Cryptocurrencies are all the rage.
Investment in cryptocurrencies, such as the famous Bitcoin, has skyrocketed in recent years, not only because of the disruptive nature of its technology but also because of the support of institutional investors, such as the well-known bank Goldman Sachs or the genius founder of Tesla Elon Musk.
Although cryptocurrencies like Bitcoin may seem like something new, the same already had a big boom at the end of 2017 (reaching a value of almost 17,000 euros) and has been around for more than 10 years since supposedly Satoshi Nakamoto created it.
Thus, tax agencies in many countries have already been thinking for years how and how much taxes taxpayers have to pay for example for the sale of Bitcoins or any other cryptocurrency.
How much tax is paid on the sale of Bitcoins or cryptocurrencies is not an easy answer, since the taxes paid on the sale or holding of Bitcoins depends on the residence of the taxpayer.
Since most of our readers are located in OECD countries, we will focus on the taxation of Bitcoins in these countries (or any other cryptocurrency), i.e. how much tax is paid on the sale of Bitcoins.
How much is paid for the sale of Bitcoin and crypto?
In general terms, in most of the OECD countries taxes are paid for the sale of Bitcoins to fiat par (euro, dollar or any official currency) and for the exchange of Bitcoins to any other cryptoasset, known as a swap.
When this sale or exchange takes place, the tax agencies understand that a capital gain occurs to the extent that the taxpayer professional activity is not the purchase and sale of bitcoins.
All this regardless of whether your Bitcoins were purchased on foreign Exchanges (such as Binance, Coinbase, Kraken), abroad, in cash or wherever. In general terms, bitcoins are taxed wherever the bitcoin holder resides.
That means that taxes are paid in your country of residency on the sale of Bitcoins regardless of whether the transactions are made in foreign markets or stored in virtual wallets located outside your country of residency.
Is it important to declare Bitcoins to the IRS or tax authorities?
The existence of Bitcoin is not alien to the tax authorities.
Since 2017, tax authorities of many European Union and OECD countries cryptoasset holders are under the scrutiny of the tax authorities.
Also, according to EU directives, your country of residency receives information on Bitcoins and other cryptocurrencies held abroad, especially in mainstream exchanges such as Coinbase, Kraken or Binance.
Thus, we strongly recommend declaring the sale and holding of Bitcoins and other cryptoassets to avoid penalties or even criminal offenses such as tax fraud.
