The 10 Biggest Myths About Cryptocurrencies - Part 5
In the series "The 10 Biggest Myths About Cryptocurrencies", we'd like to take a closer look at the 10 most widely used claims about cryptocurrencies and their opportunities and risks. In doing so, we will daily explore a new myth and check it for accuracy.
Anyone who chooses to invest in cryptocurrencies should first think about a few things to keep in mind. One of these things is the tax situation in which he goes through his investment. Otherwise, the inexperienced and uninformed investor can quickly move into the red zone of criminal liability without any or only insufficient taxation of any sales and profits - whether knowingly or unknowingly. And also when investing ultimately the old truism applies: Ignorance does not protect against punishment.
Thus, it is fundamentally discouraged to get involved in cryptocurrency trading without having knowledge of taxation. It only becomes problematic when the tax situation around a certain investment case has not yet been clearly clarified. In this case, it sounds obvious to refrain from such an investment - so at least a common argument when it comes to the rejection of crypto investments for tax reasons.
In fact, at least for Bitcoin, there is a tax legislation that applies equally to cryptocurrencies whose operation is similar to that of Bitcoin. For example, there is a 2015 Court ruling by the ECJ stating that Bitcoin sales are covered by the foreign exchange tax exemption under EU law. This essentially means that cryptocurrencies are in most cases treated analogously to foreign currencies. For cryptocurrencies, which are not primarily intended as a means of payment, but have a certain function within an ecosystem, this principle does not apply, which is why the tax situation can not always be properly clarified.
In terms of income tax, cryptocurrencies are to be treated as intangible assets. Specifically, accurate ratings of each cryptocurrency depend on the function that it performs in a given situation. Private sales transactions, so-called speculative transactions, occur when the cryptocurrency - for example, against the euro or the US dollar - is sold or when it is used as a means of payment. The acquisition date also plays a role: Cryptocurrencies, which have been held for a period of more than one year, are completely exempt from tax. In the case of a sale transaction within the one-year holding period, there is also an exemption limit of 600 euros. The speculative period may be 10 years if the asset is a source of income, even if it only generates income in one calendar year. The trade of cryptocurrencies against other cryptocurrencies is expected to be taxed on profit.
The present myth can thus - at least as far as the Bitcoin is concerned - be invalidated. The tax situation of Bitcoin is largely clarified and differentiated for practically all circumstances. The situation of the other crypto currencies depends on function and application. If a cryptocurrency, similar to the Bitcoin, serves as an alternative payment method, an application of the same right is to be assumed. However, there is still a lot to do to understand the intricacies of crypto taxation - tax law is complicated and you should not take risks.
At this point we would like to give a little insight into the tax situation around the Bitcoin and the other crypto currencies. Neither do we claim to be complete - tax law is complex - nor does this article replace our own examination of the topic.
Myth 5: The tax situation for cryptocurrencies is unclear
Anyone who chooses to invest in cryptocurrencies should first think about a few things to keep in mind. One of these things is the tax situation in which he goes through his investment. Otherwise, the inexperienced and uninformed investor can quickly move into the red zone of criminal liability without any or only insufficient taxation of any sales and profits - whether knowingly or unknowingly. And also when investing ultimately the old truism applies: Ignorance does not protect against punishment.
Thus, it is fundamentally discouraged to get involved in cryptocurrency trading without having knowledge of taxation. It only becomes problematic when the tax situation around a certain investment case has not yet been clearly clarified. In this case, it sounds obvious to refrain from such an investment - so at least a common argument when it comes to the rejection of crypto investments for tax reasons.
In fact, at least for Bitcoin, there is a tax legislation that applies equally to cryptocurrencies whose operation is similar to that of Bitcoin. For example, there is a 2015 Court ruling by the ECJ stating that Bitcoin sales are covered by the foreign exchange tax exemption under EU law. This essentially means that cryptocurrencies are in most cases treated analogously to foreign currencies. For cryptocurrencies, which are not primarily intended as a means of payment, but have a certain function within an ecosystem, this principle does not apply, which is why the tax situation can not always be properly clarified.
In terms of income tax, cryptocurrencies are to be treated as intangible assets. Specifically, accurate ratings of each cryptocurrency depend on the function that it performs in a given situation. Private sales transactions, so-called speculative transactions, occur when the cryptocurrency - for example, against the euro or the US dollar - is sold or when it is used as a means of payment. The acquisition date also plays a role: Cryptocurrencies, which have been held for a period of more than one year, are completely exempt from tax. In the case of a sale transaction within the one-year holding period, there is also an exemption limit of 600 euros. The speculative period may be 10 years if the asset is a source of income, even if it only generates income in one calendar year. The trade of cryptocurrencies against other cryptocurrencies is expected to be taxed on profit.
The present myth can thus - at least as far as the Bitcoin is concerned - be invalidated. The tax situation of Bitcoin is largely clarified and differentiated for practically all circumstances. The situation of the other crypto currencies depends on function and application. If a cryptocurrency, similar to the Bitcoin, serves as an alternative payment method, an application of the same right is to be assumed. However, there is still a lot to do to understand the intricacies of crypto taxation - tax law is complicated and you should not take risks.
At this point we would like to give a little insight into the tax situation around the Bitcoin and the other crypto currencies. Neither do we claim to be complete - tax law is complex - nor does this article replace our own examination of the topic.
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