Crypto taxation in your country

Have you either invested in or traded cryptocurrency during the last year and now wonder if you need to pay any taxes on your crypto in the United Kingdom? Her Majesty’s Revenue and Customs (HMRC) has published guidelines and a Cryptoassets Manual detailing how cryptocurrencies are taxed in the UK. The most important takeaway is that all individuals are taxed at the time when disposing of an asset.

In this complete tax guide, we will explain everything you need to know about how crypto is taxed in the UK, how much tax you must pay on your crypto gains, how HMRC treats crypto income such as staking and airdrops, how to report your crypto taxes to HMRC, and how you can save both time and money using cryptocurrency tax software to calculate your gains and losses.

We are also updating this guide regularly based on the latest tax guidelines and rules from HMRC. All updates will be listed below so that you can quickly see if anything has been updated since your last visit:

Is crypto taxed in the UK?

Yes. You have to pay tax on your cryptocurrencies in the UK. Any crypto disposed of during the tax year must be reported in the Self-Assessment.

In the next section, we will look closer at what types of transactions are considered disposal and the difference between Capital Gains Tax and Income Tax.

How is crypto taxed in the UK?

In general, your crypto will be taxed as Capital Gains Tax when disposed of. HMRC has defined disposal in the Cryptoassets Manual as the following:

• selling crypto assets for money
• exchanging crypto assets for a different type of crypto asset
• using crypto assets to pay for goods or services
• giving away crypto assets to another person

Your capital gains are in general calculated as the difference between the GBP value of the sales proceeds and the acquisition cost of the disposed asset.

However, if you are considered to be an active or professional trader you will be subject to Income Tax treatment instead of Capital Gains Tax. Any crypto received as income will also be subject to Income Tax.

We will go into more detail about both Capital Gains Tax and Income Tax in the next sections.

Cryptocurrency tax rates in the UK

There are different tax rates for Capital Gains Tax and Income Tax. How much tax you must pay depends on which tax band you fall under. To understand how much tax you must pay on your capital gains you need to first calculate your total taxable income. The different Capital Gains Tax rates can be seen in the table below:

Capital Gains Tax rates

Capital Gains Tax Rate	Band	Taxable Income
10%	Basic rate	£12,571 to £50,270
20%	Higher rate	£50,271 to £150,000
20%	Additional rate	over £150,000

This table shows the Capital Gains Tax rates and tax bands for 2022. Source: 1, 2

This means that for the 2021/2022 tax year, Capital Gains Tax rates for cryptocurrencies in the UK are:

• 0% if the entire capital gain is below the tax-free allowance
• 10% for your entire capital gain if your total taxable income is below £50,270
• 20% for your entire capital gain if your total taxable income is above £50,270

Be aware that even if your total capital gains do not exceed the tax-free allowance, you might still need to report your gains. If the total proceeds from the sale of cryptocurrencies in a given tax year exceed four times the Annual Exempt Amount (4 * £12,300 = £49,200) you are required to report the gains on your tax return.

Income Tax rates

While the Capital Gains Tax rate is capped at 20% maximum, the Income Tax rate is capped at 45% for taxable income over £150,000. The different Income Tax rates can be seen in the table below:

Income Tax Rate	Band	Taxable Income
0%	Personal Allowance	up to £12,570
20%	Basic rate	£12,571 to £50,270
40%	Higher rate	£50,271 to £150,000
45%	Additional rate	over £150,000

This table shows the Income Tax rates and tax bands for 2022.

Capital Gains Tax allowances

In the UK, you only pay Capital Gains Tax on your gains above the tax-free allowance. For the 2021/2022 tax year, the capital gains tax-free allowance is £12,300. This amount is applicable for capital gains across all capital assets. This allowance is also sometimes referred to as the Annual Exempt Amount.

How to calculate capital gains UK

As we have already mentioned, you must calculate capital gains every time a cryptocurrency is sold, traded, swapped, or otherwise disposed of.

The general formula for calculating capital gains is:

capital gains = selling price – purchase price

To work out the capital gains we need to first calculate the selling price and purchase price (cost basis) for each transaction. The selling price is what you sold the asset for and can usually be calculated by looking up the market rate in GBP at the time of the transaction.

The cost basis is what you originally purchased the asset for. You should also include any transaction fees or brokerage fees since such fees are fully deductible and should be included in the cost basis in the UK. If you received the cryptocurrency from an airdrop, staking or interest payment, you should simply calculate the cost basis as the fair market value in GBP on the day you received the asset.

If you made a profit when disposing of your crypto, you have made a capital gain and you must pay Capital Gains Tax on that gain. If you instead made a loss, you have made a capital loss on that transaction and you do not pay Capital Gains Tax. However, it’s important to keep track of your capital losses since these can be used to offset your capital gains. We will explain this in more detail later in this guide.

Calculating capital gains and losses is actually not so complicated if you only have a few transactions. However, if you have hundreds if not thousands of transactions spread on different exchanges and wallets, things start to become a lot more complicated.

Share pooling cost basis method

HMRC has stated that the concept of pooling should be used in the UK to calculate the cost basis of cryptocurrencies. According to HMRC, this method allows for simpler Capital Gains Tax calculations and applies to shares of companies and also “any other assets where they are of a nature to be dealt in without identifying the particular assets disposed of or acquired”. HMRC goes on to say that cryptocurrencies fall within this description and should therefore be pooled.

In practical terms, this means that each cryptocurrency you have bought, traded, or sold has its own pool and associated pooled allowable cost. The pool consists of the total number of coins you own, and the allowable cost is the total amount originally paid. Each time you buy or sell a cryptocurrency, the pool and associated cost will therefore change.

If only some of the coins you own are sold, it will be considered a part-disposal. In this case, capital gains are calculated by considering a corresponding proportion of the total pooled allowable cost. This method is sometimes also referred to as a “Section 104 Pool” and is similar to the Average Cost Basis method.

Example 1: Share pool and total allowable cost

Henry bought 2 BTC for £6,000 in 2017. In 2018 he bought another 1.5 BTC for £9,000. By applying the concept of pooling, Henry has now a pool of 3.5 BTC and a total allowable cost equal to £15,000.

Later in 2022, Henry decides to cash in some profits and sell a part of his Bitcoin investment. He sells 2.5 BTC for £75,000. His transactions can be seen in the below table:

Type	Date	Amount	Price	Cost Basis	Capital Gains
Buy	2017-06-08	2.0 BTC	£6,000	£6,000	–
Buy	2018-04-17	1.5 BTC	£9,000	£9,000	–
Sell	2022-02-18	2.5 BTC	£75,000	(?)	(?)

To calculate his capital gains, Henry needs to find the less allowable cost (cost basis) for his disposal of 2.5 BTC: £15,000 * (2.5 / 3.5) = £10,714. The total capital gain is then found as £75,000 – £10,714 = £64,286.

Type	Date	Amount	Price	Cost Basis	Capital Gains
Buy	2017-06-08	2.0 BTC	£6,000	£6,000	–
Buy	2018-04-17	1.5 BTC	£9,000	£9,000	–
Sell	2022-02-18	2.5 BTC	£75,000	£10,714	£64,286

After the sale, Henry has 1 BTC left in his pool and a total allowable cost of £15,000 – £10,714 = £4,286.

Special rules to prevent wash sales apply to cryptocurrencies in a similar way to shares of companies. HMRC has implemented these rules to prevent people from selling a crypto asset (or share) and repurchasing it shortly after with the intention of realizing losses and therefore reducing the total capital gains.

When you spend, sell or trade a cryptocurrency, you need to calculate the capital gains by disposing of the coins in the following order:

1. Same-day rule: coins bought on the same day as the sale
2. 30-day rule: coins acquired within 30 days of the sale
3. Total pool: all coins previously acquired

Buying a crypto asset on the same day

If you sell a cryptocurrency and buy the same coin on the same day, the cost basis will not be calculated from the main pool. Instead, the cost basis is calculated using the costs of the new tokens bought. This is done by considering all purchases on the same date – even if the acquisition has happened before you dispose of the asset.

Buying the same crypto asset within 30 days

Similar to the same-day rule, the 30-day rule says that any cryptocurrency acquired within 30 days of the sale should be considered for calculating cost basis instead of the main pool. Rather than calculating the average acquisition cost as done for the same-day rule, First-in-first-out (FIFO) logic should be applied for calculating the cost basis for the 30-day rule. The 30-day rule is sometimes also referred to as the “bed and breakfast rule”.

If any of the special rules above apply, and the number of coins sold exceeds the number of new coins acquired, the total calculation will also include the acquisition cost from the total pooled allowable cost.

We will explain these rules better using a practical example:

Example 2: The 30-day rule explained

Sara invested in Ethereum in August 2021 and has a total of 15 ETH in her wallet. She has spent a total of £25,000 acquiring the coins. This amount is therefore her pooled allowable cost.

Later, she decides to sell some of her initial investment. On January 15th, 2022 she sells 10 ETH for £30,000.

A few weeks later she decides to buy back some of the Ethereum she sold. On February 3rd she buys 5 ETH for £17,000.

Her transaction history can be seen in below table:

Type	Date	Amount	Price	Cost Basis	Capital Gains
Buy	2021-08-01	15 ETH	£25,000	£25,000	–
Sell	2022-01-15	10 ETH	£30,000	(?)	(?)
Buy	2022-02-03	5 ETH	£17,000	£17,000	–

Because the newly acquired ETH were bought within 30 days of the disposal, they will not be considered as part of the total pool. To calculate her capital gains from the sale of 10 ETH she needs to treat this as two separate disposals:

• 5 ETH that was bought after the disposal
• 5 ETH from the total pool

The cost basis for the 5 ETH bought on February 3rd is considered in the calculations using the 30-day rule. For the remaining 5 ETH, we find the cost basis from her pooled allowable cost.

Total cost basis will be £17,000 + £25,000 * 5 / 15 = £25,333. Her total capital gains are therefore found as £30,000 – £25,333 = £4,667.

Type	Date	Amount	Price	Cost Basis	Capital Gains
Buy	2021-08-01	15 ETH	£25,000	£25,000	–
Sell	2022-01-15	10 ETH	£30,000	£25,333	£4,667
Buy	2022-02-03	5 ETH	£17,000	£17,000	–

Sara still has 10 ETH in her pool which after the disposal has an allowable cost of £16,667.

Is buying crypto taxed in the UK?

The answer is that it depends. More specifically, it depends on what currency is used to purchase the other cryptocurrency. As in most countries, different tax rules apply if you are paying for a cryptocurrency with fiat currency such as GBP or using another cryptocurrency.

Buying cryptocurrency with fiat currency (Ex: GBP → BTC)

You are not taxed when buying cryptocurrency with fiat in the UK. Note that it’s important to keep track of all your purchases and complete transaction history so that you can calculate the cost basis correctly when you later sell the cryptocurrency that was purchased.

Tax status:

NOT TAXED

Buying crypto and paying with another crypto (Ex: BTC → SOL)

HMRC considers buying one cryptocurrency and paying with another cryptocurrency a taxable event since you are in fact disposing of a cryptocurrency. This means that every time you trade two cryptocurrencies, such as when exchanging Bitcoin for Solana, you need to calculate the capital gains for the crypto asset sold – BTC in this example. This includes also stablecoins which are treated similarly to other crypto assets for tax purposes.

You need to first calculate the fair market value (FMV) and the cost basis of the cryptocurrency sold according to the Share Pooling method. The capital gains can then be found directly as the cost basis subtracted from the FMV. If you have made a gain, you will need to pay Capital Gains Tax. If you have made a loss, you can offset your other gains with this loss.

Tax status:

CAPITAL GAINS TAX

Is selling crypto taxed in the UK?

Selling cryptocurrency for fiat currency (Ex: BTC → GBP)

Yes, selling cryptocurrency such as Bitcoin for fiat currency (eg. GBP) is considered a taxable event in the UK. If you have sold any crypto asset and received fiat in return, you will need to calculate the capital gains for each transaction and report this in your tax return to HMRC.

Tax status:

CAPITAL GAINS TAX

Selling crypto for another crypto (Ex: ETH → BTC)

HMRC defines “exchanging crypto assets for a different type of crypto asset” as a disposal. A crypto-to-crypto transaction (trading) is therefore considered a taxable event similar to selling cryptocurrency for fiat currency.

Tax status:

CAPITAL GAINS TAX

Important note: Stablecoins such as Tether (USDT), USD Coin (USDC), and TrueUSD (TUSD) are treated similarly to any other cryptocurrency by HMRC, hence all transactions where a stablecoin is disposed of are considered a taxable event similar to crypto-to-crypto transactions.

Example 3

Olivia exchanges 0.3 BTC for 15 LTC. Her original cost of 0.3 BTC was £1,500. At the time of the exchange, 15 LTC is valued at £2,300. This means that the sales proceeds for selling 0.3 BTC are £2,300 and the cost basis is £1,500. The resulting capital gains are calculated to be £2,300 – £1,500 = £800.

Assuming that Olivia is in the basic rate tax band, she will pay 10% on all her capital gains. However, since Olivia does not have any other capital gains during the tax year, she will not pay Capital Gains Tax since the total gain is within the tax-free allowance of £12,300.

Tax on margin and futures trading UK

HMRC has not released specific guidelines for the treatment of margin and futures trading of cryptocurrencies. This type of trading has become very popular in the last few years since you have the opportunity to borrow funds to increase your trading positions which can result in higher profits – but at a higher risk of course.

If you are considered to be a financial trader by HMRC, you should report your gains as income on your tax return and pay Income Tax. If you are not considered to be a financial trader, HMRC is not clear whether your gains and losses are subject to Capital Gains Tax or should be declared as income. It is our interpretation that the safest approach is to report your gains and losses from margin trading as capital gains.

Taxes on crypto mining in the UK

Cryptocurrency received from mining activity is generally treated as income for tax purposes by HMRC. This means that you must report cryptocurrency received from mining in your tax return and pay tax according to the tax band you fall under. However, different tax rules apply if HMRC considers the activity to be classified as a business or just a hobby. This depends on several factors such as:

• Degree and frequency of activity
• Level of organization
• Associated risks
• Commerciality of the operation

Mining cryptocurrency as a hobby

If your mining activity is classified as a hobby, you should declare the GBP value at the time of receipt of all crypto assets received from mining as miscellaneous income on your tax return. You are allowed to include any appropriate expenses to reduce the net income amount.

If you decide to keep the crypto assets in a wallet, they will be part of your pool and the GBP value will be included in the total allowable cost for that specific cryptocurrency. If you decide to sell the coins in the future, you may have to pay Capital Gains Tax if the cryptocurrency has appreciated in value. On the other hand, if the cryptocurrency has depreciated in value, you will realize a capital loss that can be used to offset other capital gains.

Tax status:

INCOME TAX / CAPITAL GAINS TAX

Mining cryptocurrency as a business

If HMRC deems the mining activity to be a business, the mining income should be reported as trading profits and is therefore subject to Income Tax. Similar to mining classified as a hobby, you can deduct appropriate expenses to reduce the net taxable amount.

If you sell the coins at a later date in the future, any gains from the disposal will be added to your trading profits and taxed as income.

Tax status:

INCOME TAX

Taxes on crypto staking in the UK

Tax rules for cryptocurrency earned from staking are in fact identical to cryptocurrency received from mining. This means that the activity will be classified as either a business or just a hobby. In both cases will the cryptocurrency received attract Income Tax, but the amount of tax you must pay will depend on how HMRC classifies the activity.

Tax on airdrops and hard forks

HMRC has released clear guidance on the treatment of cryptocurrency received as both airdrops and hard forks. In this section, we will take a closer look at the tax treatment of such transactions.

Tax on airdrops

If you have received crypto in return for a service, the coins will be subject to Income Tax and should be declared as miscellaneous income. If you are operating a business, they will be part of your trading profits.

However, HMRC says that Income Tax may not apply if any of the following conditions apply:

• You have received crypto without doing anything in return
• The crypto received is not part of a trade or business involving mining

Something to keep in mind is that if you decide to sell the coins at a later time, the gains will be subject to Capital Gains Tax. This means that even though an airdrop is not taxed as income, the coins are tax-free only until you later sell or otherwise dispose of them.

Tax status:

INCOME TAX

Example 4

Charlie received 400 UNI tokens from the Uniswap airdrop in September 2020. This airdrop does not qualify for being tax-free since the airdrop was only given to people that had used the Uniswap protocol prior to the snapshot date.

On the date Charlie claimed the airdrop, each token was valued at approximately £15 such that the fair market value of the total airdrop was £6,000. This must be reported as miscellaneous income and Charlie must pay Income Tax on the total amount according to his Income Tax band.

Charlie earns £38,000 during the tax year and is therefore in the basic rate band. He will therefore pay 20% tax on £6,000 which equals £1,200.

Tax on hard forks

An update to the blockchain protocol can result in a soft fork or hard fork. A soft fork is an update that automatically gets adopted by all participants (miners, nodes, etc). This does not result in the creation of new tokens or a new blockchain. A hard fork, on the other hand, can result in a blockchain split where new tokens come into existence.

