Any tax you are liable for on the sale of your crypto will depend on how your tax authority regards cryptocurrency. Some of the main differentiators classify crytpo as:
Foreign Currency
Though Bitcoin, and many coins that have followed, function as currency, their speculative nature and source of competition with national currencies, means that very few governments consider them to purely be foreign currency – Israel and Bulgaria are two exceptions. This has a wide implication for how cryptocurrency is taxed.
Property
Where cryptocurrency is considered property – the most common distinction – it will be liable for what is known as Capital Gains.
It may come as a surprise to you, but if you buy a house, art, shares or gold as an investment, and then sell it on, many governments expect a share of any profit. Conversely, if you lose money, you can apply this as a tax loss (more on that below).
Private Money
Some countries, such as Germany, consider cryptocurrency to be ‘private money’ which seems a logical distinction. Governments have historically held the privilege of creating money, and made it illegal for anyone else to create their own and compete, unless specifically allowed.
Cryptocurrency is unique in that most tax authorities were caught out by its rapid increase in use, so have made retrospective classification.
The case of the Liberty Dollar in the USA is a good example. Created in 1998, its creator, Bernard Van NotHaus, was convicted on multiple charges because the Liberty Dollar was too close in resemblance to the actual dollar.
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