In my previous article, I wrote about a guy who was trying to do the "right" thing, and the outcome made his life a living hell. It was due to the regulations and laws we have in Sweden. (Yes, I am from Sweden so I'm not native in English).
You can find the article here:
In Debt For The Rest Of His Life Due To Cryptocurrencies And Taxes.
Like I stated in that article:
This is based on a true story, but this should not be seen as any form of legal or tax advice. This is based on the laws and regulations in Sweden, so it might be different for you.
That applies to this article too. This should not be seen as any form of legal or tax advice. I decided to share this as the previous story raised some major concerns and I've been thinking about this 24/7 since I published it.
Tax-Free Or Not?
The story I shared previously was about a guy who was trading cryptocurrencies. He bought and sold, and he ended up with millions in tax debts due to how the Swedish regulations and laws works. Fluctuations in values doesn't matter and cryptocurrencies are not a currency in Sweden. It's seen as an asset, so you need to pay taxes for each trade you make.
- This got me thinking about Steem...
Donations are tax-free in Sweden. No matter the amount or how many times you receive donations, but the rewards on Steemit is not to be seen as donations, as it's a form of payment for your contributions...
With that being said, I started to see my entire journey on Steemit in another perspective. I started to look at it from the "IRS" (Skatteverket in Sweden)-perspective.
For each buy and/or sell, you're obligated to pay taxes, so you need to put aside 30% of the profits for each trade you do.
Whenever an article pays out, I receive rewards. What happens is that I build my portfolio, as I add more funds (tokens) to it. My portfolio on Steemit, is my wallet. I get paid in Steem and Steem Power, so according to the regulations and laws in Sweden, I need to pay 30% taxes on my profits. The profits however, is basically all the rewards, as I don't trade for profits.
30% taxes on both Steem and Steem Power would obviously affect my rewards with immediate effect and to a huge extent. Also, each time I spend Steem to buy votes from either a bid-bot or from a market like Smartsteem, I would need to pay 30% taxes on the profit.
Smartmarket has a fixed ROI of 10% and smartsteem a maximum ROI of 15%... So to make this easier to calculate, let's say I buy votes on smartmarket for 100 Steem.
With the fixed ROI of 10%, I would get 110 Steem worth of votes. That's 10 Steem profit, and I would need to pay 30% taxes on the profit. I'll end up with a profit of 7 Steem in total, after paying taxes.
However...
Once again, to make things easier to calculate, let's say that the price of Steem is $1.
I publish a new article and no one upvotes it before it pays out. Right before the payout, I spend 100 Steem to buy votes, and I get 110 Steem back. I'll need to pay $3 in taxes like before, as I profit 10 Steem... That gives me 107 Steem, which is worth $107.
But, if I don't pay taxes immediately, and the price climbs to $10 for each Steem before I pay my taxes, I'll need to pay $30 in taxes instead as my portfolio would've been worth more.
Let's say that I don't pay taxes this time either, and spend another 100 Steem to buy votes at the price of $10 per steem. I would still get 110 Steem in total, but these 110 Steem I just got, would be worth $1100.
- That's $30 taxes for the 10 Steem I profit.
Now, if I wanted to pay taxes for everything, I would have to pay $3 for the first "trade" and $30 for the second. Even if the price of Steem took a free-fall and landed on $0.1 before I paid my taxes, because they see it as an asset and don't take fluctuations in price into consideration.
So, I need to pay 30% taxes on each article that pays out, as the rewards are pure profit... However, my upvotes will not make any changes at all, as my portfolio stays the same no matter if I upvote someone with 1% or 100%. But, the curation rewards I earn, is something I would need to pay taxes on, as they are also profit.
Let's take a look at the bid-bot vote example once again...
I have 1 article with $0 rewards. Before it pays out, I spend 100 Steem to buy votes. The article pays out at $110, as smartmarket has a fixed ROI of 10%. If I wanted to pay taxes for this, I would need to pay 30% taxes on 10 Steem, as that is the profit from smartmarket... But, I would also need to pay 30% taxes for both the Steem and Steem Power rewards upon payout, as those rewards are considered to be profit.
Now, like I told you previously. This is the regulations and laws in Sweden. It might be completely different for you. Also, I am not a lawyer or an accountant so I might be missing out on crucial elements here, but this is how I interpret this whole thing with cryptocurrency and taxes... And yeah, it's a messed up nightmare. Would've been so much easier to see my Steem earnings as donations instead of profits.
Nice @hitmeasap. In Brazil we need to pay 25% of profit that we have in cryptos. In that case your process of thinking is almost the same for us, but the only difference is that we need to pay in the conversion for BRL (Brazilian Real), which means I will need to pay for anything that I transform in fiat.
Downvoting a post can decrease pending rewards and make it less visible. Common reasons:
Submit
That sounds so much easier and more logical too. All these regulations and laws makes me shiver. They're old and needs a huge update.
Downvoting a post can decrease pending rewards and make it less visible. Common reasons:
Submit
For sure @hitmeasap, here in Brazil, until now, the government knows that you can't regulate something that was created to be unregulated. So that is why they try to regulate when the money becomes fiat, because fiat they can regulate and tax, but cryptos not.
Downvoting a post can decrease pending rewards and make it less visible. Common reasons:
Submit
Interesting blog :)
Downvoting a post can decrease pending rewards and make it less visible. Common reasons:
Submit
Thank you.
Downvoting a post can decrease pending rewards and make it less visible. Common reasons:
Submit
i couldn't process all of that :P not that i care too much though cause as you said this is only in Sweden. What i think though is that they need or they will forced to make completely different regulations cause cryptos are something new and works way differently than anything else
Downvoting a post can decrease pending rewards and make it less visible. Common reasons:
Submit
I wonder how many people will just avoid crypto all together in order to avoid the risk of getting it wrong and having it cost them. I also wonder if that's the goal of government too. Create enough fear and people will avoid it, leading to a collapse on the crypto markets.
Downvoting a post can decrease pending rewards and make it less visible. Common reasons:
Submit