If you owned tokens on the original blockchain before the hard fork or split occurred, you will in most cases own an equal number of tokens on both blockchains after the event. An example of a blockchain split is Bitcoin Cash which was created in August 2017 when a group of miners decided to fork the original Bitcoin blockchain. If you held 1 BTC at the time of the hard fork, you would own both 1 BTC and 1 BCH after the event.

To avoid confusion for UK taxpayers, HMRC has provided clear guidance on the tax treatment of blockchain forks in their Cryptoassets Manual. After the fork, each crypto asset goes into its own pool. The total allowable cost associated with the original pool should be split between the two assets. HMRC has not defined specific rules for how the cost should be split but has stated that costs must be split on a “just and reasonable basis under section 52(4) Taxation of Capital Gains Act 1992“.

The most commonly used approach is that the cost of the original crypto is apportioned between the old and new assets based on the asset’s fair market value the day after the hard fork. You can also assign 100% of the cost to the original crypto asset, such that the new crypto asset created after the fork will have a zero cost associated with the new pool.

Tax status:

NOT TAXED

Other taxable transactions

We have so far covered some of the most typical cryptocurrency transactions you might have to consider when it comes to understanding crypto taxes in the UK. There are also many other different ways that you can either send or receive crypto that might have implications for your tax situation. Below, we will comment briefly on the tax treatment of other ways to interact with crypto not already mentioned.

Tax on ICOs & IEOs

ICOs (“Initial Coin Offerings”) and IEOs (“Initial Exchange Offerings”) are a popular form of raising capital by companies and projects launching their own blockchain or token. In both cases, a person typically invests in a token that will be released in the future and pays with another cryptocurrency like USDC or ETH. An IEO differs from an ICO that it is conducted by an exchange, and the token is in most cases listed on the exchange shortly after the IEO has concluded.

HMRC has not provided specific guidance for the treatment of ICOs or IEOs, but since this is very similar to a crypto-to-crypto transaction, the same taxation principle applies. If you invest in token XYZ and pay with ETH, you will have to calculate capital gains on the ETH disposed of. You should use the fair market value of ETH on the date you made the investment which will also become the cost basis (or allowable cost) of the pool for the purchased tokens.

Tax status:

CAPITAL GAINS TAX

Gifting cryptocurrency

If you are gifting cryptocurrency to a person other than your spouse or civil partner, you are required to calculate and report your capital gains. In practical terms, the same principles for selling crypto applies also for gifting crypto. The capital gains are found by comparing the sales proceeds with your allowable costs. You should use the fair market value in GBP on the date that you made the transfer to calculate the sales proceeds.

Tax status:

CAPITAL GAINS TAX

Donating crypto to charity

You do not have to pay any Capital Gains Tax on crypto assets donated to charity. However, there are two exceptions to this rule:

• If you make a tainted donation. This refers to an arrangement to obtain certain financial advantages from a charity.
• If the fair market value of the assets disposed of is higher than the acquisition cost found from your pooled allowable cost.

Tax status:

CAPITAL GAINS TAX

Tax on received interest

Have you received interest from lending out your cryptocurrency? If so, you will need to treat this similar to cryptocurrency received from mining or staking. This means you should report the interest received as miscellaneous income on your tax return.

Tax status:

INCOME TAX

Tax on salary paid in crypto

Today, some employers are paying salaries in cryptocurrency instead of fiat such as GBP to their employees. HMRC states that crypto received as employment income counts as money’s worth. This means you need to pay Income Tax in addition to National Insurance contributions on the fair market value of the crypto received.

The same rules apply to both employees and freelancers. In both cases, the fair market value is determined on the date of receipt.

Tax status:

INCOME TAX

Lost and stolen crypto

Losing private keys

If you lose your private keys and cannot access the cryptocurrency anymore, the asset is still technically owned by you since it exists on the blockchain. Because of this, HMRC does not consider the misplacing of private keys a disposal that triggers Capital Gains Tax.

If there is no possibility of recovering the private keys and gaining access to the assets in the wallet, you have the option to make a negligible value claim which we will explain in the next section. This means that the loss can be used to offset your total capital gains if the claim is approved by HMRC.

Being defrauded

Unfortunately, there are many fraudulent actors with bad intentions in the cryptocurrency community. A lot of people have been scammed by such people, often by transferring Bitcoin or Ethereum to an address with the hope of getting more value back.

HMRC does not consider fraud or theft to be a disposal since you still have the right to recover the crypto, and therefore also are the rightful owner of the assets. The implications of this are that you cannot claim a loss for the purpose of reducing your capital gains.

If you pay for a cryptocurrency and it turns out to be almost completely worthless, you can make a negligible value claim and reduce your capital gains if HMRC accepts the claim.

Minimize your taxable gains

There are a few ways you can minimize your taxable gains and reduce your tax burden. In this section, we will look at the three most commonly used methods that are allowed in the UK.

Offset capital gains

If you sell a cryptocurrency and receive less than the calculated cost basis, you will have realized a capital loss on the asset. Such losses can be used to offset your total taxable gains, either in the same tax year or in future tax years.

Losses must be claimed by including them on your tax return. HMRC says that you don’t necessarily need to report losses straight away, and you can actually claim losses up to four years after the end of the tax year that you sold the asset. This means that if you have unclaimed losses from 2022, you can use these losses to offset other capital gains for the tax year 2023/2024 or 2024/2025 for example.

Trading fees

In most cases, you will be paying trading fees when you are buying, selling, or trading cryptocurrency. Trading fees are considered allowable costs by HMRC and can be deducted from the sales proceeds amount.

Some crypto exchanges charge rather high fees, and in some cases even above 2%. If you have a large number of transactions, deducting the exchange fees can make a significant impact on your total tax liability. 

Low value and illiquid cryptocurrencies

A significant amount of crypto assets have lost almost all their value since the all-time high (ATH) value. Chances are that you still own a token that is almost worthless today with very low liquidity and perhaps only traded on a few exchanges. Luckily, HMRC has issued guidance on how to make a negligible value claim on the disposal of such assets which can be used to reduce your total capital gains.

To do this, simply fill out the claim by entering information such as the name of the cryptocurrency and the value that the asset should be treated as disposed of. If the crypto has practically no liquidity, you can normally consider the value to be £0.

How to calculate crypto taxes in the UK

Calculating your crypto taxes and figuring out the numbers you must report to HMRC can seem like an overwhelming task for most people. There are essentially two ways of doing your crypto taxes: either manually or using a cryptocurrency tax calculator.

Let’s start with the most time-consuming method…

Calculating your crypto taxes manually

Here are the steps you must take to calculate your crypto taxes manually:

1. Download the transaction history from all exchanges where you have bought, sold, received, or sent any cryptocurrency. This includes also transactions from or to your own wallets.
2. Calculate the cost basis for every single transaction where cryptocurrency is disposed of according to Share Pooling rules
3. Calculate the proceeds (sales price) and resulting capital gains for all transactions that are considered taxable disposals by HMRC
4. Identify all transactions subject to Income Tax in the UK
5. Summarize all the calculations to find the total capital gains and your taxable income during the financial year

Calculating your crypto taxes using crypto tax software

The best option for most people in the UK is likely going to be using cryptocurrency tax software to automatically do the required calculations.

Crypto tax deadline in the UK

The deadline for reporting cryptocurrency taxes in the UK is the same as the deadline for your ordinary tax return. The financial year in the UK is from The 6th of April to the 5th of April the following year.

If you file your tax return electronically, the deadline is midnight on January 31 the following year. Paper returns are due by midnight on October 31 of the same year. This means that if you are filing taxes for the 2021/2022 tax year (April 6, 2021 – April 5, 2022), the deadline is either October 31, 2022 (paper returns) or January 31, 2023 (electronic returns).

Your tax bill also needs to be paid by the deadline. If you file your tax return late, miss the deadline for payment, or file an incomplete tax return, you might have to pay a penalty.

Which records do I need to keep?

As outlined in the Cryptoassets Manual, crypto exchanges might only keep your records for a certain time period, or the exchange might even cease to exist making it very difficult or impossible to get a copy of your trade history in the future.

For these reasons, it’s important to keep records of all your transactions at all times. HMRC says that it is the taxpayer’s responsibility for practicing record-keeping which should include the following details:

• The type of cryptocurrency
• Date of the transaction
• If the coins were bought or sold
• Number of coins/tokens involved
• Value of the transaction in GBP
• The cumulative total of the investment units held
• Bank statements and wallet addresses (if needed for audit purposes)

How to report crypto taxes to HMRC

When you have calculated all your gains and losses during the financial year and identified all transactions that attract either Capital Gains Tax or Income Tax, you have the option to file your taxes either online or with paper forms.

Online Self-Assessment

Your crypto taxes should be reported as part of your Self-Assessment. In essence, this is what you must report:

• Capital gains from cryptocurrency: SA100 and Capital Gains Summary SA108
• Cryptocurrency income: Box 17 of your Self-Assessment Tax Return (SA100)

To file your taxes online, you need to log in to the Government Gateway website.

How to pay taxes on crypto in the UK

The deadline for paying your taxes is the same as the deadline for filing taxes in the UK. This means that the deadline for paying taxes is January 31st, 2023 for the 2021/2022 tax year.

How much you must actually pay in taxes will be shown after you have completed the Self-Assessment. Since the payment deadline is the same as the tax return deadline, we highly recommend doing your crypto taxes before this date to avoid any big surprises right before the taxes must be paid.

Have you invested in cryptocurrency and now wonder how crypto is actually taxed in Canada? The Canada Revenue Agency (CRA) has published a guide for the taxation of cryptocurrency which goes into detail about the different tax rules in Canada. The most important takeaway is that gains from cryptocurrencies should be reported as either business income or capital gains. If this made you more confused – don’t worry! In this complete tax guide, we will explain everything you need to know about how crypto taxes work in Canada including breaking down the latest tax guide from the CRA, how much tax you must pay on cryptocurrencies in Canada, the difference between business income and capital gains on crypto, and how you can use a cryptocurrency tax software.

Let’s start with the most important question of all…

Do you pay taxes on crypto in Canada?

Yes, you need to pay taxes on both your income and capital gains from cryptocurrency in Canada. Any cryptocurrency sold during the tax year that you made profits on must be reported to the CRA in your annual tax return similar to profits from other assets like equities or commodities. You must also report any income if you have received cryptocurrency considered business income from mining, staking, or interest.

In the next section, we will look closer at how crypto is actually taxed in Canada and how the CRA considers income from cryptocurrency to be classified as either business income or capital gains.

How is crypto taxed in Canada?

The Canadian Senate reviewed the issue of taxation of cryptocurrency already in 2014 to address the growing popularity of crypto assets. Because of this, the Canada Revenue Agency (CRA) took on the task of understanding how to tax crypto assets and later published guidance to better guide Canadians through the complex tax landscape surrounding cryptocurrencies. By following the tax rules outlined in this guide, crypto investors in Canada are now finally able to report their taxes according to the law.

The CRA considers bitcoin and other cryptocurrencies to be a commodity with regards to taxation. In general, each disposal of cryptocurrency is a taxable event according to the CRA:

• Selling of cryptocurrency and you receive fiat currency (such as Canadian dollars)
• If you trade, exchange, or swap cryptocurrency (includes also crypto-to-crypto transactions)
• Gifting cryptocurrency to another person
• Use cryptocurrency to pay for goods or services

It should be no doubt now that if you have dabbled in cryptocurrencies the last year you probably have to report this in your tax return to the CRA in 2022.

Do you pay capital gains on cryptocurrency in Canada?

The answer is that it depends.

Earnings from cryptocurrency transactions are treated as either business income or as capital gains. Similar to earnings are losses considered either business losses or capital losses. Business income is treated differently than capital gains for tax purposes.

The CRA lists some common signs that your activity may be classified as a business:

• You carry on the activity for commercial reasons
• You undertake activities like a business. This might include preparing a business plan and acquiring capital assets or inventory.
• You promote a product or service
• You have intentions to make a profit (even if you are unlikely to do so in the short term)

In most cases, a business activity needs to involve repetitive actions over time. If you are a day trader you will therefore most likely be considered to carry on a business by the CRA. On the other hand, casual investors that are not active in the market on a regular basis will probably not be considered as conducting business activity.

Gains from disposing of cryptocurrency should be reported in the following year’s tax return. This means that cryptocurrency sold in 2021 should be reported in the tax return you file in 2022. In Canada, only half of the capital gain is actually subject to tax and is also referred to as the taxable capital gain. It’s also important to be aware that you are not allowed to use any capital losses to offset other income such as employment income. Capital losses can only be used to offset other capital gains. If you had a net capital loss during the year, you are allowed to carry forward this loss to a future year, limited up to three years.

How much tax do you pay on cryptocurrencies?

Taxes on cryptocurrencies are considered as either capital gains tax or as income tax in Canada. While many countries including the US have special tax rates for capital gains, this is not the case in Canada. Instead, any earnings considered to be capital gains are taxed at the same rate as your federal income tax and provincial income tax rate. The good news, however, is that you pay only tax on half of your total capital gains!

Let’s break down the different tax rates to better understand how much tax you must actually pay.

Federal income tax

Tax Rate	Income – 2021	Income – 2022
15%	$0 – $49,020	$0 – $50,197
20.5%	$49,021 – $98,040	$50,198 – $100,392
26%	$98,041 – $151,978	$100,393 – $155,625
29%	$151,979 – $216,511	$155,626 – $221,708
33%	$216,512+	$221,708+

This table shows the federal income tax rates in Canada for 2021 and 2022. Source: The CRA

Provincial income tax

The CRA has also published information about the updated provincial income tax rates for 2022 on their website. We will summarize below the different tax rates for each province:

• Newfoundland and Labrador
• Prince Edward Island
• Nova Scotia
• New Brunswick
• Quebec
• Ontario
• Manitoba
• Saskatchewan
• Alberta
• British Columbia
• Yukon
• Northwest Territories
• Nunavut

Newfoundland and Labrador provincial tax rate

Tax Rate	Income – 2022
8.7%	$0 – $39,147
14.5%	$39,148 – $78,294
15.8%	$78,295 – $139,780
17.8%	$139,781 – $195,693
19.8%	$195,694 – $250,000
20.8%	$250,001 – $500,000
21.3%	$500,001 – $1,000,000
21.8%	$1,000,001+

This table shows the provincial income tax rates in Newfoundland and Labrador for 2022

Prince Edward Island provincial tax rate

Tax Rate	Income – 2022
9.8%	$0 – $31,984
13.8%	$31,985 – $63,969
16.7%	$63,970+

This table shows the provincial income tax rates in Prince Edward Island for 2022

Nova Scotia provincial tax rate

Tax Rate	Income – 2022
8.79%	$0 – $29,590
14.95%	$29,591 – $29,590
16.67%	$29,591 – $93,000
17.5%	$93,001 – $150,000
21%	$150,001+

This table shows the provincial income tax rates in Nova Scotia for 2022

New Brunswick provincial tax rate

Tax Rate	Income – 2022
9.4%	$0 – $44,887
14.82%	$44,888 – $89,775
16.52%	$89,776 – $145,955
17.84%	$145,956 – $166,280
20.3%	$166,281+

This table shows the provincial income tax rates in New Brunswick for 2022

Quebec provincial tax rate

Tax Rate	Income – 2021	Income – 2022
15%	$0 – $45,105	$0 – $46,295
20%	$45,106 – $90,200	$46,296 – $92,580
24%	$90,201 – $109,755	$92,581 – $112,655
25.75%	$109,756+	$112,656+

This table shows the provincial income tax rates in Quebec for 2021 and 2022. Source: Revenue Quebec

Ontario provincial tax rate

Tax Rate	Income – 2022
5.05%	$0 – $46,226
9.15%	$46,227 – $92,454
11.16%	$92,455 – $150,000
12.16%	$150,001 – $220,000
13.16%	$220,001+

This table shows the provincial income tax rates in Ontario for 2022

Manitoba provincial tax rate

Tax Rate	Income – 2022
10.8%	$0 – $34,431
12.75%	$34,432 – $74,416
17.4%	$74,417+

This table shows the provincial income tax rates in Manitoba for 2022

Saskatchewan provincial tax rate

Tax Rate	Income – 2022
10.5%	$0 – $46,773
12.5%	$46,774 – $133,638
14.5%	$133,639+

This table shows the provincial income tax rates in Saskatchewan for 2022

Alberta provincial tax rate

Tax Rate	Income – 2022
10%	$0 –  $131,220
12%	$131,221 – $157,464
13%	$157,465 – $209,952
14%	$209,953 – $314,928
15%	$314,929+

This table shows the provincial income tax rates in Alberta for 2022

British Columbia provincial tax rate

Tax Rate	Income – 2022
5.06%	$0 –  $43,070
7.7%	$43,071 – $86,141
10.5%	$86,142 – $98,901
12.29%	$98,902 – $120,094
14.7%	$120,095 – $162,832
16.8%	$162,833 – $227,091
20.5%	$227,092+

This table shows the provincial income tax rates in British Columbia for 2022

Yukon provincial tax rate

Tax Rate	Income – 2022
6.4%	$0 –  $50,197
9%	$50,198 – $100,392
10.9%	$100,393 – $155,625
12.8%	$155,626 – $500,000
15%	$500,001+

This table shows the provincial income tax rates in Yukon for 2022

Northwest Territories provincial tax rate

Tax Rate	Income – 2022
5.9%	$0 –  $45,462
8.6%	$45,463 – $90,927
12.2%	$90,928 – $147,826
14.05%	$147,827+

This table shows the provincial income tax rates in Northwest Territories for 2022

Nunavut provincial tax rate

Tax Rate	Income – 2022
4%	$0 –  $47,862
7%	$47,863 – $95,724
9%	$95,725 – $155,625
11.5%	$155,626+

This table shows the provincial income tax rates in Nunavut for 2022

How to calculate capital gains in Canada

A capital gain occurs when you sell a cryptocurrency for more than the original purchase price. On the other hand, if the sales price is lower than the purchase price, it is considered a capital loss. Only half of the capital gain is subject to tax in Canada as already mentioned, and you can also use any capital losses to offset your capital gains.

