It’s tax season and it seems like no one really knows what to make of taxes on cryptocurrencies. As the confusion grows stronger by the day and people are working hard to find solutions to avoid cryptocurrency taxes, one unlikely country has decided to make virtual currencies tax free.
The year 2017 was when cryptocurrency trading first went mainstream and started attracting regular everyday people and not only hardcore traders and blockchain enthusiasts. But as the number of users increases, governments are starting to see the need to tax cryptocurrencies, and we can understand why. The cryptocurrency market is currently worth over $550 billion dollars which means that there is a major brand new source of cash flow for the IRS and similar institutions.
However, it’s a complicated situation and everyone has their own theories of what rules apply to cryptocurrency taxes. Some people are convinced that it’s impossible for governments to track the use of digital currencies and that you don’t have to pay cryptocurrency taxes at all. Others say that authorities know exactly who’s in on it and that there will be huge fees to pay for everyone who avoids paying.
An Unsuspected Tax Haven
As the confusion spreads, one unlikely country has decided to open a cryptocurrency tax haven. The President of Belarus Alexander Lukashenko signed a decree at the end of December that legalizes all cryptocurrencies, ICOs, and smart contracts. The same decree also made all income from cryptocurrencies, including mining, tax-free until 2023.
The decree called “On the Development of Digital Economy,” is a part of a recent effort to create an appealing digital environment in Belarus. The plan is to attract tech companies to open up offices and business centers as well as develop products in the former Soviet country. A tech boom in Belarus would give a much needed break to a country that’s been struggling economically for decades.
In our eyes, making digital currencies completely legal and tax-free is a good first step towards international recognition.
Furthermore, on Thursday a statement was released by the tax authority in Portugal stating that Portuguese citizens won’t have to pay taxes on profit made from virtual currencies. This is obviously great news for the digital currency industry and we are hoping to see more countries follow suit.
Do you have to pay cryptocurrency tax?
It depends on where you live but in most cases, the answer is still yes, you are required to pay taxes on your cryptocurrency investments.
Unfortunately, the rules in most countries are still unclear and authorities are scrambling to create guidelines for virtual currency taxes. Because of this, we recommend that you don’t blatantly rely on what other cryptocurrency traders tell you online, but instead contact your local tax office to get the correct information. It can be a costly affair trying to avoid paying your taxes.
Note that most cryptocurrencies, including Bitcoin (BTC), are not anonymous. In fact, the majority of digital currencies are completely traceable. Even if you only use anonymous digital currencies and, for example, buy Monero (XMR) or trade Linda coin (LINDA), your activities can be tracked via the exchanges, brokers and wallets you use, as well as through withdrawals to fiat currencies.