Those figures are not impossible to hit if you are trading cryptocurrencies. Many crypto investors have earned so much and are still holding their positions. A good example is Tyler and Cameron Winklevoss, who are believed to be the first people to make a billion from investing in Bitcoins. As of June 2020, these two reportedly have 100,000 coins or equivalent to $950 million.
Let’s say the Winklevoss sell their 100k Bitcoins at $60k each. What’s the value when they withdraw their earnings from the platform they are using? Are Bitcoins even taxed?
If you haven’t heard of someone who says he paid his taxes for selling his cryptocurrencies, today you’ll know the answer.
Are there taxes on Crypto?
Yes, and that’s because they are properties. The value of crypto today is undeniably significant that one can buy a Tesla car or a house and a lot with one or more Bitcoins. Although they are not physical cash, they have worth and the government deems it necessary to tax cryptos when they are sold.
How do some countries deal with crypto taxes?
Although there is no specific tax policy on crypto trading or investing, the tax authorities are doing what they can do to track those who have earned from crypto, especially in the U.S.
In America, the tax agency started with what they called a "virtual currency compliance campaign" to reach the public and perform audits. In 2019, the IRS alerted 10,000 people about their tax liabilities related to cryptocurrencies. When asked how they do it, representatives said "via various IRS compliance efforts," one of which is asking cryptocurrency companies to legally cooperate and hand over their customer lists.
In the Czech Republic, it’s pretty much the same approach—taxing people who sell cryptocurrencies based on their income. Crypto is treated like conventional money and the standard income tax rate is 15%.
In the UK, cryptocurrencies are covered by their capital gains tax. So, if you’re from this country, you will have to pay the taxes the moment you liquidate your crypto.
Trading or investing in digital currencies doesn’t mean you are saved from paying your taxes. Whatever transactions you do, when they involve money, you will have tax obligations one way or another. It’s essential that you know how crypto is treated. There’s not much difference and they are considered as properties in terms of taxation.