The general formula for calculating capital gain is:

capital gain = selling price – purchase price

To calculate the capital gains, you need to first establish the cost basis for the cryptocurrency you are disposing of. In Canada, you need to use Adjusted Cost Base (ACB) which is simply the average purchase cost of all coins you have in possession. The capital gain for each transaction is then determined as the ACB value subtracted from the selling price.

Is buying cryptocurrency taxed in Canada?

The answer is that it depends. More specifically, whether or not buying cryptocurrency is taxed depends on what type of asset you are paying with to acquire the other cryptocurrency. Different tax rules apply if you are paying for a cryptocurrency with fiat currency such as CAD, or if you are paying using another cryptocurrency.

Buying cryptocurrency with fiat currency (CAD, USD, etc)

Buying cryptocurrency with fiat is not considered a taxable event in Canada. Note that it’s important to keep track of all your purchases and complete transaction history so that you can calculate your cost basis and deduct the costs when you later dispose of the assets.

Tax status:

 

NOT TAXED

Buying crypto and paying with another crypto (Ex: ETH → DOGE)

Buying one cryptocurrency and paying with another cryptocurrency is considered a taxable transaction by the CRA. The CRA sees this as a barter transaction, and you have to determine the value in Canadian dollars at the time of the transaction. The key factor is that every time you dispose of one cryptocurrency, it will be considered a taxable event in Canada similar to most other countries. This includes also stablecoins which are treated similarly to other crypto assets including altcoins for tax purposes.

This means that if you are swapping ETH for DOGE on an exchange, you must calculate and report the capital gains from the ETH that was sold.

You need to first calculate the fair market value (FMV) of the cryptocurrency received from the transaction, and then work out the cost basis of the cryptocurrency sold according to the Adjusted Cost Base method. The capital gains can then be found directly as the cost basis subtracted from the value of the crypto received.

Tax status:

 

CAPITAL GAINS / BUSINESS INCOME

Example 1: Trading cryptocurrency

Emma bought 50 Litecoin in 2021 and paid $6,000. In 2022, she decides to exchange 20 of her Litecoin for 1.2 Ethereum. At the time of this transaction, 1.2 Ethereum was valued at $4,000. Now, how can Emma calculate her capital gains?

We already know the value of her sales proceeds which are $4,000. The original acquisition price (cost basis) can be found as 20 / 50 * $6,000 = $2,400. Her capital gains are then found as $4,000 – $2,400 = $1,600. 50% of the gains ($800) are considered taxable capital gains which Emma needs to report on her tax return.

Is selling cryptocurrency taxed in Canada?

Yes, selling cryptocurrency such as bitcoin for fiat currency (eg. CAD) is considered a taxable event in Canada. If you have done so, you will need to calculate the capital gains for each transaction and report this in your tax return.

Note: The CRA states clearly that each individual cryptocurrency is a separate asset and should be valued separately.

Tax status:

 

CAPITAL GAINS/BUSINESS INCOME

Example 2: Selling cryptocurrency

Jacob bought 0.4 BTC for $2,000 in 2017. One year later he buys 0.2 BTC for $3,500. Now, Jacob owns a total of 0.6 BTC which he has paid a total of $5,500 for.

In January of 2020, Jacob decides to sell his entire investment. He sells 0.6 BTC and receives $7,000 in exchange. His transactions can be seen in the below table:

Type	Date	Amount	Price	Cost Basis	Capital Gains
Buy	2017-06-08	0.4 BTC	$2,000	$2,000	–
Buy	2018-04-17	0.2 BTC	$3,500	$3,500	–
Sell	2020-01-28	0.6 BTC	$7,000	(?)	(?)

To calculate his capital gains, Jacob needs to find the total cost basis for the 0.6 bitcoin he has sold. This is simply the total initial cost ($5,500) since he is now selling his entire investment. The total capital gain is then found as $7,000 – $5,500 = $1,500.

Type	Date	Amount	Price	Cost Basis	Capital Gains
Buy	2017-06-08	0.4 BTC	$2,000	$2,000	–
Buy	2018-04-17	0.2 BTC	$3,500	$3,500	–
Sell	2020-01-28	0.6 BTC	$7,000	$5,500	$1,500

Half of his capital gain is subject to tax (taxable capital gain = $750) which he needs to report on his tax return to the Canada Revenue Agency in 2021.

Taxes on margin and futures trading

It has become very popular to trade cryptocurrencies on margin in the last few years, and many popular crypto exchanges such as BitMEX, and Bybit offer this. Instead of buying or selling cryptocurrency that you actually own, margin trading lets you borrow funds from the exchange to speculate if the price will go up or down in the future. The former is often referred to as going long, while the latter is going short. Futures and derivates trading work in a similar fashion where you borrow funds when placing a purchase or sell order.

When you trade futures on an exchange, you will open a position each time you make a buy or sell order. When the position is closed, you will have made either a gain or loss.

This is how cryptocurrency margin and futures trading are taxed in Canada:

The Canada Revenue Agency has not yet issued tax guidance for the treatment of margin or futures trading specifically, but the safe approach is to include the gains or losses in your total earnings calculations. The profits will therefore be taxed as either capital gains or as business income.

Tax status:

 

CAPITAL GAINS/BUSINESS INCOME

Income from mining and staking in Canada

Mining of cryptocurrency

Cryptocurrency received as payment for mining is subject to tax treatment in almost all countries, with Canada being no exception. Again, the tax treatment depends on whether your mining activity is classified as a business or just a hobby. If you are mining crypto such as bitcoin or ethereum with the intention of making profits on a regular basis, you will most likely be considered conducting business activity and the crypto received will be taxed as business income.

You can normally deduct any directly associated costs like electricity and computer hardware from your mining income. You should also be aware that when you decide to sell the coins later, the sales proceeds will become part of your business income and be taxed as such.

If your mining activity is considered a hobby, you will only pay capital gains tax when you later sell the coins you have received. Because you didn’t pay anything for the coins originally, the cost basis should be considered as zero so that your capital gains are equal to the market value in CAD at the time when you sell the coins in the future.

The CRA says that it will be decided case by case if your activity is classified as a business or just a hobby.

Tax status:

 

CAPITAL GAINS/BUSINESS INCOME

Staking of cryptocurrency

The CRA has not released specific guidance for cryptocurrency received from staking. Because staking is similar in nature to mining of cryptocurrencies, the safest approach is to treat received coins from staking in a similar fashion to mining.

Tax status:

 

CAPITAL GAINS/BUSINESS INCOME

Other taxable transactions in Canada

We have so far covered some of the most typical cryptocurrency transactions you might have to consider when it comes to taxes in Canada. There are also many other different ways that you can either send or receive crypto. Below, we will comment briefly on the tax treatment of other transaction types and events not already mentioned.

Tax on Airdrops

An airdrop of cryptocurrency tokens is often done as part of a marketing or advertising campaign. In some cases, you will need to register before a deadline to become eligible to receive tokens. You may also receive tokens just from holding another cryptocurrency in your wallet or on an exchange.

The CRA has not issued specific guidance on the tax treatment of cryptocurrency airdrops, but a safe approach is to pay capital gains tax when you later decide to sell the coins since it’s not likely that the CRA will consider airdrops as business income. Similar to crypto received from mining, you should assume a cost basis equal to zero because you did not pay anything to acquire the coins.

Tax status:

 

CAPITAL GAINS

Tax on Hard Forks

Almost all blockchains, like the bitcoin blockchain, need to be updated from time to time. Such updates can result in a soft fork or hard fork. Updates that automatically get adopted by all participants are called soft forks. This does not result in the creation of new tokens or a new blockchain. A hard fork, on the other hand, can result in a blockchain split where new tokens come into existence.

Bitcoin Cash is an example of a hard fork where all miners could not agree on whether to adopt the proposed change or not, and the bitcoin blockchain was split as a result. Everyone that owned bitcoin at the exact time when the split happened would then receive an equal number of Bitcoin Cash.

The Canada Revenue Agency has not provided specific guidance on how cryptocurrency received from hard forks should be treated for tax purposes. Again, a safe approach is to pay capital gains tax when you later decide to sell the coins and assume a cost basis equal to zero similar to airdrops explained above.

Tax status:

 

CAPITAL GAINS

Tax on ICOs & IEOs

ICOs (“Initial Coin Offerings”) and IEOs (“Initial Exchange Offerings”) are a popular form of raising capital by companies and projects launching their own blockchain or token. In both cases, a person typically invests in a token that will be released in the future and pays with another cryptocurrency like BTC, ETH, or USDT.

An IEO differs from an ICO by being held on an exchange, and the token is in most cases listed on the exchange shortly after the IEO has concluded.

The CRA has not provided specific guidance for the treatment of ICOs or IEOs, but since this is very similar to a crypto-to-crypto transaction, we can treat such transactions similarly for tax purposes. If you invest in token XYZ and pay with ETH, you will have to calculate capital gains on the ETH disposed of. You will need to use the fair market value of Ethereum on the date you made the investment which will also become the cost basis for the newly purchased tokens.

Tax status:

 

CAPITAL GAINS/BUSINESS INCOME

Gifting cryptocurrency

Gifting cryptocurrency is considered disposal equal to selling by the CRA. This means that you will pay capital gains tax if you gift crypto to a friend or family member. The capital gain should be calculated similarly to cryptocurrency sold on an exchange by subtracting the cost basis from the fair market value of the crypto asset on the date you made the transaction.

The cryptocurrency received by the other person will take on a cost basis equal to the fair market value on the date of the transaction. Assuming that the price of the cryptocurrency appreciates in the future, he or she will pay capital gains tax if deciding to sell the coins later.

Tax status:

 

CAPITAL GAINS

Cryptocurrency donations

Donating cryptocurrency is tax-free in Canada as long as the donation is made to a registered charitable organization. See the Government of Canada’s website for a list of registered organizations.

Tax status:

 

NOT TAXED

Earned interest

The CRA has not mentioned the tax treatment of crypto received as interest specifically. Again, a safe approach is to apply the same practice as used for cryptocurrency received from mining or staking. This means you will calculate capital gains only when you sell the coins in the future and assume an acquisition cost equal to zero. Keep in mind that the CRA might consider this business income if you are earning interest on a regular basis.

Tax status:

 

CAPITAL GAINS/BUSINESS INCOME

Salary paid out in cryptocurrency

Today, some employers are paying salaries in cryptocurrency directly instead of a fiat currency such as CAD to their employees. The CRA states that crypto received as payment for salary or wages will be included in the employee’s normal income. This means you need to pay income tax according to subsection 5(1) of the Income Tax Act.

The same rules can be assumed to apply to both employees and freelancers. In both cases, the fair market value is determined on the date of receipt.

Tax status:

 

BUSINESS INCOME

Superficial loss rule

To prevent investors from taking advantage of capital losses, the CRA has put the superficial loss rule in place. Section 54 of the Income Tax Act indicates that a superficial loss occurs from selling cryptocurrency when both of the following two conditions are met:

1. During the period that begins 30 days before and ends 30 days after the disposition, the taxpayer or a person affiliated with the taxpayer acquires a property (in this definition referred to as the “substituted property”) that is, or is identical to, the particular property, and
2. At the end of that period, the taxpayer or a person affiliated with the taxpayer owns or had a right to acquire the substituted property,

This might sound confusing, but simply put it means that a capital loss cannot be claimed if you buy the same cryptocurrency either 30 days prior to or after the disposition when it was sold. Without this rule, a taxpayer could reduce his or her tax burden by selling a cryptocurrency and triggering a capital loss, then immediately buying it back shortly after.

It is important to mention that it is not illegal to buy back the same cryptocurrency shortly after you have sold it. However, you need to make sure you are not claiming a capital loss for transactions where the superficial loss rule kicks in.

If you want to avoid the superficial loss rule altogether, you simply need to wait. You will need to wait at least 30 days before you sell a cryptocurrency after purchasing it, and also 30 days before you buy back the same cryptocurrency you have sold.

To learn more about how the superficial loss rule works, please refer to our detailed article which also includes several examples:

• Crypto Taxes in Canada: Adjusted Cost Base Explained

Foreign property

If you during any time of the year hold specified foreign property valued greater than CAD 100,000, you are required to report this by filing a Foreign Income Verification Statement. This also applies to cryptocurrencies which means you need to file this form if the total value of your crypto assets exceeds the threshold anytime during the tax year.

How to minimize your taxable gains

There are several ways you can minimize your taxable gains and tax liability. In this section, we will look at the three most commonly used methods that are allowed in Canada.

1. Deduct cryptocurrency losses

If you sell a cryptocurrency and receive less than the calculated acquisition cost using ACB, you will have realized a capital loss on the asset. Such losses can be used to not only offset your total capital gains for cryptocurrencies but also capital gains for other capital assets like equities or index funds.

It’s important to be aware that capital losses cannot always be claimed due to the superficial loss rule already discussed. Also, you are allowed to deduct only 50% of the losses, similar to how you are paying capital gains tax on only 50% of your total gains.

2. Trading fees

Most exchanges charge trading fees when you buy, sell, or trade cryptocurrency. Trading fees are considered costs that can be deducted from the sales proceeds amount.

If you have a large number of transactions, deducting the fee amount can make a significant impact on your total tax liability.

3. Lost and stolen cryptocurrencies

It is not clear today how the CRA treats lost or stolen cryptocurrency. However, most countries allow the taxpayer to deduct the original cost from their capital gains if they have been a victim of fraudulent actions or permanently lost access to their private keys.

We recommend that you ask a certified tax professional in Canada before reporting this in your tax return.

How to calculate total earnings from cryptocurrency

Figuring out your crypto taxes might feel overwhelming at first, but hopefully, it’s a bit clearer after reading this guide. So far, we have explained the different tax rules for cryptocurrency issued by the CRA, but you might still be wondering how to actually do all the required calculations so that you can report your taxes correctly and avoid penalties.

Basically, there are two different methods you can use which we will explain next.

Let’s start with the most time-consuming method…

Manually calculating your cryptocurrency taxes

Filing and reporting cryptocurrency taxes can be summarized in the following four steps:

1. Download the transaction history from all exchanges where you have bought, sold, or received any cryptocurrency. It is important to include the history for ALL previous years to calculate your cost basis correctly.
2. Calculate the cost basis for every single transaction where cryptocurrency is disposed of according to the Adjusted Cost Base and the superficial loss rule.
3. Calculate the proceeds and resulting capital gains for all transactions that are considered taxable disposals by the CRA.
4. Summarize all the calculations to find the total capital gains during the tax year.

This can be a very tedious and complicated process for most people that have had more than a few transactions during the year.

Calculating your crypto taxes using crypto tax software

The best option for most people is likely going to be using cryptocurrency tax software to do the calculations for them

Earnings from cryptocurrency should be reported together with your Income Tax Return. There are two forms on which you might have to report your crypto taxes:

• Schedule 3: This form should include all your capital gains and losses
• Income Tax Return T1: Income paid in cryptocurrency

 

Crypto tax deadline in Canada

The deadline for reporting cryptocurrency taxes in Canada is the same as the deadline for your ordinary tax return. The tax return deadline in Canada is the 30th of April every year. The financial year is the same as the calendar year and runs therefore from the 1st of January until the 31st of December.

The tax return for 2021 needs to be filed by the 30th of April 2022. You need to report both your income and capital gains from cryptocurrencies in your tax return to the CRA.

Similarly, your crypto taxes for the 2022 financial year must be filed by the 30th of April 2023.

Record-keeping of transactions

The CRA puts the responsibility of keeping records of all transactions on the taxpayer itself. Many cryptocurrency exchanges keep these records for a limited time only, so you should make it a habit to periodically export and save this information. You are required to keep records of all transactions and supporting documents for a minimum of six years following the last tax year they relate to.

