The surges in the cryptocurrency bitcoin this year will have many wondering: is all this new wealth taxable?
For instance, in the UK, bitcoin is not subject to VAT at the moment, however, this may be subject to change.
Timeline for Crypto
- April 30, 2020
- November 13, 2019
- October 28, 2019
Over in Denmark, the country with the highest tax burden, regulators are looking at whether to tax the cryptocurrency in order to benefit from its rise.
The Danish tax minister, Karsten Lauritzen, told Bloomberg:
Whether buying and selling bitcoin is seen to be speculation [is] key in determining whether bitcoin gains need to be taxed.
The tax board is meeting in the new year, on 30 January, after which a ruling is to be expected.
Should bitcoin be taxed?
The cryptocurrency has risen in value from just about $1,000 at the start of 2017 to $20,000 by the December. Anyone who was buying bitcoin in the years running up to 2017 will have seen the value of their investment go up and up.
However, they might not hold all that wealth themselves.
Already in the Nordic region, Sweden and Norway apply a capital gains tax to bitcoin. In addition, in Finland, the government introduced guidelines on how to tax digital currencies in August 2013.
Denmark will simply be following this trend if it does instigate a bitcoin tax.
Elsewhere in Europe, the Swiss investment bank UBS has come out against the cryptocurrency. The bank has described it as having “all the hallmarks of a bubble.”
In its latest House View note, the bank said:
The State of Technology This Week
We believe this has all the hallmarks of a bubble. High turnover, against limited real-world use, suggests that many buyers are seeking speculative gain. And while the supply of bitcoins is limited, the broader stock of cryptocurrencies is not, with thousands of potential substitutes.
We don’t advise clients either to invest in bitcoin or to short it – on the principle that markets can remain irrational longer than you can remain solvent.
In India, the income tax department is also coming for those who skipped paying taxes on the money they have made from bitcoin. Quartz reported that an official from a virtual currency exchange said income tax authorities are going to look into whether gains from the cryptocurrency boom have been used to buy other assets.
The department is reportedly looking into around 500,000 investors in the country.
As of this week, the cryptocurrency market is worth over $600bn.