Special provisions for the realisation of capital assets are found in section 9. Similarly, losses from the realisation of a capital asset are deductible under section 6-2 of the Taxation Act. The realisation of Bitcoin may result in a gain or eventual loss.Ĭapital gains from the realisation of a non-business capital asset are taxable under section 5-1 of the Taxation Act. Tax liability upon realisation of Bitcoin and other virtual currencies and capital assets for private individuals Realisation of Bitcoin and other virtual currencies - capital income It is estimated that the virtual currency Bitcoin will have “issued” all 21 million Bitcoin by the year 2140. 15.1 million Bitcoin have been generated and are in circulation. A Bitcoin can be divided into 100,000,000 Satoshi, each of which is freely exchanged. Miners who verify transactions are rewarded with new Bitcoins and a small transaction fee.īitcoin is designed with an absolute limit of 21 million Bitcoins, which can be divided into smaller units called “Satoshi”. New Bitcoin is mined by solving advanced data algorithms that verify the Bitcoin transactions. The issue of new Bitcoin is regulated in the Bitcoin design and occurs through a process called mining. Bitcoins can also be “exchanged” into other currencies and therefore have a resource value for the owner. This makes it possible to exchange values over the internet and to be used as a means of payment for those who wish to receive this as payment for goods and services. All historical Bitcoin transactions are available on blockchain.īasically, Bitcoin is a data file that can be transferred to another person. An address is an account number that can be used to accept payments and also verify purchases/sales. Simply put, cryptography is the process of coding information in such a way that only authorised parties can read it.īitcoin is linked to an address. The use of cryptography ensures that no one can falsify payments or use their Bitcoins more than once. If you have bought, sold, mined or have virtual currency assets such as Bitcoin, you must report this in your tax return.Īs previously mentioned, Bitcoin is a type of virtual currency originating online and is an unregulated, digital currency/means of payment that, unlike traditional money, is not issued or guaranteed by a national central bank.īitcoin uses “peer-to-peer” technology to send and verify transactions online. Virtual currency is an asset and falls under the general rules for income and asset taxation. For tax purposes, virtual currency is not considered an ordinary currency because it is not issued or guaranteed by a national central bank. In other words, “virtual currencies” share many similarities with conventional currencies.
Some businesses also accept virtual currency as payment for the purchase of goods or services. Similar virtual currencies can be bought and sold in various arenas on the internet. The price is solely determined by the supply and demand of the users. There is no formal issuer of a virtual currency, and there are no official currency rates. The information shown here is based on the general tax and VAT implications of using the Bitcoin asset but will also apply for other virtual currencies such as Ethereum, IOTA, Litecoin, Stellar, Dogecoin, etc. The most well-known and prominent virtual currency today is Bitcoin. Virtual currency originated online and is a type of unregulated, digital currency.