As stated in the Guide for cryptocurrency users issued by the CRA, you should keep the following records on your transactions:

• the date of the transactions
• the receipts of purchase or transfer of cryptocurrency
• the value of the cryptocurrency in Canadian dollars at the time of the transaction
• the digital wallet records and cryptocurrency addresses
• a description of the transaction
• the exchange records
• accounting and legal costs
• the software costs related to managing your tax affairs

If you are mining cryptocurrency, remember to also keep the following records:

• receipts for the purchase of cryptocurrency mining hardware
• receipts to support your expenses and other records associated with the mining operation (such as power costs, mining pool fees, and maintenance costs)
• the mining pool details and records

Conclusion

After reading this guide is should be no doubt that tax authorities around the world including the CRA are now enforcing strict measures so that individuals have to report and pay their taxes from profits arising from cryptocurrency.

Here are some of the key points from this guide:

• Buying (and paying with fiat currency) and transferring crypto between wallets is tax-free
• Selling, trading, swapping, and margin trading is taxed as capital gains
• Cryptocurrency received from mining, staking, airdrops, etc is taxed when you sell the coins later
• The CRA considers earnings from cryptocurrency to be classified as either business income or capital gains and is taxed differently

Have you dabbled in cryptocurrencies and now wonder if you need to pay any taxes on your crypto in the US? The IRS has published a list of frequently asked questions that guides the tax treatment of bitcoin and other cryptocurrencies in the US. The most important takeaway is that cryptocurrencies are taxed as either Capital Gains Tax or Income Tax for most American people. In this complete tax guide, we will explain everything you need to know about crypto taxes in the US including the latest tax guidance from the IRS, how much tax you must pay on your crypto gains, when you must report income tax on crypto, and how to file your crypto tax return with ease!

We are also updating this guide regularly based on the latest tax guidelines and rules from the IRS. All updates will be listed below so that you can quickly see if anything has been updated since your last visit:

Let’s start with the most important question of all…

Do you need to pay taxes on crypto?

Yes, you need to pay taxes on your capital gains and income from cryptocurrencies in the US. If you have sold, traded, or otherwise disposed of any crypto during the tax year, you must report this in the annual tax return. Keep in mind that there are certain ways to reduce your tax liability such as the tax-free allowance and the long-term capital gains tax rate.

With increasing attention to cryptocurrencies from tax authorities worldwide today, including the IRS in the US, it has become even more important than ever to understand the tax implications to avoid potential fines and trouble with tax authorities.

All American taxpayers have to file Form 1040 where on the first page the IRS is asking if you have received, sold, or exchanged any cryptocurrency during 2022. It has therefore become very difficult to hide from the tax authority today, and every crypto investor needs to consider what to report in this year’s tax return for 2022.

Digital asset question on Form 1040

If you check “Yes” on Form 1040, the IRS can double-check that you have reported the capital gains from cryptocurrencies correctly. If you have received, sold, or traded any cryptocurrency during 2022 and you check “No“, you might get in trouble with the IRS if they discover that you have been withholding information about your tax situation.

While this might sound very frightening initially, reporting your taxes correctly and accurately might be less stressful than you think. Keep on reading to first learn more about how crypto is taxed in the US before we towards the end of this guide will explain how cryptocurrency tax software can solve your tax pain with little effort from your side!

How is crypto taxed in the US?

Bitcoin and other cryptocurrencies are a form of digital money, or virtual currency, as it is sometimes referred to. It is in many ways similar to US dollars ($) or euros (€), but the most important distinctions are:

• Cryptocurrencies are exclusively digital. No physical coins or bills exist
• A 100% decentralized form of money without any central authority

Cryptocurrency is taxed as property in most countries, including the US. This means that if you buy a cryptocurrency like bitcoin, then later sell your coins when the price has appreciated, you will need to pay capital gains tax on your gains. If the cryptocurrency depreciates after purchasing, you can sell the coins and deduct the losses against other capital gains to reduce your taxes. This means you only pay taxes on the net capital gains from all transactions with cryptocurrencies during the tax year.

This also means that owning crypto is similar to owning other assets like stocks, gold, or real estate for tax purposes. Just as you would report capital gains from buying and selling stocks, you must also report capital gains from cryptocurrency transactions.

So, what are the taxes that you need to pay?

Which taxes do you pay on crypto in the USA?

There are two types of taxes you might need to pay if you own any cryptocurrency: Capital Gains Tax and Income Tax. In the US, capital gains are either short-term or long-term depending on how long you hold the asset from the purchase date until the same asset is sold in the future. Short-term and long-term capital gains are taxed at different rates in the US.

Which taxes you need to pay and how much depends on several factors:

• The type of transactions you have made (buying, selling, trading, etc.)
• If you have used cryptocurrency to pay for goods or services
• If you have received crypto from airdrops, staking, mining, interest payments, etc
• How long you held the asset before selling
• Your marital status and other income

The general formula for calculating capital gains is:

capital gains = selling price – purchase price

The selling price is simply the value of what you sold (disposed of) when you made the transaction. The purchase price is what you originally paid when you acquired the coins earlier and is also referred to as the cost basis. The cost basis should include associated costs such as commissions or trading fees.

Example

You buy 1 BTC for $30,000 plus a fee of $400. The cost basis for your 1 BTC is now $30,400. A few months later, you sell your bitcoin and receive $35,000 in return.

The capital gain is now easily found as $35,000 – $30,400 = $4,600 (assuming you don’t have any other transactions this year). This gain should be reported on your annual tax return, and you must pay short-term capital gains tax on the profits.

We will go into much more detail about calculating capital gains later in this guide, so fear not if this is still somewhat difficult to wrap your head around.

Next, we will look at how much tax you must pay on your crypto in the US for both Capital Gains Tax and Income Tax.

How much tax do you pay on crypto?

In the US, short-term capital gains and crypto income are taxed up to 37%, while long-term capital gains are taxed between 0% and 20% for the 2022 tax year. The applicable tax rates for crypto in the USA are dependent on your total taxable income, the types of transactions you have made, and for how long you held the asset before selling.

Tax rates in the USA

The two most important taxes for American taxpayers are Income Tax and Capital Gains Tax. Let’s look at both in more detail.

Income Tax

Crypto received as income is taxed at your ordinary-income tax rate which depends on your marital status and total income amount during the tax year.

The income tax brackets and tax rates for 2022 (filing in 2023) in the US are as follows:

Tax Rate	Single	Married Filing Jointly	Married Filing Separately	Head of Household
10%	$0 – $10,275	$0 – $20,550	$0 – $10,275	$0 – $14,650
12%	$10,276 – $41,775	$20,551 – $83,550	$10,276 – $41,775	$14,651 – $55,900
22%	$41,776 – $89,075	$83,551 – $178,150	$41,776 – $89,075	$55,901 – $89,050
24%	$89,076 – $170,050	$178,151 – $340,100	$89,076 – $170,050	$89,051 – $170,050
32%	$170,051 – $215,950	$340,101 – $431,900	$170,051 – $215,950	$170,051 – $215,950
35%	$215,951 – $539,900	$431,901 – $647,850	$215,951 – $323,925	$215,951 – $539,900
37%	$539,901+	$647,851+	$323,926+	$539,901+

This table shows the income tax brackets and tax rates for 2022. Source: Intuit

Example: Assuming you are a single tax filer with a taxable income of $45,000 during 2022, any additional income will now be taxed according to the 22% tax bracket as long as your total income does not exceed $89,075. This means that if you have received crypto from airdrops, staking, or mining, you will pay a 22% tax on the Fair Market Value (FMV) of the coins received at the time of the transaction.

Capital Gains Tax (CGT)

In the US, the Capital Gains Tax rate depends on how long you held the asset before you sold it. The gain is classified as long-term capital gains if you own a cryptocurrency for one year or longer before you sell. On the contrary, the gain is classified as short-term capital gains if you sell the cryptocurrency within one year of purchase.

Short-term capital gains are added to your income and therefore taxed at your ordinary-income tax rate discussed above. This means that depending on your other income, you will pay anywhere between 10% and 37% tax on capital gains from cryptocurrencies you held for less than one year.

If you have been hodling or invested long-term in a crypto project or token and waited more than 365 days before you sold, you are eligible for the long-term capital gains tax rate. Your long-term CGT tax rate depends on your total taxable income:

CGT Tax Rate	Single	Married Filing Jointly	Married Filing Separately	Head of Household
0%	$0 – $41,675	$0 – $83,350	$0 – $41,675	$0 – $55,800
15%	$40,401 – $459,750	$80,801 – $517,200	$40,401 – $258,600	$54,101 – $488,500
20%	$459,751+	$517,201+	$258,601+	$488,501+

This table shows the Capital Gain Tax Rates for 2022. Source: The IRS

As we can see from this table, long-term capital gains are tax-free if your taxable income is less than or equal to $41,675 for single filers! This is certainly a huge tax advantage, so it can be a good strategy to consider your holding period before selling your bitcoin or other cryptocurrencies.

Tip: Free Cryptocurrency Tax Software

It can be very challenging to keep track of all crypto transactions and correctly calculate your short-term and long-term capital gains. That’s why most people use a cryptocurrency tax calculator.

How to calculate capital gains on crypto

We have already defined the general formula for calculating capital gains:

capital gains = selling price – purchase price

To work out the capital gains we need to first calculate the selling price and purchase price (cost basis) for each transaction, and then classify the gain as either short-term or long-term. This can be done in four steps:

1. Calculate the selling price as the fair market value (FMV) on the date of the transaction
2. Calculate the cost basis using either FIFO, LIFO, or HIFO accounting method
3. Subtract the cost basis from the selling price to work out the capital gain or loss
4. Determine the holding period to classify the capital gain as either short-term or long-term

If you made a profit when selling, exchanging, or swapping your crypto, you have also made a capital gain. If you instead made a loss, you have made a capital loss on that transaction.

Calculating capital gains and losses is not very complicated if you only have a few transactions. However, most people that have bought cryptocurrencies have hundreds if not thousands of transactions spread on different exchanges and wallets, and that’s when things start to become a bit more complicated.

Next, we will show how to calculate capital gains with a practical example. We will consider only the First-in First-out (FIFO) cost basis method for simplicity, but you can learn more about the different accounting methods allowed in the US and how they are used in this article.

Example

Paul has been dipping his toes in the cryptocurrency world this year after creating his Coinbase account. These are his transactions in 2022:

• Bought 1 BTC for $22,000 (excl. $300 fee) on July 15th
• Sold 0.5 BTC for $12,000 (no fee) on September 1st
• Traded 0.3 BTC for 8.5 ETH on September 10th
• Received 20 XTZ from Coinbase Earn on October 5th

The fair market value (FMV) of 0.3 BTC at the time of the transaction was $6,500. The FMV of 20 XTZ on the day he received the tokens was $35. The cost basis for the 6 XTZ tokens take on the same value of $35. Paul’s transactions are summarized in the table below:

Tx No.	Type	Date	Amount	Price	Fees	Cost Basis	Capital Gains/Income
1	Buy	2022-07-15	1.0 BTC	$22,000	$300	$22,300	–
2	Sell	2022-09-01	0.5 BTC	$12,000	–	(?)	(?)
3	Trade	2022-09-10	0.3 BTC	$6,500	–	(?)	(?)
4	Income	2022-10-05	20 XTZ	$35	–	$35	(?)

Paul needs to do some calculations to work out his capital gains and taxable income to report to the IRS in 2023.

• Tx 2:Cost basis for selling 0.5 BTC is 0.5/1.0 * $22,300 = $11,150. Therefore, the capital gain is $12,000 – $11,150 = $850 (gain).
• Tx 3:Cost basis for exchanging 0.3 BTC is 0.3/1.0 * $22,300 = $6,690. Therefore, the capital gain is $6,500 – $6,690 = -$190 (loss).
• Tx 4:The taxable income for 20 XTZ tokens received is equal to the fair market value of $35.

The updated table, including resulting capital gains, will now look like this:

Tx No.	Type	Date	Amount	Price	Fees	Cost Basis	Capital Gains/Income
1	Buy	2022-07-15	1.0 BTC	$22,000	$300	$22,300	–
2	Sell	2022-09-01	0.5 BTC	$12,000	–	$11,150	$850
3	Trade	2022-09-10	0.3 BTC	$6,500	–	$6,690	-$190
4	Income	2022-10-05	20 XTZ	$35	–	$35	$35

Therefore, Paul’s total capital gains are $850 – $190 = $660. This gain is classified as short-term and will be taxed according to his ordinary-income tax bracket. He will also need to report $35 of cryptocurrency income which will be added to his total income.

As we can see from this simple example, calculating capital gains and losses for your cryptocurrency transactions is relatively straightforward – as long as you don’t have too many transactions!

Next, we will look at different transaction types and taxable events for cryptocurrencies in the US.

Is buying crypto taxed in the US?

Whether or not you need to pay tax when buying crypto depends on what you are using to pay for your crypto. There are different tax rules for buying cryptocurrency with fiat currencies such as USD, or if you are buying crypto with another crypto including stablecoins.

Buying cryptocurrency with fiat currency (USD, EUR, etc)

Buying cryptocurrency with any type of fiat currency (USD, EUR, GBP, etc) is not a taxable event in the US. This means if you bought BTC and never sold it, you don’t have to worry about any taxes!

Tax status:

 

NOT TAXED

Buying crypto and paying with another crypto

Exchanging, swapping, or trading a cryptocurrency for another cryptocurrency is a taxable event in the US. The key point is that you are disposing of a cryptocurrency which is why this is considered a capital gains transaction by the IRS even though you are not receiving USD in your wallet or account.

This means that if you are exchanging BTC for ETH on an exchange, you must calculate and report the capital gains from the BTC sold (disposed of).

You need to first calculate the fair market value (FMV) of the cryptocurrency received from the transaction, and then work out the cost basis of the cryptocurrency sold. The capital gains can then be found directly as the cost basis subtracted from the value of the crypto received.

Example: you buy 1 BTC for $8,000, and later you go all-in on Chainlink and buy 1000 LINK with the 1 BTC. First, you need to calculate the FMV of 1000 LINK which we assume is $9,500 at the time of the transaction. The capital gains for disposing 1 BTC is therefore found as: $9,500 – $8,000 = $1,500 (profit).

Tax status:

 

CAPITAL GAINS TAX

Note: Stablecoins like USDT and USDC are considered equal to other cryptocurrencies. This means that there is no difference between trading with stablecoins or other cryptocurrencies for tax purposes.

Is selling crypto taxed in the US?

Yes, selling cryptocurrency is a taxable event in the US as stated by the IRS.

The capital gains will be considered short-term capital gains if you are selling your crypto within one year of purchasing it. Short-term gains are taxed similar to your ordinary income. If you are holding onto your coins for one year or longer before selling, you will pay long-term capital gains tax instead. The long-term capital gains tax rate depends on your total income and is anywhere between 0% and 20% for cryptocurrencies in the US.

It’s important to be aware that it does not matter if you are selling your crypto for USD, EUR, or another cryptocurrency. The transaction will be considered a taxable event by the IRS as long as you are disposing of any cryptocurrency.

Tax status:

 

CAPITAL GAINS TAX

Paying for goods or services

Using cryptocurrency to pay for goods or services is equal to selling and is therefore considered a taxable event.

For example, if you are buying a cup of coffee for $4.5 with bitcoin using the lightning network, you need to calculate capital gains for the bitcoin you sent to the coffee shop. The same rules also apply if you are using a crypto debit card like the MCO Visa card from Crypto.com.

There is no difference between paying for a physical good (coffee, laptop, car) or a service (flight, hotel booking, Spotify subscription) for tax purposes in the US according to the IRS.

Tax status:

 

CAPITAL GAINS TAX

Tax on cryptocurrency mining

Any cryptocurrency received to your wallet from mining is taxed as ordinary income in the US. There is no difference if you are mining in a pool or solo, or if you are using your own mining hardware or a cloud mining service. You need to calculate the fair market value of the coins on the day when you received them and report the total amount on your tax return the next year.

Cryptocurrency received from mining is also subject to capital gains tax when you sell the coins in the future. The cost basis is equal to the fair market value when you received the coins. In other words, you are only paying capital gains tax if the cryptocurrency has appreciated in value before being sold in the future.

Similarly, if the coin depreciates in value from the date you received the mining reward and until you sell it later, you can claim this as a capital loss and potentially offset your other capital gains.

Tax status:

 

INCOME TAX

Tax on staking rewards

The IRS is yet to issue specific guidance on cryptocurrency staking rewards. However, most CPAs and tax professionals seem to agree that the safest approach is to report crypto received as staking rewards similar to mining rewards.

In Notice 2014-21, the IRS has laid out clear guidelines to the tax treatment of mining rewards. By applying the same guidance, a staking reward is taxable as ordinary income at its fair market value on the date you receive the coins or tokens. Similar to mining, any crypto received from staking that is later sold will be subject to capital gains tax.

What is worth mentioning is that the IRS has agreed to refund the taxes paid by an American couple for staking rewards they received from the Tezos network. This opens up the question of whether staking rewards should actually be taxed or not in the US. The outcome of this court case is still pending and we will update this guide with any news related to this case later.

Tax status:

 

INCOME TAX

Margin and futures trading

Any gains from cryptocurrency margin or futures trading are taxed in the US. Similarly, any trading loss can be used to potentially offset your other gains so it’s important to keep a good record of all your transactions.

We will break down the tax rules applicable to margin and futures trading in the US in more detail below.

