A longstanding bugbear for vast swathes of the cryptosphere, taxation is getting easier. The emergence of powerful tools for simplifying cryptocurrency taxes has helped brighten the mood of bitcoiners everywhere. Crypto heads in a handful of Euro nations have added cause for jubilation, however, in the wake of clarification from national tax agencies on the treatment of digital assets.
The tax bodies in Portugal and France have both recently issued statements on the status of cryptocurrencies, and it’s good news for residents of the Mediterranean countries. The Portugal Tax Authority garnered headlines in August when it confirmed that crypto payments and trading are tax-free. Confirmation of the tax-exempt status of Portuguese crypto citizens – but not businesses – was welcomed, arriving at a time when other European agencies have been making less favorable noises about bitcoin and its sister currencies.
Where Portugal Leads, France Follows
In Europe, countries determine their own tax status, but other matters are devolved to the European Union. The EU’s decrees on compliance and anti-money laundering directly intersect with digital assets, despite protests from their proponents that bitcoin sees far less usage in criminal circles than fiat currency. Whatever the case, there appears to be a growing consensus in Europe that crypto assets are here to stay. As such, it makes sense from a fiscal perspective for governments to acknowledge them and to tax them like any other asset class.
There is another, bolder approach that forward-thinking and tech-friendly governments can take: to not merely regulate and tax digital assets, but to adopt a light touch that will drive blockchain business to the country, rather than sending them scampering overseas. France has taken a sensible stance here, concluding that crypto-crypto trades will not be taxable, meaning investors will only be liable for tax when cashing out to fiat.
This contrasts with the US, where crypto traders are prone to bemoaning the complexity and costliness of having to pay tax on every winning trade – not to mention every cup of coffee bought with bitcoin.
Reducing the Tax Burden While Saving Time
Bitcoiners not fortunate enough to live in a tax-lite country have no getting around the obligation to calculate tax every time they use crypto. Thankfully, determining those obligations no longer requires a 20-tab Excel spreadsheet, eight cups of coffee and saintly patience. The quality of online guides and tools for cryptocurrency taxes has improved dramatically in the last few years, with “Crypto Tax as a Service” software now automating the process from end to end.
Short of relocating to France or Portugal, there’s no way to avoid paying Caesar’s things to Caesar, even when dealing in satoshis. Some things in life are unavoidable, tax being one of them, but that doesn’t mean the process has to be a chore. Perhaps one day, when the rest of the developed world has given in and joined the crypto revolution, taxes will be automatically deducted by smart contract, preventing the need to file anything whatsoever. Whether that’s your idea of administrative heaven or Panopticon hell depends largely on the characteristics that drew you to crypto in the first place. Whatever the case, until that utopia/dystopia arrives, crypto users are just going to have to file their taxes the old-fashioned way along with everyone else.