Today, a considerable number of crypto organizations strive to operate completely legally. The crypto exchange license cost largely depends on which jurisdiction you have chosen. However, in selecting the country with the lowest duty, many people need to remember that they will have to pay taxes for the duration of their work. Today we want to talk about how crypto companies are taxed.
How cryptocurrencies are treated for tax purposes
Many quickly point out that cryptocurrencies are not backed by any government and are subject to less regulation than fiat currencies such as the dollar or the euro. This lack of oversight has led many to believe that crypto investors are engaging in elusive and anonymous transactions that have allowed them to avoid paying taxes. However, this belief is entirely wrong. In the United States, cryptocurrency exchanges must report user activity on profits and losses to the Internal Revenue Service (IRS). Cryptocurrencies are taxed the same way as traditional stocks or similar assets.
When is the purchase of cryptocurrency tax-free?
When maintaining a book of income and expenses for taxes, we deduct the costs of obtaining them from payment to determine income.
To be able to settle this expense in tax expenses, the following conditions must be met:
- Expenses must be incurred to generate income, maintain or provide a source of income,
- The deal is executed correctly.
Buying cryptocurrencies for resale undeniably meets the first two conditions, but it must be borne in mind that the company must have proof of its purchase. Similarly, there must be evidence of their occurrence to pay off other costs associated with trading cryptocurrencies, such as commissions on the exchange. If we have such documents, it is possible to include expenses in tax deductions.
Tax on civil law transactions
According to the latest tax interpretations and the position of the Ministry of Finance, cryptocurrencies are treated as property rights. As a general rule, we must pay a civil transaction tax on every sale and exchange of virtual money.
When selling cryptocurrencies, the tax liability lies on the buyer’s side. In contrast, in the case of exchanging one cryptocurrency for another, this obligation falls on both parties to the transaction. Concerning the PKK, it is necessary to file a declaration (for each transaction) and pay this fee within 14 days from the date of the tax liability. When buying cryptocurrencies, we spend a tax of 1%, which we charge on the market value of the property right.
The presented position of the tax inspectorate regarding the need to pay tax on civil law transactions and submit many declarations caused protests from taxpayers. The Ministry of Finance plans to introduce another form of cryptocurrency taxation, but there needs to be specific information on how this will look in practice. In an interview, the Deputy Minister of Finance confirmed that taxpayers must pay RCC on each transaction under the current rules. Still, due to complex formalities (the obligation to file multiple returns), tax should be paid whenever possible and convenient for an entrepreneur. However, it is yet to be known when a person doing business is entitled to consider the calculation of TCLT inconvenient for themself.
Which countries offer the most advantageous taxation?
Each country sets its own taxation rules for the crypto industry, but if you study the market, you can understand that the most favorable conditions are offered by:
- Great Britain;
- Czech Republic.
There are no hidden fees or unnecessary bureaucracy here, and everything is as transparent and understandable as possible.
Among the above countries, the corporate tax is the smallest in the UK, and it is approximately 13%. However, many people like Estonia because here, you pay 20% of your income, and there are no other payments. If you have a small startup with fewer than 10 people, then Poland is the right place for you, where there are tax incentives for small and medium-sized businesses.
How to get a work permit?
Each jurisdiction sets its own rules for licensing the crypto industry. However, some rules are common to all countries.
To begin with, you need to develop a business strategy, decide what your organization will be called, what services it will provide, and much more. The better you think about the aspects of the future company, the more likely you will be able to get a work permit.
After that, you can register an organization in your chosen jurisdiction. Documents can be submitted remotely. Registration of all documents takes only a few days.
After that, the preparatory stage for licensing begins. You need to open a bank account, pay state fees, prepare a document package, and ensure that your company complies with the requirements of state regulators. Special attention must be paid to the selection of employees and compliance with the fraud prevention policy.
When all the details are considered, you can apply for a license. Government agencies have several weeks to study your company’s activities and make a decision. If the inspector has questions, they may extend your application and ask for changes.
In all European countries, the license is perpetual, but you can lose it if your company is suspected of fraud or money laundering.
Services of our company
If you need help understanding the terms of taxation, you can seek help from our specialists. The above taxation rules may vary depending on the jurisdiction you have chosen.
Our experts will conduct a comprehensive consultation and help you calculate how much taxes you have to pay, depending on your income level or the number of employees. For example, Poland has tax incentives to support small and medium-sized businesses. Our experts will study the specifics of your organization and choose the jurisdiction that suits you best.
After you understand all the intricacies of taxation, you can start preparing for licensing. Our experts will help you collect the necessary documents, check compliance with the requirements of state authorities and tell you what you need to pay attention to first.
Paying taxes is an incredibly important aspect of the work of every organization. Not all accountants and lawyers today understand the rules for taxing crypto companies since this industry has appeared relatively recently, and government agencies have not yet had time to develop stable rules. If you need qualified assistance on this issue, you should contact our organization’s specialists. They will conduct a full consultation and suggest how to make taxation more profitable for you. High-quality promotion of sites in the cryptoindustry team and apply to them for help you can on this site