The Canadian city of Richmond Hill recently became the second city in the country to accept cryptocurrency for tax payments.
Following recent council approval, the city is in discussions with trading platform Coinberry to provide a crypto payment option for paying property taxes with cryptocurrency.
“We believe that the demand for a digital currency payment option is only going to grow in the coming years, especially amongst millennial’s,” said Deputy Mayor Joe DiPaola.
Coinberry has already implemented a crypto payment solution in the Canadian town of Innisfil.
Paying your taxes with cryptocurrency is pretty progressive, but better yet are the countries were you face little or no taxation at all.
Bitcoin transactions are exempt from VAT and if you hold crypto for more than one year you are exempt from capital gains too. Any EU citizen can move there and benefit.
Businesses and individuals who hold crypto for long term investment do not face capital gains tax.
Crypto is exempt from VAT and personal income tax, although businesses need to pay tax on profits from crypto trading.
Day trading crypto is taxed as business income, but buying and holding by retail investors is not taxed.
Doesn’t have a capital gains tax.
Crypto mining and investment is not taxed.
Professional crypto trading is subject to business tax, mining is treated as self-employment income but individuals who invest and trade are exempted from capital gains tax.
According to the IRS, crypto is classified as property and taxed in the same way that stocks are. If you buy it and hold for more than a year, you’ll pay between 0-20% depending on your income tax level.
Like many countries, Australia sees every trade as a capital gains event, requiring precision record keeping and ongoing conversion at the time of a trade into Australian dollars.
Profits are taxed it at the same rate an individual pays income tax – with a 50% discount to this rate if the cryptocurrency is held longer than a year.
There are also some odd laws like subjecting companies to fringe benefits taxes if they pay employees with crypto. And some people can just fall through the cracks of the system and end up with a $100,000 bill on $20,000 worth of coins.
There have been documented cases in Israel and Sweden where users who can’t prove how much they purchased crypto for can end up paying a few hundred percent in taxes.
That’s because the tax department can decide to assume the purchase price of the currency was zero and charge you tax on the entire sale price, rather than the profit.
Experts say it can happen in Australia too, though it’s unlikely.
Crypto profits are vastly underreported in Japan due to the sky-high tax rate of 55% applied to “miscellaneous income“. By comparison, stock trading attracts a tax of just 20%.
Lawmakers in December proposed changing the crypto tax rate from 55% down to 20%.
The worst countries for cryptocurrency taxes are those that ban it outright like Bolivia, Columbia, and Ecuador.
The only thing worse than paying high rates of tax on crypto profits is being banned from making any profits at all.
The other class of country that makes life difficult for crypto users are those that ban various aspects while still allowing you to technically own it – China for example – or those in which the regulations are yet to be finalized such as India and Russia.
Both countries keep threatening to pass new crypto tax laws with proper definitions and rules, but until that happens there isn’t a lot of guidance to help users comply with the law.
In fact, it is estimated that around three-quarters of countries in the world are yet to implement cryptocurrency specific taxation legislation.
They’ll need to soon though, to comply with recommendations from international watchdog, the Financial Action Task Force.
In Russia for example (which bans the use of crypto as a form of payment) there are three different tax rates crypto profits can fall under depending on the circumstances and hodlers there only officially found out early last year they had to report crypto gains.
“Legal experts say that Russian tax officials lack the expertise necessary to address the matter adequately,” Bitcoin.com reported.
“The Federal Tax Service inspectors are struggling to understand how crypto exchanges work.”
Despite this, individuals and businesses face prosecution if they fail to declare income and gains from crypto-related activities. And the country still might ban crypto outright.
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