Taxes on crypto margin trading

When you are trading on margin you are raising your buying power by borrowing funds to buy or sell a cryptocurrency. This means that you have an increased opportunity to make more profit, but also a higher risk of losing all your money.

No specific tax guidance has been issued by the IRS regarding taxes on margin trading for cryptocurrencies, but the general agreement among CPAs and tax professionals is that any gains should be treated as capital gains. The easiest way to account for this is to calculate the closed pnl for closed margin positions. Some exchanges can also provide this information directly as a downloadable CSV file.

Tax status:

 

CAPITAL GAINS TAX

Taxes on crypto futures and derivatives trading

Similar to margin trading, derivatives trading can increase your buying power through the use of leverage. Instead of buying or selling the actual asset, you are trading what is referred to as derivative contracts. A contract always represents a real asset so the price will in most cases not be very different than the price on spot exchanges. There are many cryptocurrency derivative exchanges today, and you can trade contracts representing almost all of the most popular cryptocurrencies.

Because of the complicated tax environment surrounding futures and derivatives today, the conservative approach for traders is to report all gains and losses from cryptocurrency trading as capital gains similar to margin trading.

Tax status:

 

CAPITAL GAINS TAX

Tax on DeFi and NFTs

Both the DeFi and NFT landscape is relatively new even in the crypto universe. Everything DeFi, liquidity mining, and earning passive income from your cryptocurrency became hugely popular in the summer of 2020, which is until this day still often referred to as the “DeFi summer”.

The IRS is yet to issue specific guidance that addresses the tax treatment of both DeFi and NFTs. The best approach until then is to look at the current guidance for buying, selling, exchanging, and receiving cryptocurrency from the IRS to deduce the best approach for reporting taxes today.

As we have already covered, capital gains tax is triggered every time you are either selling, exchanging, swapping, or otherwise disposing of any cryptocurrency. Income tax, on the other hand, is generally triggered every time you receive a cryptocurrency from activities such as mining, staking, airdrops, hard forks, etc. Based on these simple guidelines, we can make the following assumptions for how the IRS most likely will consider DeFi transactions for tax purposes:

DeFi transaction	Tax status	Comment
Earning interest	Income tax	Receiving new tokens is taxed as income
Paying interest	Capital gains tax	Capital gains tax if the interest is paid in cryptocurrency. No tax if paid in fiat.
Lending out cryptocurrency	Not taxed	Not taxed as long as the crypto lent out is not converted
Borrowing cryptocurrency	Not taxed	No tax as long as your collateral is not converted or liquidated
Liquidations	Capital gains tax	A liquidation is considered equal to disposing of cryptocurrency
Receiving staking rewards	Income tax	Most likely taxed as income. See chapter about Staking rewards for more details.
Depositing crypto to staking pool	Not taxed	Not taxed as long as the crypto deposited is not converted
Swapping crypto on a DEX (eg. Uniswap)	Capital gains tax	Considered equal to selling crypto
Adding/removing liquidity from a pool	Capital gains tax	Generally, capital gains tax applies every time a cryptocurrency is disposed of
Earning liquidity rewards	Income tax / Capital gains tax	Depends on whether you receive new tokens or if your already owned tokens accrue value instead
Yield farming on DeFi protocols	Income tax	Receiving new tokens is taxed as income
Tokens received from Play to Earn protocols/games	Income tax	Receiving new tokens is taxed as income

Do you pay tax on NFTs in the US?

Yes, NFTs are taxed in the US since buying and selling NFTs are not any different than buying and selling other cryptocurrencies. This means that you are realizing capital gains every time you are selling or otherwise disposing of an NFT token.

You are realizing a capital gain if the NFT has appreciated in value from the date you bought it and until you sold it later. Similarly, you realize a capital loss if the NFT has depreciated in value instead. Capital gains from NFTs are taxed as either short-term or long-term capital gains tax as previously discussed in this guide.

Tax status:

 

CAPITAL GAINS TAX

Crypto gifts and donations

Tax on cryptocurrency sent or received as a gift

The annual gift exclusion is $15,000 for the 2021 tax year in the US. This means that if you have either received or sent gifts below this threshold, the cryptocurrency is generally not taxed for either the receiver or sender.

The annual gift exclusion is calculated per person so that you can give multiple gifts to different persons without being taxed as long as the total amount sent to any single person does not exceed the allowance of $15,000.

If you exceed the annual gift exclusion for any single person, you will pay tax between 18% and 40% depending on the total amount gifted during the tax year.

The general rule for receiving crypto as a gift is that the receiver simply acquires the sender’s cost basis including the holding period. Neither the sender nor receiver is therefore taxed on the date of the transaction, but the receiver is instead first taxed when the coins are sold later in the future.

Tax status:

 

NOT TAXED

Tax on cryptocurrency donations

The IRS has clarified the taxation on donations in the latest guidance released in 2019. The guidance specifically says that you will not trigger any capital gains or income tax if you donate cryptocurrency to a registered charitable organization.

Not only are crypto donations not taxed, but you can also claim the donation as a tax deduction! How much deductions you are allowed depends on a few things:

• the original cost basis
• the fair market value at the time of donating the cryptocurrency
• for how long you have owned the asset

Keep in mind that the organization must be registered with the IRS and have a 501(c)3 status for you to be allowed to claim the tax deduction. You can check an organization’s status on the Tax-Exempt Organizations Search page.

Tax status:

 

NOT TAXED

Other cryptocurrency transactions

We have so far covered some of the most typical cryptocurrency transactions you might have to consider when it comes to taxes in the US. There are also many other different ways that you can either send or receive crypto. Below, we will comment briefly on the tax treatment of other transaction types and events not already mentioned.

Investing in ICOs/IEOs

When investing in a new project through an ICO/IEO you are always exchanging crypto for another crypto. In most cases, you will either send ETH, USDT, or BTC and receive token XYZ sometime in the future. Participating in an ICO or IEO is therefore no different than trading cryptocurrency and is a taxable event.

It is important to note that you are not taxed before you actually receive the new tokens in your wallet as clarified in the latest guidance from the IRS. This means that if you participated in an ICO in 2019 and the tokens were distributed in 2020, you should report this on your tax return for 2020 (which you file in 2021).

Tax status:

 

CAPITAL GAINS TAX

Token swaps

Cryptocurrencies are sometimes conducting what is called a token swap. This can happen when a project launches its own mainnet and needs to migrate all the tokens over to the new blockchain. This is usually done at a 1:1 ratio so that if you send 100 tokens you will also receive 100 tokens, or it can be a totally different ratio so that your new token balance is changed after the swap.

For example, VeChain did a 1:100 token swap in 2018 which means that you would receive a 100x amount of the coins you owned previously. Token swaps are in general not taxed, but remember that it’s important to make any necessary adjustments to your holdings if the number of coins you own has changed after the token swap event.

Tax status:

 

NOT TAXED

Hard forks

There has been a lot of confusion surrounding the taxation of hard forks in the past because of the complicated nature of how new coins are actually created. When the IRS published Rev. Rul. 2019-24 in 2019, this was finally a lot clearer to all cryptocurrency holders:

Crypto received from a hard fork is taxed as ordinary income at the time when the coins become available to you, which is usually when they were deposited in your wallet or exchange account.

What’s worth noting is that in many cases, the price of a newly forked cryptocurrency is zero right after the blockchain split occurs because no one has bought the new coin from someone else yet. In this case, you will not pay any income tax because the fair market value is essentially zero. Instead, you will only pay capital gains tax with a cost basis equal to zero when you sell the coins later.

Tax status:

 

INCOME TAX

Airdrops

Airdrops are generally taxed in a similar manner as hard forks. Because many airdrops are of negligible value and sometimes impossible to sell on an exchange, it’s still not 100% clear if you are required to report such airdrops as income or not.

Tax status:

 

INCOME TAX

Rewards, bonuses, referral commission

Some exchanges use incentives like sign-up or referral bonuses to get more customers to use their platform. Any type of bonus or reward you have received should generally be declared and taxed as ordinary income.

Tax status:

 

INCOME TAX

Sending crypto between wallets

You don’t have to worry about taxes if you are simply sending cryptocurrency between your own wallets or exchange accounts. Keep in mind that the IRS might ask you to provide a full breakdown of which addresses you have sent or received crypto from, so remember to keep full records of all your transactions.

Tax status:

 

NOT TAXED

How to calculate your crypto taxes

We have so far been focusing on how cryptocurrency is taxed in the US and what the IRS says about different crypto transactions and taxable events. We have also briefly discussed the formula for calculating cost basis and capital gains. There are essentially two different ways to go about this – either manually or using a crypto tax calculator.

Let’s look at both methods:

Calculating your crypto taxes manually

Here are the steps you must take to calculate your crypto taxes manually:

1. Download the transaction history from all exchanges where you have bought, sold, received, or sent any cryptocurrency. This also includes transactions from or to your wallets.
2. Calculate the cost basis for every individual transaction where cryptocurrency is sold or otherwise disposed of
3. Calculate the proceeds and resulting capital gains for all transactions that are considered taxable disposals by the IRS
4. Identify all transactions subject to income tax in the US
5. Summarize all the calculations to find the total capital gains and your taxable income during the tax year

Remember to also keep track of both the date for acquisition and selling for every transaction since you need to report short-term and long-term capital gains separately in the US.

It is also a good idea to consult a CPA or tax professional if you are doing your crypto taxes manually since it can be very challenging to work out all the calculations correctly unless you are using very sophisticated spreadsheets that can automatically check for any errors such as missing purchase history.

Calculating your crypto taxes using crypto tax software

The best option for most people will likely be using cryptocurrency tax software to do their calculations.

For American tax filers, you can download Form 8949 and Schedule D for your capital gains transactions. You can also download the Schedule 1 form with your total taxable income from cryptocurrencies.

How to report your crypto taxes in the US

Taxes on your cryptocurrency should be filed together with your annual tax return. You can either file your crypto taxes using paper forms, or you can use tax apps like TurboTax or TaxAct. The deadline for reporting your crypto taxes is the same as your ordinary tax return deadline.

Crypto tax forms

There are quite many IRS tax forms today, but only a handful of these are applicable for reporting your cryptocurrency-related activity. The three most important forms you need to know about if you are from the US are:

• Form 8949: This form should include a complete list of cost basis and proceeds for all crypto disposals for both long-term and short-term holding periods
• Schedule D: A summary of the disposals entered on Form 8949 showing the total long-term and short-term capital gains
• Schedule 1: The total income from cryptocurrency should be reported on line 8z of this form

For each disposal, you must first calculate the fair market value (FMV) of the cryptocurrency received when you made the transaction. This is also referred to as the proceeds. Next, you need to determine the cost basis of the cryptocurrency sold. The gain or loss is then found as the cost basis subtracted from the proceeds.

This is how Form 8949 looks like with this information:

IRS Form 8949 

Form 8949 should include all your crypto disposals together with the date you acquired the crypto, when it was disposed of, your proceeds, your cost basis, and the resulting capital gain/loss. After adding all transactions, summarize the gain/loss on each page at the bottom, and transfer the total sum to your Schedule D.

How to report taxes with cryptocurrency tax software

Using cryptocurrency tax software to calculate capital gains can be a huge time-saver.

When to report your crypto taxes

The deadline for reporting taxes on cryptocurrencies in the US is the same as the deadline for your ordinary tax return which is the 15th of April the following year. In 2023, this date falls on a weekend, and the following Monday is the District of Columbia’s Emancipation Day holiday. This means that for the 2022 financial year, which runs from the 1st of January to the 31st of December 2022, the official tax deadline is April 18, 2023.

There are some exceptions to this like for US citizens living abroad (ex-pats) or for military personnel on duty outside the US. If this applies to you, the IRS will automatically grant you a 2-month extension period such that the deadline is June 15, 2023.

We recommend consulting with a tax professional if you have further questions about the tax deadline or what to do in case you have failed to report your crypto gains in your annual tax return.

What happens if I don’t report my crypto taxes?

It is a common belief among cryptocurrency traders that the government and the IRS will not get knowledge about their crypto activity such as trading on exchanges, but this is far from true.

While the IRS didn’t make much effort around crypto tax reporting during the first years (up until 2016), the agency is now actively tracking down people who own or have transacted with cryptocurrencies. For example, since 2018, the IRS has received records of individuals who bought crypto on Coinbase directly from the exchange itself.

Not only that, more than 10,000 warning letters were sent in 2019 to US taxpayers who had either not correctly reported their gains from cryptocurrency investments, or ignored it completely.

IRS warning letter sent to more than 10,000 US tax filers in 2019

It should be clear now that it’s impossible to hide completely from the IRS if you have ever bought or sold cryptocurrency. Failing to report your crypto taxes is very risky and can get you in a lot of trouble down the road including penalties or even criminal prosecution if you have been committing tax fraud.

If you have failed to report your crypto taxes for prior years, you can still amend your prior tax returns for up to three years by filing Form 1040-X. We strongly recommend consulting with a CPA or tax professional if you are in this situation to avoid potential fines from the IRS in the future.

Frequently asked questions

Do you still have any questions? Here are the answers to some of our most frequently asked questions.

Why can’t the exchange provide me with accurate tax reports?

This is one of the biggest challenges with crypto tax reporting today. As soon as you either transfer cryptocurrency from the exchange or purchase crypto on a different platform, the exchange no longer knows when, how, or at what rate you acquired all your cryptocurrencies. This information is required for tracking your cost basis and generating tax reports, which is why the only solution is to use a crypto tax app to do the job in most cases.

How can I pay less tax on my crypto?

There are two methods you can use to reduce your tax liability from cryptocurrencies:

1. Buy and hold your crypto for one year or longer for the gains to be considered long-term capital gains instead of short-term capital gains. Long-term gains are tax-free if your ordinary taxable income does not exceed $41,675 in 2022.
   2. Practice wash-selling by selling any cryptocurrency currently at a loss and then buying the coins back shortly after if you still want to maintain ownership. This is normally not allowed for other asset classes like equities but is completely legal for cryptocurrencies since it is considered property by the IRS. This is also referred to as tax-loss harvesting.

Can I deduct losses if I have lost money from crypto trading?

Losses that arise from selling or trading cryptocurrency are considered capital losses and can be used to offset your capital gains both from cryptocurrencies and other assets.

If you have a net capital loss at the end of the year, the loss can be deducted from your ordinary taxable income up to the maximum allowed amount. For 2022, this amount is currently $1,500 for individuals filing as single, or as married and filing separately. If you are married and filing jointly, the maximum amount is currently $3,000.

Can I deduct losses from exchange hacks or scams?

It was possible to claim tax deductions on casualty losses in the past, but this changed after the passing of the Tax Cuts and Jobs Act in 2017. The current ruling says that you can only claim deductions if “the loss is caused by a federally declared disaster declared by the President”.

This is not the case if you have lost your crypto from an exchange hack or a scam attempt. In any case, we recommend that you consult a tax professional for advice if you are in doubt about your particular situation.

How can I report my taxes from DeFi?

The IRS has not yet issued any specific tax guidance on transactions with DeFi protocols such as Uniswap, Aave, or Compound. The best approach until then is to look at the current guidance for buying, selling, exchanging, and receiving cryptocurrency to deduce the best approach for reporting DeFi taxes today.

The general rule is that capital gains tax is triggered for all cryptocurrency disposals, while income tax is triggered each time you receive new tokens as interest, staking rewards, etc.

Summary

The most important take-away message from this guide should be that tax authorities around the world including the IRS are now enforcing strict measures so that individuals have to report and pay their taxes according to the law. Today, all American tax filers have to answer Yes or No whether they have dealt with cryptocurrency during the last year in their tax return. Failing to report your crypto taxes is very risky and can result in penalties, or worse.

Here are some of the key points from this guide:

• Buying (and paying with fiat currency), transferring crypto between wallets, donations, and gifting cryptocurrency is tax-free
• Selling, trading, swapping, and margin trading are taxed as capital gains
• DeFi transactions where a cryptocurrency is disposed of are taxed as capital gains
• Cryptocurrency received from mining, staking, airdrops, etc., is taxed as ordinary income
• Capital gains are considered either short-term or long-term and are taxed at different rates
• In the US, you typically have to file Form 8949, Schedule D, and Schedule 1 if you have bought and sold cryptocurrency during the tax year

If you have been using different exchanges like Coinbase or Binance, it will quickly become very challenging to report your crypto taxes manually. That’s why we built Coinanda which today has helped more than 80,000+ cryptocurrency traders solve their tax problems. Not only can you import transactions automatically from all exchanges and blockchains today, but the software also allows you to download all required tax documents including IRS Form 8949 and Schedule D.

 

Have you dabbled in cryptocurrencies and are not quite sure how crypto is taxed in Germany? Similar to most other countries, you need to pay the tax man if you made gains on your crypto. But luckily, you can keep all the profits yourself under special circumstances according to current tax rules from the German Federal Ministry of Finance, or Bundesfinanzministeriums (BMF). In this complete tax guide, you will learn everything you need to know about how crypto is taxed in Germany, how much tax you pay on your crypto gains, how to calculate your crypto taxes, how to reduce your taxes by hodling your crypto, how to file your crypto taxes to the BMF, and how to use a crypto tax calculator to generate all the tax reports you need.

