Cryptocurrency Taxation: What You Need to Know When Using Digital Money

Digital currencies are gradually becoming more and more important in our lives. Some people use cryptocurrencies exclusively for investments, while others use them for daily transactions.

However, not everyone realizes that profits made using cryptocurrencies are taxed in the same way as profits from exchange rate differences in transactions with conventional currencies.

Therefore, a letter from the tax service with a proposal to pay taxes and penalties for late payment may come as an unpleasant surprise.

It would seem that there could be no taxes here if you are not engaged in stock market speculation, but use this type of asset exclusively for your own needs.

But the general rule is that if you bought something cheaper and sold it for more, the difference between the purchase and sale will be considered profit, on which you must pay income tax.

So, if you bought Bitcoin at $20,000 at the beginning of the year and sold it at the end of the year for $30,000, $10,000 is taxable income.

The tax rate depends on your country of residence: Russia - 13%, Ukraine - 18%, Belarus - 13%, Kazakhstan - 10%. However, each country may have its own nuances, such as a tax-exempt minimum income or currency holding periods:

The moment of tax liability occurs when the cryptocurrency is sold, after which the tax must be paid and the profit must be included in the income tax return at the end of the year.

If you trade cryptocurrency professionally, some cryptocurrency exchange brokers may deduct income tax when you withdraw profits from your trading account.

Taxation of Forex trading - https://time-forex.com/info/nalogi-s-zarabotka-na-forks

If you store your money in cryptocurrency and don't exchange it for the national currency, you won't incur any tax liabilities, so you can sleep soundly.

Stablecoin transactions

Many users believe that there is no need to pay taxes when trading stablecoins, as these cryptocurrencies have a stable exchange rate.

The only time you don't have to pay is when you exchange stablecoins for the US dollar or another currency that a specific altcoin is pegged to.

But with the national currency, the situation is different. For example, you bought 100 Tether (USDT) at 50 rubles per coin and sold it a month later for 60 rubles. This means that even though you used a stablecoin, you still made a profit in the national currency.

Is it possible to avoid paying taxes on cryptocurrency transactions?

In principle, it's possible. There are two options under which paying the tax will be entirely your responsibility:

• Use of cash payments – that is, buying and selling immediately for cash without the use of bank cards and accounts.
• No withdrawal to a bank account – you can pay for goods or services with cryptocurrency, your purchase will remain anonymous and there will be no tax liabilities.