When bitcoin made its debut on the global markets a few years ago, few people thought about the forms of taxation of cryptocurrencies. Over time, their popularity grew until they acquired real value. Cryptocurrency holders have decided to cash them in. When more and more stores and service facilities began to tolerate bitcoin and other cryptocurrencies, the problem of proper tax payment on transactions arose. For many years, cryptocurrencies were even considered tax-free. Do you know how to settle?
What is cryptocurrency income?
Discussions in the field of taxation and legal recognition of cryptocurrency income have often touched the courts. According to the rulings of administrative courts, it was found that cryptocurrencies are property law. Such classification makes all transactions related to the sale and exchange of property rights with other owners are subject to tax on civil law transactions. The definition of cryptocurrency income is defined in Art. 17 sec. 1f of the PIT Act and it reads:
The sale of a virtual currency for consideration is understood as the exchange of the virtual currency for legal tender, goods, service or property rights other than the virtual currency, or the payment of other liabilities with the virtual currency. Revenue from the sale of cryptocurrencies should be settled without settling exchange differences. If we are dealing with a currency exchange for another virtual one, the income is not settled. Additionally, the income from cryptocurrencies is reduced by:
- direct currency purchase costs, including costs related to the purchase of production equipment, as well as costs incurred for the purchase of electricity;
- currency disposal costs.
Any tax deductible expenses are deducted in the year in which they are incurred.
What about the tax?
When considering cryptocurrency as a property right, it should be remembered that its turnover is subject to a 19% tax calculated from the base. This means that only the value of income is taxable, excluding tax deductible costs. We pay the cryptocurrency tax once a year, there is no obligation to settle each transaction once, after each sale. If we sell cryptocurrencies at different prices, once with losses, once with profits, the annual income is added up and the tax is paid on the amount that results from the annual income.
Although the most popular method of settling accounts with the Tax Office is filling in PIT-37 (more at https://www.pitax.pl/pit-37), cryptocurrency tax is settled on the PIT-38 form. In the case of different types of revenues from cryptocurrency transactions, these amounts are summed up and included in one form that we submit to the tax office. A taxpayer who had cryptocurrencies during the tax year and decided to sell them or pay with them for goods or services, he should submit the tax return no later than the end of April of the year following the one in which he received the virtual currency income. The 19% tax should be paid by bank transfer to the tax office, remembering to indicate in the title of the transfer that it is a payment of tax for PIT-38.
According to the expert:
When settling the annual income from cryptocurrencies, remember that we only settle virtual currencies that have been exchanged for legal tender, goods, services or property rights other than the virtual currency. We can also deduct costs that we incurred directly in connection with the purchase or sale of e.g. bitcoin. The cryptocurrency mining itself is not an income settled in the annual tax return, nor is the exchange for another cryptocurrency. Unfortunately, the achievement of losses in this field does not allow us to deduct them in other income shown in PIT-38. It is important to know what expenses can be counted as costs, which is not always so simple – says Patryk Groszer, tax expert at PITax.pl Easy Taxes, which produces software for PIT settlements.
How should we account for?
Starting from 2019, the method of accounting for income from cryptocurrencies has changed. The annual PIT-38 declaration provides information on the revenues and costs incurred as a result of the transaction. Keep in mind that:
- cryptocurrency income can be settled and summed up only with other income on the same account;
- the costs incurred for trading in cryptocurrencies can also be added only with the costs of the same title;
- the difference between income and tax deductible costs can only be settled in relation to cryptocurrencies;
- the surplus of tax deductible costs is carried over to the next accounting year.
It is worth remembering that it is not possible to purchase and settle the income for the purchase of cryptocurrencies as part of your business. Any barter exchanges should be valued for each taxpayer separately.
Settlements with the tax office should be made by anyone who in the tax year obtained a profit from mining or trading cryptocurrencies, as well as settling purchases of goods or services in a virtual currency. There are no reasons why the settlement with the tax office should not be made. There is also no set minimum amount, free of the payment of tax on the sale of cryptocurrencies.
Personal Income Tax Act, http://isap.sejm.gov.pl/isap.nsf/download.xsp/WDU19910800350/U/D19910350Lj.pdf