Do you pay taxes on crypto in Germany?

Yes, but it depends. Short-term gains and crypto income are taxed similar to ordinary income for German taxpayers. This means that any cryptocurrency sold during the tax year that you made profits on must be reported to the BZSt each year. However, if you hold your coins for one year or longer, the gains are completely tax-free.

In the next section, we will look closer at how crypto is actually taxed in Germany.

How is crypto taxed in Germany?

According to German law, all cryptocurrencies are considered a “digital representation of value” that is neither issued nor guaranteed by a central bank or public authority. This means that crypto assets do not have the legal status of money or currency, also called legal tender, but are instead treated as private goods from a tax perspective.

Because cryptocurrencies are considered private goods, they don’t attract Capital Gains Tax such as equities or stocks do. Instead, crypto gains are taxed as Income Tax, but only if you held the cryptocurrency for less than 12 months before you sold. Like in most other countries, all transactions where you dispose of a cryptocurrency are considered taxable events in Germany. This includes selling crypto for fiat currency such as Euro or US dollar, converting one cryptocurrency to another, or paying for goods or services with crypto.

If you wait one year before selling your coins, you don’t need to pay any taxes at all! This is great news for German crypto investors who have the patience to not sell too early.

In addition to taxes on cryptocurrency disposed of, you might also need to pay Income Tax on crypto received from staking, mining, airdrops, etc. We will explain these tax topics in more detail later in this guide.

Germany crypto tax rates

All short-term cryptocurrency gains are taxed as Income Tax according to your individual Income Tax rate in Germany. This means that depending on your total income during the tax year, you will pay anywhere from zero to 45% tax on your crypto gains.

Income	Single taxpayers	Married taxpayers
0%	€0 – €10,347	€0 – €20,694
14 – 42%*	€10,348 – €58,596	€20,695 – €117,192
42%	€58,597 – €277,825	€117,193 – €555,650
45%	€277,826+	€555,651+

This table shows the individual Income Tax rates for 2022 for single and married German taxpayers. Source: PWC

* Geometrically progressive rates start at 14% and rise to 42%.

Please note that the tax rates above do not include the solidarity surcharge tax of 5.5% which is imposed on single taxpayers paying more than €16,956 in income tax as well as married taxpayers paying more than €33,912.

How to calculate capital gains in Germany

A capital gain occurs when you sell a cryptocurrency for more than what you originally paid for it. On the other hand, a capital loss occurs if the sales price is lower than the purchase price. All values used to determine a capital gain or loss for German taxpayers must be in Euro at the time when the transaction happened.

The general formula for calculating capital gain is:

capital gain = selling price – purchase price

The selling price is simply the value of the crypto sold at the time of the transaction. This value can be found directly from the exchange or from popular price aggregator sites. The purchase price can be trickier to figure out since you need to look up what you originally paid for the coins that you sold. If you are not able to establish the purchase price, a conservative approach is to consider the value to be zero. However, this means that you need to pay tax on the full amount, and therefore more tax than you actually should.

According to the latest crypto tax guideline issued by the BZSt on May 10, 2022, the purchase price, or cost basis, can be calculated using individual identification when possible and as long as it can be documented. However, when this is not possible, the recommended accounting method is First in First out (FIFO) which means that the oldest coins are sold first.

Germany tax-free crypto

The biggest advantage for German taxpayers is that any gain from crypto hold for more than a year is not taxed at all. It does not matter how much gain you actually made, only the holding period before the coins were disposed of.

Let’s look at all the different tax-free situations in Germany:

• If you hold your cryptocurrency for one year or longer
• If your total profits from short-term gains are less than €600 during the tax year
• If your total income from crypto (staking, mining, etc) is less than €256 during the tax year

Next, we will look at the different crypto tax rules in Germany in more detail.

Taxable transactions in Germany

For most crypto users in Germany, the most important thing to keep in mind is that crypto sold within one year is taxed as income according to the crypto tax guidance issued by BMF. However, there are also other transactions that might trigger income tax.

Let’s break it all down:

Selling cryptocurrency for fiat currency within 1 year

Cryptocurrency sold within one year after buying is taxed as income in Germany. This is because cryptocurrency is considered private goods in Germany and is therefore not taxed in the same way as for example stocks and equities.

Note that you are only taxed if the total short-term profit during the tax year exceeds €600.

Tax status:

 

INCOME TAX

Selling crypto for another crypto within 1 year

The latest tax guidance issued by the BMF clearly states that exchanging one cryptocurrency for another is a taxable event – as long as you held the coins for less than one year. This means that trading one crypto for another is taxed as income tax in Germany if your total profits exceed €600 during the tax year.

Further, the guidance states that the sales proceeds should be accounted for in Euro by looking up the fair market value of the cryptocurrency received. If you cannot value the crypto received at the time of the transaction, you can find the market value in EUR of the cryptocurrency sold instead.

Tax status:

 

INCOME TAX

Spending crypto within 1 year

Cryptocurrency used to purchase goods or services is considered similar to selling crypto and is therefore also taxed as income if the coins were sold less than one year after the initial acquisition.

Tax status:

 

INCOME TAX

Investing in an ICO or IEO

The BMF has clarified the tax treatment of ICOs and IEOs in the latest guidance from May 2022. Since this is essentially similar to exchanging one crypto for another crypto, such transactions are also treated similarly for tax purposes. This means that if you invest in token XYZ and pay with Bitcoin, you will have to calculate the profits on the Bitcoin disposed of. You will need to use the fair market value of Bitcoin on the date you made the investment. This value will also become the acquisition price, or cost basis, for the newly purchased tokens.

The transaction will be taxed as income if you made a profit and held the coins for less than a year. If you held the coins for more than a year, the profits are tax-free as already discussed.

Tax status:

 

INCOME TAX

Selling of staked cryptocurrency within 1 year

Good news for all DeFi enthusiasts in Germany – the tax-free holding period for staked crypto has been reduced from 10 years to one year. This means that depositing crypto to a staking pool will not change the holding time requirement since the one-year period is still calculated from the time of acquisition rather than the time of withdrawal from the staking pool.

The same rules apply to cryptocurrency deposited into decentralized lending protocols and also centralized lending platforms.

Tax status:

 

INCOME TAX

Tax on cryptocurrency mining rewards

The BMF has provided detailed clarifications on the topic of cryptocurrency mining in the latest guideline. What is important to know with regard to taxes is that hobby miners with an annual turnover of less than €256 do not need to report the income to BZSt in the annual tax return.

However, if the total amount exceeds this threshold during the tax year, the total amount is treated as ordinary income and is subject to income tax similar to short-term gains. You are also allowed to deduct any directly related expenses from the total profits such as hardware or electricity cost, so keep this in mind when working out your total profits during the year.

In addition, you are also required to register as a business and pay the associated one-time fee if your annual turnover exceeds €256.

Tax status:

 

INCOME TAX

Tax on cryptocurrency staking rewards

Cryptocurrency received as staking rewards is treated similarly to mining rewards. This means that you are only taxed on your staking rewards if the total amount during the tax year exceeds the threshold of €256. Similarly, to mining, you are also required to register as a business if you receive staking rewards exceeding the threshold.

Tax status:

 

INCOME TAX

Tax on cryptocurrency airdrops

Airdrop of a cryptocurrency or token is often done as part of a marketing or advertising campaign. In some cases, you will need to register before a deadline to become eligible to receive tokens. You may also receive tokens just from holding another cryptocurrency in your wallet or on an exchange, or the airdrop might be given to people who perform specific actions such as sharing social media posts or inviting people to a Discord channel.

The BMF has clarified that airdrops are taxed as income tax only if the airdrop has been received in exchange for a service. This means that if you received the airdrop without doing any specific actions, the airdrop is considered tax-free. However, if you provided a service of any kind such as sharing social media posts or creating content, the airdrop will be taxed as income tax.

Tax status:

 

INCOME TAX (DEPENDS)

Tax on received interest

If you are lending out your cryptocurrency on an exchange or DeFi protocol and are paid interest from the deposited collateral, you need to pay income tax on the amount received. You should use the fair market value at the time of receipt when calculating the value of the interest payments.

Tax status:

 

INCOME TAX

Other crypto income

Today, some employers are giving the option to their employees to have their salaries paid out in cryptocurrency instead of Euro. The BMF states that crypto received as payment for salary is considered a normal salary and is therefore taxed equal to other income paid in Euro directly.

Tax status:

 

INCOME TAX

Example 1

Benjamin bought 4 ETH for €600 in 2020. One year later he buys another 2 ETH for €2,000 in April of 2021. Now, Benjamin owns 6 ETH which he has paid a total of €2,600 for.

In February of 2022, Benjamin decides to sell his entire investment. He sells 6 ETH and receives €15,000 in exchange. His transactions can be seen in the below table:

Type	Date	Amount	Price	Cost Basis	Profit/loss
Buy	2020-06-08	4 ETH	€600	€600	–
Buy	2021-04-17	2 ETH	€2,000	€2,000	–

To calculate his capital gains Benjamin needs to calculate the two disposals separately to take advantage of the tax-free short-term gains when he reports his taxes.

• Price of 4 ETH sold: 4/6 * €15,000 = €10,000
• Price of 2 ETH sold: 2/6 * €15,000 = €5,000

Type	Date	Amount	Price	Cost Basis	Profit/loss
Buy	2020-06-08	4 ETH	€600	€600	–
Buy	2021-04-17	2 ETH	€2,000	€2,000	–
Sell	2022-02-28	4 ETH	€10,000	€600	€9,400 (tax-free)
Sell	2022-02-28	2 ETH	€5,000	€2,000	€3,000

Now that Benjamin has worked out his capital gains, he simply needs to report the €3,000 gains on the annual tax return so that he will be taxed according to his Income Tax rate. The long-term gains of €9,400 are tax-free since he held the coins for longer than one year.

Tax-free transactions in Germany

Compared to many other countries, Germany is rather tax-friendly when it comes to cryptocurrency taxation and German taxpayers can enjoy several tax breaks on their crypto.

Buying cryptocurrency with fiat (Ex: EUR → BTC)

The BMF and BZSt do not consider buying crypto and paying with fiat currency a taxable event. This is because only the currency disposed of is considered for Income Tax purposes.

It’s important to keep track of all your purchases and complete transaction history so that you can calculate the purchase price correctly when you sell the cryptocurrency in the future.

Tax status:

 

NOT TAXED

Selling cryptocurrency after 1 year

Cryptocurrency held for one year or longer is always tax-free in Germany. That means if you have the patience to hold your coins for one year or longer before selling, you don’t even need to report your gains to the BZSt the next year!

 

Wonder how cryptocurrency taxes work in the Netherlands? Not sure if Dutch taxpayers need to report transactions with cryptocurrencies in their personal tax return? If you are curious about how crypto taxes actually work, we’ve got you covered in this crypto tax guide for the Netherlands! Read on to learn more about how crypto is taxed in the Netherlands, how much tax you must pay on your crypto gains, and how to report your crypto taxes to the Dutch Tax Administration, Belastingdienst.

Do you pay tax on crypto in the Netherlands?

Yes – but only based on the value of your cryptocurrency portfolio at the beginning of the year. Contrary to most other countries, you are not taxed when buying, selling, exchanging, or otherwise disposing of a cryptocurrency.

How is crypto taxed in the Netherlands?

From a legal perspective, cryptocurrencies are not considered equal to the euro, other fiat currencies, or as an official method of payment guaranteed by the central bank. Instead, all crypto assets are considered a type of personal asset which is taxed similarly to stocks and equities for example.

You might have heard the word “capital gains tax” thrown around in the context of cryptocurrency taxes previously. While most countries impose this type of capital gains tax on the profits from selling cryptocurrencies, this is actually not the case in the Netherlands. Rather than paying taxes on their realized profits, Dutch taxpayers are taxed on the assumed increase in value of their cryptocurrency holdings during the year. This means that, in practical terms, Dutch taxpayers are taxed even by just buying or holding cryptocurrencies without ever selling.

So how does this work in practical terms? First, you need to establish the acquisition cost at the beginning of the tax year or on the date you acquired the asset – whichever comes last. If you acquired a cryptocurrency for the first time sometime during 2022, you will use the value on the acquisition date(s) as your cost basis. On the other hand, if you hold a cryptocurrency at the end of the year that was acquired during previous years, you will use the value on January 1st as the cost basis since you already paid taxes on the assumed increased value the year before. We will explain this in more detail later in this guide, so if this sounds confusing, take a deep breath and keep on reading!

When it comes to the actual process of reporting taxes in the Netherlands, there are three different types of income that must be reported separately. More specifically, all income is divided into three different boxes:

• Box 1– Taxable income from work and home
• Box 2– Taxable income from a substantial interest
• Box 3– Taxable income from savings and investments

Different tax rates apply to the different boxes, and each income type falls under only one box. You are therefore not taxed twice on your income, luckily. You are also not allowed to offset a loss in one box with a profit or positive income in another box. Cryptocurrencies fall under Box 3 since this is considered an investment from a tax perspective.

With that out of the way, let’s look at the different tax rates in the Netherlands in more detail.

Tax rates in the Netherlands

The rates applicable for most Dutch taxpayers are the Box 1 tax rate – typically your ordinary employment income – and the Box 3 tax rate – the tax on the increased value of your assets and investments. Let’s break both down in more detail.

Tax on savings and investments

If you hold assets such as savings and investments at the beginning of the year, you will pay 31% tax on the assumed increase in value from the investment basis – also referred to as the fictitious gain.

Keep in mind that the 31% tax rate is not applied to the actual increase in value during the tax year, but rather the assumed increase according to specific criteria and rules. Also, the calculation of Box 3 income was changed recently after a decision by the Supreme Court on the 24th of December, 2021. We will explain how the new calculations work in more detail in the next section.

Personal income tax rates

Taxable income from employment falls under Box 1 and is taxed according to progressive tax rates. Box 1 also includes income from home ownership, periodic receipts and payments, and benefits relating to income provisions.

For 2022, the personal income tax rates for Box 1 vary from 9.42% to 49.50%.

Taxable income band	Tax rate
€0 – €35,472	9.42%
€35,473 – €69,398	37.07%
€69,399+	49.50%

This table shows the Personal Income tax rates for 2022 in the Netherlands. Source: PWC

How much tax do I pay on my crypto?

As already explained, Dutch taxpayers are not taxed when selling, exchanging, or disposing of cryptocurrencies, but are instead taxed based on an assumed increase in value during the year calculated from the asset’s value on the 1st of January.

With the new calculation method that came in place recently, investments such as cryptocurrencies are assumed to have fictitious returns of 5.69% during 2021. The fictitious return rates for 2022 have not yet been published but are likely to be slightly higher than the current rates.

To understand how these calculations actually work, let’s look at a practical example next.

Example 1

Your cryptocurrency portfolio is valued at €100,000 on the 1st of January, 2021. We assume for simplicity that you do not own any other investments or savings. You have €20,000 in student loan debt.

Step 1 – Calculate the taxable return

First, we need to calculate the total return on your assets. Since the only assets you own are cryptocurrencies, we find the total return this way:

Total return: €100,000 x 5.69% = €5,690

Next, we need to calculate the return on the deductible debt.

Deductible debt: €20,000 – €3,200 = €16,800
Return on deductible debt: €16,800 x 2.46% = €413.28

We can now find the taxable return this way:

Taxable return: €5,690 – €413.28 = €5,276.72

Step 2 – Calculate your net worth

Assets: €100,000
Deductible debts: €20,000 – €3,200 = €16,800
Net worth: €100,000 – €16,800 = €83,200

Step 3: Calculate the rate of return

The rate of return is calculated as your taxable return divided by your net worth.

Rate of return: €5,276.72 / €83,200 x 100% = 6,34%

Step 4: Calculate the basis for savings and investments

The basis for savings and investments is your deductible debts and tax-free capital (€50,000) subtracted from your net worth.

The basis for savings and investments: €100,000 – €16,800 – €50,000 = €33,200

Step 5: Calculate your benefits from savings and investments

The benefits from savings and investments are simply your basis from the previous step multiplied by the rate of return percentage from Step 3.

Benefits from savings and investments: €33,200 X 6.34% = €2,104.88

You pay 31% tax on this amount which equals €2,104.88 x 31% = €652.51

The total amount of taxes you need to pay on your cryptocurrency assets in 2021 is therefore €652.51.

Is buying cryptocurrency taxed in the Netherlands?

No – you do not pay tax for simply buying cryptocurrency in the Netherlands. You are only taxed based on your crypto asset’s value at the beginning of the tax year.

Please see the example in the previous section that explains the calculations in more detail.

Tax status:

 

NOT TAXED

Is selling cryptocurrency taxed in the Netherlands?

Contrary to most other countries in the world, you are not taxed when you sell or otherwise dispose of cryptocurrencies in the Netherlands – even if the cryptocurrency has skyrocketed in value.

As a Dutch taxpayer, the only tax you have to worry about is the tax on fictitious gains that are based on your cryptocurrency portfolio’s value on the 1st of January each year.

