Bitcoin is the all-time leading cryptocurrencies due to its peer-peer nature and the first crypto industry to adopt blockchain technology. They do not have any third-parties or other banking systems in the middle. Every bitcoin user connected in the transaction chain is transparent to transactions taking place in the network.
The transactions also quickly take place, say 5 minutes or maximum within 24 hours. In a traditional currency system, there will be some transaction limit on how much to transact or how many times a transaction could take place. With bitcoins, there are no such limits in the transactions. Also, there is no transaction fee for performing the transaction within the nation. For transacting to other foreign countries, and only a minimal transaction fee will be obtained. But in a traditional banking system, a high amount of transactions will be incurred for both national and international transactions.
The most attractive feature of Bitcoin is its anonymity nature. As the transaction occurs in a distributed fashion, everyone in the transaction chain will know if any transaction occurs. But no one will know the details associated with the transaction like name, address, phone number, and lots more. To start Bitcoin trading, a user must log on to the Website For Bitcoin, where they will be able to buy and sell bitcoins.
Bitcoins and the tax procedures
The blockchain technology adopted in the bitcoin transaction ensures the bitcoins are transferred securely. The value of the bitcoins went to hikes, and many people started to trade with bitcoins. But as they are virtual currencies, initially, they were not subjected to any taxation rules. Later with bitcoin owners getting more returns and but not paying any taxes, the U.S government was planning whether it will be right to impose a tax on bitcoins users or not.
Later on, Internal Revenue Service (IRS) laid a statement that the bitcoins payments and returns are taxable, and tax forms will be sent to all the bitcoin users who need to pay the tax to the government based on their returns. IRS also stated that people who fail to pay the taxes would be subject to penalties or other severe actions.
Categorization on bitcoins
Each country has its categorization of bitcoins. Countries like the U.S regard Bitcoin as a property rather than a currency. As a result, a bitcoin transaction is considered taxable or not based on a few criteria. So, suppose if you had bought something for $1000. If you sell the thing after few years and if the value of the bitcoin has increased to $1200 when compared to the bought rate, then the concerned person is taxable as he has $200 as profit. If it remains the same, they are not subjected to taxation.
The European government has had laid a statement that the bitcoins are not property, and they are currency. They are subjected to any Value Added Tax (VAT). But the bitcoin transaction is subjected to other taxes like income tax, capital tax, and lots more.
Countries like the U.K are considering bitcoins as a foreign currency. Hence the taxation rules and regulations applied to the traditional currency system are also applicable to the bitcoins. But the government has also laid the rule that approximate bitcoin transactions are not taxable, and it will be decided based on the facts and circumstances.
In countries like Germany, a bitcoin is considered confidential money, and they are subjected to only 25% of the tax. Also, this taxation applied only for the bitcoin transaction, where the owner has gained some profit from selling bitcoins within one year. If the owner is holding the bitcoin for more than one year, then they will not be subjected to taxation.
In Japan, like other banking systems, bitcoins are also treated as the legal payment method. So they are considered as business profits or valuable assets, and they became taxable only based on the profits and principal gains.
In Australia, the Bitcoins are treated as assets, and the government has strictly laid a rule that, whoever does a bitcoin transaction, must record the transaction details with the value as per the date’s AUD value. The government has also laid a rule that if the bitcoin transaction is done for personal use or if the transaction falls within 10.000 AUD, then they are exempted from taxation.
So, the taxation of bitcoins solely depends on the countries rule and regulations. But as a whole, we can access that most of the countries are incurring tax for a bitcoin transaction.
