational exchanges such as Coinbase with over $ 850 million in revenue. Form 8975 must contain information about bitcoin transactions for each country separately. The form also indicates the value of tangible assets. This item also includes digital currencies that are not recognized as money in the United States and qualify as property. Corporate penalties apply in the United States and 57 other countries.
Thus, the highly lucrative cryptocurrency business has attracted the attention of the regulatory tax authorities. The IRS received permission to audit all companies involved in the cryptocurrency business: exchanges, bitcoin wallets, hedge funds.
After all, one way or another, paying taxes for making a profit from any economic or investment activity is the responsibility of every resident and non-resident living under the jurisdiction of a particular country.
At the same time, it should be noted that at this stage, while cryptocurrency exchanges are not legally in the FATF zone, they are not tax agents. And, as a result, they do not report to the tax authorities information about the income of their clients.
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