Cryptocurrency tax is a topic that is of great interest to many countries that accept cryptocurrency around the world and are making efforts to establish clear regulations on this special tax. Typically the United States, England and Canada are countries that accept cryptocurrency and paying taxes on cryptocurrency is mandatory, so citizens of these countries who own cryptocurrency must clearly understand their country’s tax laws and how it works. In addition, there are still many countries that do not have cryptocurrency taxes at the time of writing such as Singapore, Switzerland, UAE, Hong Kong,…
How the US Approaches Crypto Taxes
In the United States, the Internal Revenue Service (IRS) is the agency responsible for cryptocurrency taxes, which requires all sales of cryptocurrency or gambling to be declared, as cryptocurrency is considered an asset in the United States. Meanwhile, in the United States, losses are allowed to be offset against gains, which helps cryptocurrency owners reduce their overall tax liabilities.
U.S. law also allows cryptocurrency losses to not be declared if they originate from a cryptocurrency that has lost value or is no longer listed on exchanges. In addition, if cryptocurrency remains stationary and their market value increases, interest rates will not be taxed. The US government is also very flexible in taxation as the country also allows cryptocurrency losses to be deducted from personal income tax if those losses exceed profits from cryptocurrency investments.
How the UK Approaches Crypto Taxes
In the United Kingdom, His Majesty’s Revenue and Customs (HMRC) is the agency responsible for cryptocurrency taxation. Similar to the US, in the UK, cryptocurrency is considered an asset, so any transaction or purchase of cryptocurrency requires taxation. In the UK, every profitable cryptocurrency transaction is subject to tax and the interest rate is usually 10% to 20%, depending on the amount of interest.
And unlike the United States, in the UK, if the loss of investing in cryptocurrency during a fiscal year exceeds the gain, personal income tax will not be deducted, but future interest of cryptocurrency holders will be deducted. Many people believe that in the turbulent cryptocurrency market, this mechanism may cause significant losses or significant profits for the cryptocurrency holders.
How Canada Approaches Crypto Taxes
In Canada, The Canada Revenue Agency (CRA) is the agency responsible for cryptocurrency taxes. Canada also considers cryptocurrency as an asset, so if someone only holds crypto currency it will not be taxed; Taxation only occurs when another cryptocurrency is sold or exchanged. In Canada, it is difficult to evade taxes because exchanges that wish to operate in the country must agree to report transactions worth more than $10000, and if required by the CRA, must also report transactions below this threshold.
The Canadian government also allows cryptocurrency losses to be deducted like in the UK and US, but there will be some certain differences. Losses will not be deducted from personal income tax like in the US, but like the UK, losses will be offset against future profits when investing in cryptocurrency and the main difference is that only 50% of the loss will be applied.
The emergence of the Crypto Asset Reporting Framework (CARF)
CARF is a legal framework for encrypted tax reporting, drafted by the OECD under the authorization of the G20 agreed upon by 47 countries around the world. In the context of the extremely growing global e-money market, CARF will play an important role in helping countries have a common tool to manage the transparency of cryptocurrency taxes, limiting illegal practices and tax evasion, and obtaining a common regulatory framework is crucial when cryptocurrencies are no longer a specific country issue.
Besides the US, UK, and Canada, there are many other countries that also agree with this new legal framework of the OECD such as Australia, Singapore, France, Germany, Japan, Korea, Spain, Sweden, Switzerland, etc.