Topic: Tax when buying bitcoins in an exchange - page 2. (Read 6043 times)

First the disclaimer: I am not a lawyer

The question here is whether Bitcoin is subject to the Good and Services Tax (GST) in Canada. The GST is the Canadian version of a value added tax.  The relevant legislation is the Excise Tax Act http://laws-lois.justice.gc.ca/eng/acts/E-15/page-94.html#h-71. It may come down to whether Bitocin is considered "money" which is defined in the act as follows:


There is probably a good case here under "and other similar instrument" for the position that Bitcoin is "money" and therefore not subject to the GST, given that its purpose is its use a medium of exchange in trade.

Yeah, you should?
But we would really need someone more competent to comment on this.

wait a minute what about capital loss?
can i claim that on my taxes!?

Exchanges don't sell bitcoins, they offer you a service. They earn commissions and pay taxes on those commissions.

Bitcoins are bought and sold by two individuals.

Depends on the country.
For example in Poland I have to pay 2% tax upon registering a second hand car (2% of the price paid for that second hand car, but if the price is considered too low by the Revenue Service they will ask for 2% of the car's market value, same goes for real estate, etc. but that's off topic). Most companies, however, are exempt from this tax.

I think that only the BTC exchanges should be paying taxes from profits they make from exchange fees.
As for BTC buyers - tax paid from capital gains?


In all probability the VAT tax is already included in those .99 cents.

This is a question that does not have a simple answer. I found a 16-page small print PDF from the tax administration of Finland that was explicitly about the use of VAT when selling used items. It apparently depends on a lot of things, but the general answer is that if it's a clear case of "double taxation" then you do not have to pay VAT. But again, this depends on who the seller is, in what use the item was and if it was originally bought with VAT included. That is important because companies can buy stuff without VAT.

This is incorrect. Exchanges are affected by VAT, at least in most countries that have VAT. The fact that the commodity is virtual is not a reason to not pay VAT, that's ridiculous. Everything is in the domain of VAT except the exceptions and there are not many of them. Financial instruments are an exception but bitcoins are not a financial instrument as I've already mentioned. This is how it is in Finland, the VAT laws might be different in other places though.

In case of an exchange, it's not the same as if you were directly selling bitcoins. It's totally different. If you were directly selling them, you'd have to add the VAT to the price of the bitcoins being sold, which would be ridiculous. No one does it that way.

Exchanges don't actually sell bitcoins, they offer a service. But now it's important to remember that not only are all commodities in the domain of VAT, so are all services (with some rare exceptions of course). The exchanges provide a service and the fee they take from each transaction is something that must include VAT unless the exchange is based in a country that doesn't have it. Or if the VAT laws are crappy (well, not crappy from the exchange's perspective but full of holes from any other perspective).

If I'm wrong about this I'd certainly like to know because I'm just about to start a company that will broker bitcoins from an exchange to my clients and vice versa. This is from a taxation perspective the same thing that exchanges do, so I need to include the VAT into the fee that I take from the brokering. I really can't find any loopholes that I could use to avoid VAT, the Finnish VAT law seems fairly strict and has no exceptions that apply, now that I confirmed that bitcoins are not a financial instrument.

This might be the case in Israel, but in EU there is a directive "VAT on electronic services". Merchants outside of EU selling certain electronic goods/services to EU citizens must register for VAT and collect it. Whether this applies to Bitcoin is unclear. Exchanges are probably not affected, since they are not the seller.

I agree.

This is the best way to help legitimate Bitcoin and put some light on the good things we can and should do with Bitcoin instead of having SilkRoad thow in our face every time Bitcoin is mention in the media.

The taxation issue for Bitcoin is interesting. One thing I can say for sure is that it is NOT a currency. The definition from a taxation law standpoint is "virtual commodity". This is the case at least in Finland, I had to verify all of this from the Finnish financial supervisory authority because I'm starting a business that will sell bitcoins.

I have to add VAT (value added tax) to the price of bitcoins but to go around the problem of needing to add 23% on top of the whole amount (which would create a ridiculously high price for the coins), my business will actually do brokering for our customers so in principle we use the money deposited to us to broker bitcoins from an exchange to our customers and then we only have to include the VAT in the fee we take from the brokering.

Another note, I'm pretty sure that there are a lot of Bitcoin enterpreneurs who are either not paying taxes at all or are somehow doing it wrong. My business will do it by the book from the start, that will save me from the troubles to come when authorities start to get more interested in Bitcoin businesses.

https://www.cavirtex.com/faq#taxes

It's clearly written that GST is included in their transaction fee.

I just found this in the forum:

Bitcoin exchange not the same as LD exchange?
https://bitcointalksearch.org/topic/bitcoin-exchange-not-the-same-as-ld-exchange-53458

I don't think gift card can loses or gains value if you let them sit. I'm pretty sure a 100$ gift card will always be worth 100$ no more no less. We can't say that about Bitcoin.

How does work Facebook credit and SecondLife Linden (they have a exchange - LindeX) ? Isn't Bitcoin kinda like those virtual currency?

I'd try to play it like stored value..  you don't pay tax on gift cards right?

Personnal experience, no. But that doesn't mean I should not have paid taxes.


Also


I'm from Canada, Apple knows I'm from Canada since every time I buy or rent something (music, movies, etc.) they send me a bill by email and my physical address is shown. Also, they are registred in Canada (Apple Canada) so they have taxes numbers. I don't know why they don't charge me taxes but they should have. Since I have not paid taxes I should make a declaration of self-assessment.

Anyway, the OP should contact the revenu agency to make sure it won't come back in it's face if he doesn't charge tax on fee or if he doesn't declare capital gains or loses.

The person you are buying them from is not the exchange, it's the person who's selling them on the exchange - it is their responsibility to deal with this tax, not the exchange. The profits the exchange make on the transaction will be dealt with like any profit, and will be taxed depending on where they are located.

Fom the The Carleton Student Engineering Society's Lounge and Store website :

Wow, I miss read the OP.

I still think that if YOU buy bitcoin, be it a exchange or between two individuals, and YOU paid a fee to on top of what the bitcoin valuation, since you are a Quebec resident, you should fill out a form to declare the tax you did not pay.

For the part where you ARE the exchange, you don't have to charge tax. Just think of Canadian Tire money (CDNT) : You can exchange it for money with someone else and not be paying tax as long as the 5 CDNT is exchange for exactly 5 CAD. Now, here the tricky part : BTC/CAD change often. So you have to declare gains or loses as you would do for any financial product. Also, if you charge fee for providing the service of exchanging bitcoin you have to charge tax on those services.

You should consider writing (not calling) to Revenu Quebec to avoid suprises. Also, do as Meni and get a accountant who may know a little more about tax law that we do 

Cheers

This is definitely possible one way or another, but the details probably depend on the country and even the accountant's interpretation of the activity.

Here is what my accountant told me.

So if you buy a bitcoin at $3 and sell it at $3.05, in fact you have provided a service and charged $0.05 for it, so you pay 15% of $0.05 in taxes.