Tax status:

 

NOT TAXED

Do you pay tax for owning crypto in the Netherlands?

Yes – you are taxed on the total value of your cryptocurrencies on the 1st of January each year. The Dutch Tax Administration assumes that your investments increase in value each year and this forms the basis for the current tax regime that applies to cryptocurrencies in the Netherlands today.

Tax status:

 

INVESTMENT TAX (BOX 3)

Taxes on crypto mining rewards

Similar to many other countries, income from mining is considered differently based on the professionalism of the mining operation. More specifically, Belastingdienst looks at how much time and money are spent on the mining business, to which degree you are making a profit or not, and the overall character of the operation.

Mining as a hobby

If Belastingdienst considers your mining operation as just a hobby, you should declare your income in Box 3 on your tax return similar to your cryptocurrency holdings.

If you are mining sporadically and not making a net profit during the year, it’s safe to assume that you are simply mining as a hobby. If you are unsure if your mining activity is classified as a hobby or not, you can contact Belastingdiesnt directly to get clarification around this.

Tax status:

 

INVESTMENT TAX (BOX 3)

Mining as a business

If you are mining bitcoin or other cryptocurrencies on a regular basis and making a profit during the year, you will most likely be seen as carrying on a business operation rather than mining as a hobby. In this case, you should report your mining income in Box 1 and your profits will be taxed similar to your ordinary income – anywhere between 9.42% and 49.50% depending on your total taxable income.

Tax status:

 

INCOME TAX (BOX 1)

How are airdrops taxed in the Netherlands?

There is currently no official stance regarding the taxation of cryptocurrency airdrops by the Dutch Tax Administration. However, to the best of our knowledge, most Dutch tax advisors seem to agree that airdrops should be reported in Box 3 as investment income.

We will update this guide with more information later if Belastingdienst publishes updated guidance that includes also the tax treatment of airdrops.

Tax status:

 

INVESTMENT TAX (BOX 3)

Is receiving cryptocurrency as a gift taxed in the Netherlands?

Whether or not you are taxed when receiving cryptocurrency as a gift depends on two factors:

• The value of the cryptocurrency received as a gift
• Your relation to the person that sent the gift

The general tax exemption for gifts is €3,244. Between parents and children, the tax exemption is increased to €6,604. Both exemptions can be used annually and there is no limit to how many times you can give a gift to the same person.

If you receive a gift above the tax exemption limit, you have to pay tax according to these rates:

Gift value	Children and partners	Grandchildren	Any other person
€0 – €128.75	10%	18%	30%
€128.75+	20%	36%	40%

This table shows the Gift Tax rates for 2021 in the Netherlands.

Tax status:

 

GIFT TAX (DEPENDS)

Is being paid in cryptocurrency taxed in the Netherlands?

Being paid in cryptocurrency, either as a salary from employment or in exchange for services as a freelancer, is taxed similarly to being paid in euros or another fiat currency. This means that from a tax perspective, there is no practical difference in what type of currency you receive your compensation – the income amount will be taxed as income in all cases.

To calculate the income amount in euros at the time of receipt, you can use cryptocurrency prices from any reputable exchange.

Tax status:

 

INCOME TAX (BOX 1)

Crypto tax deadline in the Netherlands

The tax year in the Netherlands runs from January 1 to December 31 each year. Your crypto taxes should be reported in your personal tax return where you also report ordinary income from employment.

The deadline for filing your personal tax return is the 1st of May of the following year. This means that your crypto taxes for the 2022 tax year must be filed before the 1st of May, 2023.

How to report crypto taxes in the Netherlands

Reporting your crypto taxes in the Netherlands is actually not that complicated – especially when compared to most other countries that tax every single transaction made during the tax year.

In essence, you need to work out both your portfolio’s total value on the 1st of January of the year that you report your taxes for in addition to the total amount of income you have received from activities such as mining.

The easiest way to file your taxes is using the online portal Mijn Belastingdienst.

 

Cryptocurrency is taxed in almost all countries today, with France being no exception. However, the tax rules surrounding cryptocurrencies in France as outlined by the General Directorate of Public Finances, or Direction Générale des Finances Publiques (DGFiP) in French, differ quite a lot from other European countries. If you wonder how crypto is actually taxed in France, this guide is for you! In this complete cryptocurrency tax guide for France, we will explain everything you need to know about how DGFiP classifies cryptocurrency, how much tax you must pay on cryptocurrency in France, and how traders and investors in France can report their crypto taxes correctly.

Do you pay taxes on crypto in France?

In France, cryptocurrencies are taxed when you convert a crypto asset to fiat. Trading, exchanging, or swapping one crypto asset for another crypto asset is, however, not taxed. How much tax you need to pay depends on if you are seen as a casual investor by DGFiP or if the activity is classified as professional trading.

You must also declare any cryptocurrency received from activities like mining or staking. Crypto received from such activities is also taxed, and special tax rules apply if you are considered to be carrying out mining or staking as a commercial operation.

In the next section, we will go into more detail about how cryptocurrency is actually taxed in France according to DGFiP.

How is cryptocurrency taxed in France?

Cryptocurrencies were for the first time legally classified in May of 2019 under the Action Plan for Business Growth and Transformation law, also known as PACTE. The legal definition of bitcoin and other cryptocurrencies in France is:

“Any digital representation of a security which is not issued or guaranteed by a central bank or by a public authority, which is not necessarily attached to a currency having legal tender and which does not have the legal status of a currency, but which is accepted by natural or legal persons as a medium of exchange and which can be transferred, stored or exchanged electronically.”

Art. L54-10-1 of the French Monetary and Financial Code

As stated by the General Directorate of Public Finances (DGFiP), cryptocurrencies such as bitcoin or ethereum are considered movable investments for tax purposes. The DGFiP goes on to say that cryptocurrencies are not actual currencies and that the only legal tender in France is the Euro. However, the DGFiP makes it clear that it is completely legal to use cryptocurrency to pay for products or services.

So how is cryptocurrency taxed in France?

Earnings from cryptocurrencies are subject to capital gains tax in France. The taxation of capital gains, according to Art. 150 VH of the French General Tax Code, depends on if the cryptocurrency was acquired from investments or from other activities such as mining.

Crypto acquired from investments

The first thing to establish is whether exchanging, trading, or investing in cryptocurrencies is carried out occasionally or on a regular basis. Why is this important? Because it determines the tax treatment and how much tax you must pay on your crypto earnings.

If the General Directorate of Public Finances considers your cryptocurrency trading activity to be carried out on a regular basis, you will be taxed according to industrial and commercial profits. This means your capital gains will be subject to progressive income tax rates. On the other hand, conducting cryptocurrency trading occasionally will be considered individual capital gains and is subject to flat-rate taxation. The flat-rate taxation is also referred to as single flat-rate levy or prélèvement forfaitaire unique (PFU) in French.

Classification	Taxation	Tax rate (2021)
Individual capital gains	Flat-rate taxation (PFU)	30%
Commercial profits	Progressive income tax rates	0% – 45%

This table shows the tax rates for occasional and professional traders in France. Source: Ministère de l’Économie

The French tax law does not specifically state how to decide whether the activity is carried out on an occasional or regular basis, but in Conseil d’Etat n° 417809 it is clearly stated that this will be judged on a case-by-case basis instead. Here are some of the factors that the DGFiP will consider when separating occasional traders from professional traders:

• The amount invested
• The total trading volume
• The frequency of transactions

If you have further questions related to if you are likely to be considered as an occasional or professional trader, we recommend contacting the General Directorate of Public Finances directly or consulting a tax advisor in France.

Crypto acquired from mining

Cryptocurrency acquired from mining activities is classified differently than cryptocurrency acquired as an investment for tax purposes. In Conseil d’Etat n° 417809, it is specifically stated that bitcoin and other crypto assets earned from mining will be taxed as non-commercial profits and not as capital gains.

In the next section, we will look at how much tax you must pay on cryptocurrency in France in more detail.

France cryptocurrency tax rate

Since cryptocurrencies are considered movable investments, how much tax you must pay depends on whether the crypto trading activity will be taxed as individual capital gains or as commercial profits.

Let’s break down the different tax rates in more detail.

Individual capital gains tax rate

On January 1st, 2018, a single flat tax known as prélèvement forfaitaire unique (PFU) was introduced on capital gains in France. This new taxation on movable investments includes both social security contributions and income tax. The flat tax rate is calculated this way:

Prélèvement forfaitaire unique (PFU)	Tax rate
Income tax	12.8%
Social security contributions	17.2%
SUM	30.0%

This table shows how the flat tax rate in France known as PFU is calculated. Source: Ministère de l’Économie

The total capital gains tax rate for cryptocurrencies in France is therefore 30% for the 2021 tax year.

PFU is called a flat rate because the tax rate does not depend on the total taxable income from capital gains or regular income. PFU applies to both movable investments, like cryptocurrency, and capital gains from the sale of securities. Other financial products affected by flat-rate taxation is life insurance, the ‘Housing savings plan’, and the ‘Housing savings account’.

You do also have the possibility to opt for crypto gains to be taxed according to the progressive income tax rates. This can be done by ticking box 20P in Formulaire N°2042 when you are filing your tax return. This can potentially reduce your tax burden but depends on several factors like your other income and which tax bracket you fall within. If you are considering this, we highly recommend discussing this with a tax advisor first.

Commercial profits tax rate

If you are considered a professional trader, all earnings from selling cryptocurrency for Euro or other fiat currency will be subject to progressive tax rates similar to your employment income. The progressive tax rate varies between 0% and 45%, and a surtax of 3% is added to the portion of the taxable income exceeding 250,000 EUR for single persons and 500,000 EUR for married couples.

The table below breaks down the progressive tax rates for personal income for the 2021 tax year:

Total compensation	Employee social contributions	Net taxable compensation	Personal income tax (Single)	Personal income tax (Married)
35,000	7,351	28,646	1,695	0
40,000	8,401	32,739	2,761	133
45,000	9,405	36,877	3,879	728
50,000	10,396	41,029	5,000	1,325
55,000	11,387	45,180	6,121	1,922
60,000	12,377	49,333	7,242	2,520
65,000	13,368	53,484	8,363	3,045
70,000	14,359	57,635	9,483	3,456
75,000	15,349	61,788	10,605	4,527
80,000	16,340	65,939	11,725	5,647
85,000	17,331	70,091	12,847	6,769
90,000	18,322	74,242	13,967	7,889
95,000	19,312	78,395	15,088	9,010
100,000	20,303	82,546	16,209	10,131
105,000	21,294	86,698	17,713	11,252
110,000	22,284	90,850	19,246	12,373
120,000	24,266	99,153	22,310	14,615
150,000	30,210	124,064	31,502	21,341
200,000	40,169	165,547	48,336	34,058
250,000	50,149	207,017	66,693	51,061
300,000	60,129	248,487	85,355	68,064

This table shows the personal income tax rates for France for 2021. Source: PWC

How to calculate capital gains in France

Now that we have covered how cryptocurrency is taxed in France including the applicable tax rates, you might ask yourself how do I actually calculate capital gains for cryptocurrencies according to the single flat tax?

Profits from cryptocurrency is only taxed when sold for any government issued currency like Euro or US dollar. This has implications for how to calculate purchase price and the resulting capital gains which must consider both your total portfolio value and the effective acquisition cost at the time you sold the cryptocurrency.

The general formula for calculating capital gain is:

capital gain = selling price – purchase price

To calculate the capital gains, you need to first establish the purchase price for the cryptocurrency sold for fiat currency. The purchase price is also referred to as the cost basis.

The purchase price must be calculated as the fraction of the effective acquisition cost of your cryptocurrency holdings relative to the value sold divided by total portfolio value.

While this might be difficult to wrap your head around, we can define the formula more easily this way:

purchase price = (value sold / total portfolio value) * effective acquisition cost of portfolio

Still confused? Don’t worry! We will explain how this works with a practical example next which should make it much easier to understand how to calculate the purchase price.

Example 1

Raphaël has been investing and trading cryptocurrency in 2020 and 2021. He did not sell any cryptocurrency for EUR in 2020 and did not pay any tax this year. In 2021, however, Raphaël cashed out half of his cryptocurrency portfolio and received EUR to his bank account. That means he is required to report his cryptocurrency income and pay tax according to the individual capital gains tax rate when filing his taxes in 2022. Here are all his transactions from the past two years:

• 2020-07-10: Bought 1 BTC for €8,000
• 2020-08-15: Exchanged 0.5 BTC for 14 ETH
• 2020-10-07: Exchanged 5 ETH for 30 LTC
• 2021-02-18: Sold 0.5 BTC for €20,000
• 2021-04-12: Sold 7 ETH for €15,000

In January of 2020, Jacob decides to sell his entire investment. He sells 0.6 BTC and receives $7,000 in exchange. His transactions can be seen in the below table:

Type	Date	Taxable event?	Selling price (Tx value)	Purchase price (Cost basis)	Capital gains
Buy	2020-07-10	No	€8,000	€8,000	–
Trade	2020-08-15	No	–	–	–
Trade	2020-10-07	No	–	–	–
Sell	2021-02-18	Yes	€20,000	(?)	(?)
Sell	2021-04-12	Yes	€15,000	(?)	(?)

Since crypto to crypto trades are not taxed in France, the second and third transaction will be considered interim and we don’t need to do any calculations for these transactions. For both sell transactions, however, we need to calculate the following:

1. Value of cryptocurrency sold(already known – 4th column in table)
2. Total portfolio value– at the time of the transaction
3. Effective acquisition cost of portfolio– at the time of the transaction

Just before Raphaël sold 0.5 BTC for EUR, his portfolio consisted of 0.5 BTC + 9 ETH + 30 LTC. Let’s assume that the total market value of his portfolio on February 18th, 2021 before selling 0.5 BTC was €45,000. The effective acquisition cost can be found directly as €8,000 since he has only bought crypto with fiat on one occasion. We have now all the required information to calculate the cost basis for 0.5 BTC sold:

Cost basis = (€20,000 / €45,000) * €8,000 = €3,556

We can now calculate his capital gains easily as:

Capital gains = €20,000 – €3,556 = €16,444

Next, we need to repeat the previous calculations also for his second sell transaction. His portfolio consisted of 9 ETH + 30 LTC before he sold 7 ETH for EUR. Let’s assume that the total market value of his portfolio on April 12th, 2021 before selling 7 ETH was €23,000. The effective acquisition cost is found as €8,000 (original acquisition cost) – €3,556 (used cost when selling BTC) = €4,444.

Cost basis = (€15,000 / €23,000) * €4,444 = €2,898

Capital gains = €15,000 – €2,898 = €12,102

All calculations and resulting capital gains are summarized in the below table:

Type	Date	Taxable event?	Selling price (Tx value)	Purchase price (Cost basis)	Capital Gains
Buy	2020-07-10	No	€8,000	€8,000	–
Trade	2020-08-15	No	–	–	–
Trade	2020-10-07	No	–	–	–
Sell	2021-02-20	Yes	€20,000	€3,556	€16,444
Sell	2021-04-12	Yes	€15,000	€2,898	€12,102

Raphaël has therefore realized a total profit of €28,546 in 2021. Of this profit he must pay 30% tax according to single flat tax which equals €8,564.

Most crypto investors and traders in France prefer to use cryptocurrency tax software to do all the required calculations automatically for them. 

Which transactions are taxed?

We have already established that the general principle is that only transactions for converting cryptocurrency to fiat currency are considered taxable events in France. Below, we will summarize the tax status for some typical scenarios cryptocurrency traders might encounter.

Buying cryptocurrency with fiat currency (Ex: EUR → BTC)

Buying cryptocurrency with fiat is not considered a taxable event in France. Note that it’s important to keep track of all your purchases and complete transaction history so that you can calculate your effective acquisition cost and cost basis when you later sell the assets.

Tax status:

 

NOT TAXED

Buying crypto and paying with another crypto (Ex: BTC → SOL)

Buying one cryptocurrency and paying with another cryptocurrency is considered an interim transaction by the DGFiP and is therefore not taxed. This is great news for all French crypto investors since this applies also to converting cryptocurrency to a stablecoin such as USDT.

Tax status:

 

NOT TAXED

Selling cryptocurrency for fiat currency (Ex: DOGE → EUR)

Selling cryptocurrency and receiving government issued fiat currency in return is considered a taxable event, and you must calculate the capital gains as explained previously. If you are seen to carry out cryptocurrency transactions occasionally, you will pay the flat tax rate of 30% on your net gains.

Tax status:

 

SINGLE FLAT TAX / COMMERCIAL PROFITS TAX

Cryptocurrency mining rewards

Cryptocurrency received from mining is taxed in France. Unlike income from selling crypto assets which is taxed as capital gains are mining rewards taxed as non-commercial profits. There are also different tax rules for professional miners carrying out commercial activities.

Tax status:

 

NON-COMMERCIAL PROFITS

Gifting cryptocurrency

Gifting cryptocurrency to a friend or family member is not taxed in France. However, the receiver will be taxed when he or she later decides to sell the crypto for Euro or another fiat currency.

