As the popularity of Bitcoin and cryptocurrency continues to expand, so is the EU’s interest in finding ways of regulating the process. Avoiding the new regulations isn’t possible, particularly as Bitcoin traders face steeper penalties for trading without paying their fair share.
Whether it’s a topic that intrigues you or something you’d rather avoid like the plague, understanding how your crypto trading may influence your tax bill is essential. Unfortunately, for those wanting a blanket answer of how bitcoin and crypto are taxed in Europe, there isn’t one. Individual countries are responsible for coming up with guidelines, regulations, and taxation of the currency. It seems many countries are too far apart on the issue to suggest that global regulation is likely any time soon.
Understanding How Governments Interpret Cryptocurrency
If someone were to buy bitcoin in Europe, it’s under the veil of anonymity. That isn’t to say all cryptocurrency is untraceable. Bitcoin has a permanent blockchain that discloses details of transactions, making it traceable, although out of government vision. Monero, however, protects its users under a block of privacy and anonymity. It hides all transactions virtually, making tracing difficult. Creating, moving, and storing digital currency is often performed outside government and financial institutions, making it difficult to track.
Some officials struggle to define cryptocurrencies as securities, assets, or currencies. It seems this definition changes again when you consider whether a person bought the asset, inherited the funds, or received them as a payment for service.
How Does the Definition Influence Taxation?
A country’s definition directly influences how taxation will occur. Currently, if a cryptocurrency is taxed, it’s often done under income tax, VAT, or capital gains tax. As a general rule, you can expect to pay anywhere from 0-50% tax, depending on how it’s used. The amount of tax paid is also directly influenced by your current tax bracket.
How Do Different Countries in Europe Charge Taxes on Cryptocurrency?
Taxation Rules in Norway
Norway considers all income from trading as business income or capital property income. As such, you’ll be liable to pay taxes on the profits made. This tax rate is currently 25$. Likewise, mining Bitcoin is considered income from other sources. Businesses in the country will have to pay corporate income tax on their crypto income.
Taxation Rules in Portugal
Currently, there are no taxation laws regarding cryptocurrency in Portugal. A declaration was recently released promoting blockchain use within the region.
Taxation Rules in Spain
In an attempt to crack down on tax evasion cases, citizens are now forced to disclose any profits received from cryptocurrency trading, thanks to a new bill passed. Likewise, short-term trades will be subject to 24-52% taxes on all gains. For those with long-term trades, there’s a noted lower tax rate of 19-23%. The tax percentage you pay will be dependent on how much you make in a calendar year. There is no VAT currently charged when converting Bitcoin to Euros.
Taxation Rules in Romania
While this country only charges tax on gains made from cryptocurrencies, they have recently added a 10% taxation for 600 leu or above per year. This taxation does not occur for revenues, only earnings.
Taxation Rules for Germany
Currently sitting as one of the lowest tax areas for crypto, Germany has upheld its decision to charge 0% on all Bitcoin transactions. In specific circumstances, VAT may apply. If the funds are considered business assets, they can be subject to trade tax. Currencies considered private assets are not subject to this tax. As Bitcoins are mined, there is no issuer. This definition means all cryptocurrencies are viewed as private money, known for tax exemptions.
Interestingly, cryptocurrency is not viewed as a legal tender in Germany. Local businesses are not obligated to accept the payment but can independently trade goods and services for these currencies under private law.
Taxation Rules in France
Currently, a strict protocol is in place for taxation on Bitcoin. As Bitcoin is not considered a commercial transaction, one-time sales will face a 66% tax on all profits. Currently, France doesn’t charge VAT on sales; however, you will need to pay VAT when paying for goods with the cryptocurrency.
Taxation Rules in Slovenia
Currently, there is a 0% income tax on profits made from cryptocurrencies in Slovenia. The capital of the country is currently home to shops that accept crypto as a payment tender. If tokens act as security, bring investors income, or are used in profit sharing, they are subjected to VAT.
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