Bitcoin and Tax

Screenshot 2020-02-22 at 10.16.57You own some Bitcoin, but what are the Tax implications?

Firstly I must state that I am not a tax advisor and that you should get professional advice from a tax specialist in the country or state in which you pay tax.

When you buy bitcoin you are usually buying with money you have earned and already paid tax on. So there are no taxes when you buy Bitcoin.

Will I have to pay tax when the value of my Bitcoin increases? If you keep the Bitcoin and do not sell it there is no tax to be paid, however in some countries they may ask you to declare the amount of Bitcoin and other cryptocurrencies you are holding. If you are required to declare this you will need to consult with a professional tax advisor who can give you the correct information, as the price of Bitcoin fluctuates constantly.

Will I have to pay tax when I sell Bitcoin for FIAT Currency?  Yes, you will need to declare the income, when you sell Bitcoin it is like capital gains tax. You will need to pay tax on the profit you have made.

Is there a standard tax rate payable on Bitcoin profits? No, you will be taxed at your particular tax rate based on income.

Could selling a large amount of Bitcoin force me into a super tax bracket? Yes it could, you will be taxed at your particular tax rate based on this additional income.

What if I never sell my Bitcoin, will I still have to pay tax? No, but it will become part of your estate when you die. This is why you need some sort of succession plan regarding your bitcoin. Ultimately the passwords etc need to be stored securely.

You will probably have other questions that are not addressed in this article, and you are advised to contact a registered tax professional who deals with your region and country.

The information in this article was supplied by my brother Mike Simmonds, who is a business accountant with many years experience in individual and business taxation in South Africa. He can be contacted on mike@accountkeepers.co.za

 

About RichSimmondsZA

Top 20 Global Digital Marketing Influencer | Professional Speaker & Facilitator | Author | MTI Bitcoin Business Opportunity
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