Tax status:

 

NOT TAXED

How to reduce your tax liability

There are several ways you can minimize your taxable gains and therefore reduce the tax liability. In this section, we will look at some of the most common practices for reducing your crypto taxes in France.

1. Hodl your coins

If you never sell your coins, you don’t pay any tax on your profits either. Less stress, and less tax. No wonder why so many crypto investors are determined to never sell their coins!

2. Convert to stablecoins instead of fiat currency

Since you are only taxed when converting your cryptocurrency to any government issued fiat currency, converting your crypto to stablecoins instead can reduce your tax burden significantly. This might be a relevant strategy if you want less exposure to the volatility of the crypto market and prefer to have some fiat currency pegged stablecoins such as USDT or USDC in your portfolio.

You can even hold stablecoins indefinitely without paying any tax on your capital gains, but keep in mind that if you one day spend your stablecoins for goods or services, you will need to pay taxes on your profits.

3. Deduct cryptocurrency losses

If you sell a cryptocurrency and receive less than the calculated purchase price, you will have realized a capital loss on the asset. In France, capital losses can be used to offset capital gains of the same year. This means that you will only pay tax if you have a net positive capital gains during the tax year.

Unlike securities such as stocks, capital losses for cryptocurrencies cannot be carried forward to future years if your total loss exceeds your total gains.

4. Trading fees

Most exchanges charge trading fees when you buy, sell, or trade cryptocurrency. Trading fees are considered costs that can be deducted from the sales price when selling cryptocurrency for fiat currency.

Not only that, but you can also include trading fees from interim crypto to crypto trades in the effective acquisition cost of your portfolio. This means that all trading fees are fully deductible. Great news for all French crypto traders!

If you have a large number of transactions, deducting the trading fees can make a significant impact on your total tax liability.

France crypto tax forms

You are required to report all capital gains from the sale of cryptocurrency in addition to other income such as mining rewards in your annual tax return, or déclaration des revenus in French.

Formulaire n°2042 is the main tax return where you must declare all income from employment, gains and losses from securities or other financial products, and your gains, losses, and income from cryptocurrency.

There are three tax forms you must attach to Formulaire n°2042 when reporting your crypto taxes:

1. Formulaire n°2086– Capital gains and income transactions
2. Formulaire n°2042 C– Capital gains and income summary
3. Formulaire n°3916-bis– A list of cryptocurrency accounts outside France

On Form 2086 you will need to list all transactions realizing either a capital gain or capital loss during the tax year. This form is limited to 20 transactions, so you might need to consult a tax advisor if you have more taxable transactions than this.

When you have calculated your net capital gain or loss, simply fill in this value on Form 2042-C on line 3AN if you made a net gain, or on line 3BN if you made a net loss.

How to file your crypto taxes in France

Once you have all your tax forms ready, the last step is to actually file your taxes before the tax deadline.

To file your taxes online in France you need to first log in to your FranceConnect account. From this portal you will have access to all the required forms and information about how to file your taxes.

All French taxpayers are required to file their taxes online today unless there are special circumstances making this impossible.

Deadline for reporting taxes in France

The deadline for reporting cryptocurrency taxes in France is the same as the deadline for your ordinary tax return. Similar to other European countries, the financial year is the same as the calendar year and runs therefore from 1st of January until 31st of December.

There are three deadlines for the tax return in France which depends on which department you belong to:

• 26th of May, 2022:departments 1 to 19 and non-residents
• 1st of June 2022:departments 20 to 54
• 8th of June, 2021:departments 55 to 976

Cryptocurrency tax software

Figuring out your crypto taxes might feel overwhelming at first, but hopefully, it’s a bit clearer after reading this guide. So far, we have explained everything you need to know about how cryptocurrency is taxed in France, but you might still be wondering how to actually do all the required calculations so that you can report your taxes correctly and avoid penalties from the French tax authority.

Calculating your crypto taxes using crypto tax software

The best option for most people is likely going to be using cryptocurrency tax software to do the calculations for them.

 

While cryptocurrencies (criptovalute in Italian) such as bitcoin and ethereum have been growing in popularity the last few years, the question regarding how cryptocurrency as an asset class should be taxed is something all countries need to consider. In this complete tax guide for Italy, you will learn everything you need to know about how cryptocurrencies are taxed in Italy, how much tax you must pay on your crypto gains, and how to report your crypto taxes to the Italian Tax Administration, Agenzia Entrate.

Is cryptocurrency taxed in Italy?

Yes – profits from selling, exchanging, or disposing of cryptocurrencies are taxed at a flat rate of 26% in 2022. However, this applies only if your cryptocurrency portfolio’s total value exceeds €51,645.69 for more than seven consecutive days during the tax year.

How is crypto taxed in Italy?

The Italian Tax Administration has been rather reluctant with regard to providing official tax guidance on the topic of cryptocurrency taxation. However, two resolutions issued by Agenzia Entrate in the past are currently being used to form the basis for how cryptocurrencies are taxed in Italy.

According to Resolution no. 72 /E/2016, profits from trading cryptocurrencies are not considered taxable income due to the lack of speculative nature. However, if the person’s total wallet or account balance exceeds €51,645.69 for a minimum of seven consecutive days during the tax year, the profits are taxed as capital gains at a flat rate of 26%.

While this resolution was issued in 2016, it still holds legal ground considering Agenzia Entrate is yet to issue new tax guidance replacing or altering the previous statements. The latter statement regarding the €51,645.69 limit was mentioned in Resolution no. 788/2021. Here is the original quote from Agenzia Entrate:

Conseguentemente, le cessioni a termine di valute virtuali rilevano sempre fiscalmente, mentre le cessioni a pronti generalmente non danno origine a redditi imponibili mancando la finalità speculativa, salva l’ipotesi in cui la valuta ceduta derivi da prelievi da portafogli elettronici (wallet), per i quali la giacenza media superi un controvalore di euro 51.645,69 per almeno sette giorni lavorativi continui nel periodo d’imposta (…)

Agenzia Entrate

This is good news for all Italian crypto investors considering you are not paying taxes on your profits as long as your total portfolio value does not exceed €51,645.69 for seven or more consecutive days.

While Agenzia Entrate has not made any statements regarding a new cryptocurrency tax policy to the best of our knowledge, it is expected that the tax agency will publish more detailed guidance in the future considering the current resolutions do not clarify how all different ways of interacting with cryptocurrencies – such as staking, DeFi, or NFTs – should be taxed. We are keeping a close eye on the tax development in Italy and will update this guide regularly when official statements or new guidelines are published by Agenzia Entrate.

Tax rates in Italy

The two most important taxes to consider for Italian taxpayers are Personal Income Tax and Capital Gains Tax. Let’s look at both in more detail.

Personal Income Tax

The main income tax in Italy is the Personal Income Tax, also known as “Imposta sui redditi delle persone fisiche” (IRPEF). The income tax is comprised of three different taxes:

• National income tax
• Regional income tax
• Municipal income tax

The national income tax makes up the majority of the total tax that Italian taxpayers need to pay. The tax rates are progressive and vary between 23% and 43% depending on the taxable income amount. The more you earn, the more you pay in taxes – much similar to other European countries today.

The Personal Income Tax rates on a national level for 2022 are as follows:

Taxable income	Tax rate
€0 – €15,000	23%
€15,001 – €28,000	25%
€28,001 – €50,000	35%
€50,001+	43%

This table shows the Personal Income Tax rates for 2022 in Italy. Source: Agenzia Entrate

The regional income tax is levied on a regional level and varies between the different regions in Italy. The current regional income tax rates vary between 1.23% and 3.33%.

Lastly, we have the municipal income tax. As the name suggests, this tax is levied on a municipal level where you are considered a resident and the current tax rates vary between 0% and 0.9%.

Capital Gains Tax

Generally speaking, if you own an asset for investment or speculative purposes that you later sell, you will make either a capital gain or capital loss. Assets subject to capital gains taxation in Italy are stocks, bonds, and cryptocurrencies to mention a few. Until 2018, capital gains in Italy were taxed differently based on if the asset sold was classified as a ‘Qualified shareholding’ or a ‘Non-qualified shareholding’.

However, effective from January 1st, 2019, all capital gains are considered equal for tax purposes and are subject to a flat tax rate of 26%. This means that you will pay a 26% tax on your profits from cryptocurrencies.

How to calculate capital gains in Italy

Selling, exchanging, or otherwise disposing of a cryptocurrency generates a capital gains event and you need to calculate the resulting capital gain or capital loss. First, you need to determine both the sales price (proceeds) and the purchase price (cost basis) of the cryptocurrency sold. The selling price is simply the value of the cryptocurrency sold at the time of the transaction in euros. The purchase price should be determined using the Last-in First-out (LIFO) accounting method rather than FIFO which is used in most other countries. The LIFO method implies that the latest acquired coins are sold first if you have acquired a cryptocurrency on more than one occasion before selling the same cryptocurrency later.

You should also add any directly related trading fees to the purchase price so that the fees are deducted from the resulting gains.

Let’s look at an example to better understand how to calculate capital gains from transactions with cryptocurrencies.

Example 1

Roberto bought 0.2 BTC for €7,500 in December of 2021. Two months later, in February of 2022, he buys 0.3 BTC for €10,000. Roberto owns now 0.5 BTC which he has paid a total of €17,500 for.

In March of 2022, Roberto decides to sell 0.4 BTC while keeping 0.1 BTC as a long-term investment. He sells 0.4 BTC and receives €20,000 in exchange. His transactions can be seen in the table below:

Type	Date	Amount	Price	Cost Basis	Profit/Loss
Buy	2021-12-10	0.2 BTC	€7,500	€7,500
Buy	2022-02-08	0.3 BTC	€10,000	€10,000
Sell	2022-03-15	0.4 BTC	€20,000	(?)	(?)

The first thing Roberto needs to do is to calculate the acquisition price of the 0.4 BTC sold using the FIFO method: €10,000 + 0.1 / 0.2 * €7,500 = €13,750.

Since we know the sales price was €20,000, we can find the resulting capital gains directly: €20,000 – €13,750 = €6,250.

The resulting table will look like this:

Type	Date	Amount	Price	Cost Basis	Profit/Loss
Buy	2021-12-10	0.2 BTC	€7,500	€7,500
Buy	2022-02-08	0.3 BTC	€10,000	€10,000
Sell	2022-03-15	0.4 BTC	€20,000	€13,750	€6,250

If Roberto’s total portfolio value exceeded €51,645.69 for more than seven consecutive days during 2022, he needs to pay 26% tax on the gains: €6,250 x 26% = €1,625.

Cost basis method Italy

The cost basis method to be used in Italy is Last-in First-out (LIFO). This accounting method assumes that the earliest acquired units are being sold first.

This is what the Italian Tax Administration said in Resolution no. 788/2021:

Tenuto conto che, ai sensi dell’articolo 67, comma 1-bis, del Tuir ai fini della determinazione delle plusvalenze/minusvalenze, si considerano cedute per prime le valute acquisite in data più recente; per determinare la plusvalenza conseguente a prelievi da wallet, che abbiano superato la predetta giacenza media, si deve utilizzare il costo di acquisto considerando cedute per prime le valute acquisite in data più recente.

Agenzia Entrate

Is buying cryptocurrency taxed in Italy?

Buying cryptocurrency with euros or other fiat currency is not a taxable event in Italy. This is because no cryptocurrency is either sold or disposed of.

Buying cryptocurrency with fiat currency

Simply buying cryptocurrency with fiat currency is not taxed according to the current tax rules. Keep in mind that you should keep track of your purchases because you need this information to calculate the profits or losses when you sell the coins at a later time.

Tax status:

 

NOT TAXED

Buying crypto and paying with another crypto

Buying one cryptocurrency and paying with another cryptocurrency is taxed in Italy and you have to calculate the resulting capital gains for the currency that is sold. You will pay 26% tax on the profit – but only if your total portfolio’s value exceeds €51,645.69 for seven consecutive days or more during the tax year.

Tax status:

 

CAPITAL GAINS TAX

Is selling cryptocurrency taxed in Italy?

Yes – selling cryptocurrency is always considered a taxable event and you have to calculate the realized gains on the currency sold. This includes also stablecoins which are considered equal to other cryptocurrencies from a tax perspective.

Selling cryptocurrency for fiat currency

Selling or exchanging cryptocurrency for fiat currency such as the euro or US dollar is considered a taxable disposal by Agenzia Entrate and you need to calculate the gains on the currency sold. To find the gains, you need to calculate the purchase price (cost basis) of the currency sold and then subtract this from the sales price. Profits are then taxed at a 26% flat rate – but only if the total value of your portfolio exceeds €51,645.69 for seven consecutive days or more during the tax year.

Tax status:

 

CAPITAL GAINS TAX

Selling crypto for another crypto

Selling crypto for another crypto is similar to buying crypto for another crypto and is therefore a taxable event and you need to pay 26% flat tax on the profits.

Tax status:

 

CAPITAL GAINS TAX

Crypto mining taxes Italy

To the best of our knowledge, no official statement with regards to how rewards from cryptocurrency mining should be taxed has been issued by Agenzia Entrate. The two published resolutions address the general tax implications for businesses and natural persons dealing with cryptocurrencies, but do not mention mining specifically.

However, it is rather unlikely that mining rewards are tax exempt, and the safest approach is most likely going to be reporting mining rewards as general income in the annual tax return. This is also in line with how mining rewards are taxed in most other countries today.

Tax status:

 

INCOME TAX

Taxes on crypto staking rewards

Similar to mining rewards, no specific mention of how cryptocurrency staking rewards are taxed can be found in the published resolutions by Agenzia Entrate. However, we believe the most correct and safest approach is to report staking rewards as general income similar to mining rewards in your personal tax return.

Tax status:

 

INCOME TAX

How are airdrops taxed in Italy?

Similar to mining and staking rewards, no specific tax guidance exists yet that clarifies how cryptocurrency airdrops are taxed. The safest approach is likely to report all airdrops of non-negligible value as general income in your tax return.

We will update this guide with more information later if Agenzia Entrate publishes updated guidance that includes also the tax treatment of airdrops.

Tax status:

 

INCOME TAX

Receiving salary in a cryptocurrency

Being paid in cryptocurrency, either as a salary from employment or in exchange for services as a freelancer, is taxed similarly to being paid in euros or another fiat currency. This means that from a tax perspective, there is no practical difference in what type of currency you receive your compensation – the income amount will be taxed as income in all cases.

To calculate the income amount in euros at the time of receipt, you can use cryptocurrency prices from any reputable exchange.

Tax status:

 

INCOME TAX

How to calculate crypto taxes in Italy

If you are an Italian taxpayer and have transacted with cryptocurrency during 2022, you need to calculate the realized gains and income from all transactions. There are essentially two different ways to go about this – either manually or using a crypto tax calculator.

Let’s look at both methods:

Calculating your crypto taxes manually

Here are the steps you must take to calculate your crypto taxes manually:

1. Download the transaction history from all exchanges where you have bought, sold, received, or sent any cryptocurrency. This includes also transactions from or to your own wallets.
2. Calculate the cost basis for every individual transaction where cryptocurrency is disposed of
3. Calculate the proceeds and resulting capital gains for all transactions that are considered taxable disposals by Agenzia Entrate
4. Identify all transactions subject to income tax by Agenzia Entrate
5. Summarize the calculations to find the total taxable amount during the financial year

 

Calculating your crypto taxes using crypto tax software

The best option for most people in Italy is likely going to be using cryptocurrency tax software to automatically do the required calculations.

Crypto tax deadline in Italy

The tax year in Italy runs from January 1 to December 31 each year. Your crypto taxes should be reported in your personal tax return where you also report ordinary income from employment.

The deadline for filing your personal tax return depends on which tax return you have to file:

• Modello 730 – September 30th, 2022
• Modello Redditi PF – November 30th, 2022

The Mod. 730 tax return is a simplified income tax return that applies only to Italian residents meeting certain requirements. If you have to report profits from cryptocurrencies in your tax return, you should file Mod. Redditi PF rather than Mod. 730 and the deadline is November 30th, 2022.

How to report crypto taxes in Italy

After calculating your capital gains and income for all transactions during the tax year, the last step is to report your crypto taxes in your personal tax return before the deadline on November 30 the following year.

Since Mod. 730 is a simplified income tax return, you should most likely file Mod. Redditi PF instead where you need to report both your taxable income from cryptocurrencies and also your net worth.

The easiest way to file your taxes is using the online portal Fisconline. If you have further questions about how to access the online portal or how to file your taxes, we recommend contacting Agenzia Entrate or a tax advisor in Italy directly.

Which records may Agenzia Entrate ask for?

There is currently no official list of records or bookkeeping details that Agenzia Entrate may ask you to provide for cryptocurrency transactions in case of a tax audit. However, as a general rule, you should keep records of the following details for each transaction as a minimum:

• The date of the transaction
• The cryptocurrencies involved in the transaction
• Type of transaction
• How much was bought, sold, or exchanged
• The value of the cryptocurrency in euro at the time of the transaction
• Exchange records and other relevant statements

You should periodically take backup of these records from all exchanges you have traded on since many exchanges keep these records for a limited time only – or the exchange itself may cease to exist in the future.