Bitcoin Payments Are Subject to UK Income Tax | International Tax News

On December 19, 2018, the UK officials confirmed that Bitcoin payments received by UK tax residents will be subject to UK taxation. The HMRC is now clear: digital currency is not a currency or money.

The exact purpose of a Bitcoin transaction seems to determine the exact tax treatment of it. For example, if you just own cryptocurrency like Bitcoin that you later sell, then the Bitcoin is treated as an investment asset; any subject such Bitcoin payments will be subject to the UK capital gain taxes. Similarly, if you mine Bitcoins on an occasional basis, then it is also taxed as a capital gain.

However, if the mining of Bitcoins rises to the level of doing business, then it would be treated as income gains as part of a financial trade and subject to ordinary income taxation.

Moreover, if a UK employee receives Bitcoin payments from his employer, these payments will be subject to UK payroll taxes. The amount to be taxed will be based on the “best reasonable estimate” of the value received. It also appears that the employer may need to recognize a capital gain in certain situations.

The most interesting guidance appears to be with respect to Bitcoins received and given away for free as well as stolen Bitcoins. If a Bitcoin received for free (rather than received a payment for a service), then it may actually be tax free. It is not clear what the cost-basis would be in such a Bitcoin.

Stolen Bitcoins do not appear to produce any tax consequences, because, paradoxically, HMRC appears to consider such Bitcoins as still owned by the same taxpayers. If a taxpayer forgets his password needed to access his Bitcoins, however, he may be able to claim a loss if he persuades HMRC that he will never remember the password. It is not clear at all how the taxpayer would be able to do so.

The recent HMRC guidance concerning Bitcoin payments is highly important and seems to be mostly aligned with that of the IRS in the United States. Sherayzen Law Office advises its clients on the US tax consequences of Bitcoin transactions. Contact Us Today to Schedule a Confidential Consultation!

South Korean Cryptocurrency Taxation of Exchanges | IRS Tax Lawyer

In January of 2018, South Korea announced that it will start taxing cryptocurrency exchanges. This is a highly important development in international tax law concerning cryptocurrencies, because South Korea is a major hub for cryptocurrency trading. Let’s delve a bit deeper into South Korean cryptocurrency taxation.

South Korean Cryptocurrency Taxation of Exchanges

The first important point to make is that the new law affects only South Korean cryptocurrency exchanges, such as Bithumb and Coinone.

South Korean Cryptocurrency Taxation Starts With Tax Year 2017

The new South Korean cryptocurrency taxation will apply retroactively to any income derived from digital currency in the calendar year 2017. In other words, any profits the exchanges realized in 2017 on the trading of cryptocurrencies will be subject to the South Korean corporate taxation.

South Korean Cryptocurrency Taxation Rates

There is no new special tax rate created for cryptocurrency exchanges. Rather, the current corporate income tax rates will apply. In other words, the cryptocurrency exchanges are likely to pay a 22 percent tax rate for corporate profits exceeding an annual threshold of KRW 20 billion and an additional 2.2 percent local income tax (which constitutes 10 percent of the corporate income tax rate).

South Korean Cryptocurrency Taxation Deadlines

The deadline to pay the corporate income tax for the tax year 2017 will be March 31, 2018. The deadline to pay the 2017 local income tax will be April 30, 2018.

South Korean Cryptocurrency Taxation is Part of the South Korean Overhaul of the Cryptocurrency Market

The extension of corporate taxation to cryptocurrency exchanges is part of a major overhaul of the entire South Korean cryptocurrency market.  In fact, the South Korean government has instituted a number of non-tax measures to address concerns about money laundering and tax evasion.  For example, South Korea recently prohibited the opening of new virtual accounts for cryptocurrency investors while the cryptocurrency traders are required to change the names of their accounts to make them identifiable.

Cryptocurrency Trading is Taxable in the United States

Sherayzen Law Office reminds US taxpayers cryptocurrency exchanges are taxable in the United States as capital gains. Contact Sherayzen Law Office to schedule a consultation to learn more about US taxation of cryptocurrencies.