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Crypto Tax Regulations Increases as Adoption Rises: Everything You Need to Know about Crypto Tax in 2022

The once mysterious currency is becoming more regulated as regulatory boards become more familiar with it and implicating tax laws. This shouldn’t come as a surprise as the number of people using Crypto increases. Part of this is due to the recent market surges and Altcoins that continue flooding the market.

The majority of crypto tax either comes from Income Tax or Capital Gains tax. Although, tax-free crypto conditions still exist today and highly depends on where you live or what type of transaction you engage in.

A report by Cryptowisser- a leading Crypto service comparison site, shows a country like Malaysia offering a tax-free benefit to those holding and selling cryptocurrencies occasionally unless you’re a day-trader. This means you’d only be taxed if you trade crypto as a full-time business.

There are other situations where crypto is considered tax-free.

a. Buying Crypto

You can literally buy crypto in thousands of dollars without having to pay tax on such a transaction. This is because buying crypto is not taxable by law. The only thing you’re paying for is the transaction fees, which varies from one exchange platform to another.

b. Swaps

Those that kept the original coin of a cryptocurrency that witnessed a swap or changed its underlying technology will not be required to pay tax.

c. Crypto Transfers

One of the taxable events is when you decide to move your assets from one crypto wallet to another as long as you keep the transactions and/or records of the transfer for future proof to tax officers that you’re the owner of the property.

d. Gift

Most countries allow giving a third party a gift of crypto as a non-taxable event.

e. Donation

In most countries, donations can be claimed as a tax deduction with the condition that it is a legitimate, registered charity.

Capital Gains Tax on Crypto

Unless the crypto holder is in a capital gain tax-free country such as New Zealand, Sri Lanka, Singapore, any investment return made from the cryptocurrency will be looked at the same as any other investment- and tax will be paid. However, this is not the case in most countries.

Here’s what you need to know about Capital Gains Tax on Crypto.

1. Trading Crypto

Once you decide to trade-in or sell off some of your BTC for some other crypto, you’d trigger a taxable event, and tax officials will demand a cut from the transaction. Most people see trading BTC for Ethereum as trading one crypto for another. But looking at the perspective of the law, it is simply a sale for purchase, and therefore is taxed.

2. Selling crypto

Selling off crypto holdings is a taxable event because you’re basically gaining profit from selling an asset that you own. The tax percentage, however, will differ from country to country.

3. Online Shopping

Some crypto platforms like StormX allow their users to make an online purchase from popular stores like Microsoft, Newegg, and earn cashback on those purchases. All payments are made in cryptocurrencies which is taxable because you’re making a purchase nonetheless. Even if the item you’re buying is not a cryptocurrency.

Crypto Income Tax

Crypto has become a popular payment option as we’ve seen an increase in remote-based companies and opportunities and employees spreading across the globe. Regardless of wherever you find yourself, you’re required by the law to pay income tax from the crypto you hold or earn.

Let’s see the prerequisites for crypto income tax.

1. Payments or Salary in Crypto

You need to pay income taxes if you’re paid by an employer in crypto, whether in ETH, BCH, or BTC, just like you would on a regular currency at a regular office job. However, you’ll need to declare your earnings yourself because, unlike a regular salary, cryptocurrencies are decentralized and there is no record of your crypto payment from the organization you work for. This is especially true for independent contractors like freelancers who work for companies worldwide and receive their payments online.

2. Mining

Crypto miners also have to put up with taxes because mining crypto is a taxable situation as any possible return from it is considered an income. Miners also need to fill in capital gains tax anytime they wish to sell the crypto they mined.

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Abdullah Idris

I’m a freelance writer/content marketer for start-up companies offering financial services. I love to write about interesting subjects that educates readers.