Vlog #55: More info about tax on the Steem blockchain. Visited an accountant today.
I went to the accounting office today. Not a big firm, maybe 12 people. I talked to the owner and his main tax man. It was a good conversation and I learned a lot.
For them, crypto currencies is still a world to explore so I made a deal with them. I give them info about cryptocurrencies and the blockchain for free and they will give me tax advice for free.
I spend 90 minutes there and if you don't have time to watch the vlog this is the main point:
There is a huge difference between earning STEEM through blogging compared to buying STEEM as an investment when it comes to taxes in the Netherlands.
In the Netherlands money from blogging is 95% sure an income. You put effort into a blog post and get paid for it and therefore income tax applies.
The big difference between a normal income and income from a blockchain is that income from a blockchain is generated out of thin air. That is the reason for the 5% doubt. They will give me a final answer soon.
But most likely because the token we get paid in has value (it's possible to change steem tokens to euro) it probably doesn't matter when it comes to taxes in the Netherlands. For me, it's already a done deal and I'm putting money aside already (we are talking 30-40% of my earnings)
Buying Steem with fiat as an investment falls under property tax (it's 1.3% per year in the Netherlands). It's completely different.
Why is this important? All this tax stuff.
I'm sure if you want to get away with not paying taxes, for now, that's 100% possible. But remember everything you do is recorded forever in the blockchain. So when governments eventually catch up they can just go back in time following your account and see how much you earned and how much taxes you did not pay.
It's just something to think about now.
But there is also a cool thing though:
When income tax applies to earning steem tokens with blogging than the investments you have made to earn this income are eligible for tax deductions. I bought an Osmo stick for instance and a lot more to make blogs and vlogs. But my favorite investment of them all, my Big Green Egg, lol!
I talk about it more in my vlog.
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Well I agree that one of the greatest investments of yours was definitely the green egg @exyle
Do you get income tax relative to how much you are earning or because you are registered as a 'blogger' and 'working'?
I don't know what the taxation system is like in The Netherlands but in the U.K. you are taxed after the deceleration of your job and how much you are earning purely from that job but you wouldn't get taxed on money earned from trading cryptocurrency.
Let's see if people will be filled for tax fraud in the future for people who haven't declared and haven't been paying tax for many years
I love my Green egg :). But I don't know all the answers yet m8. I'm learning as I go. That's why I asked these accountants to look into it. I do think it's smart to think about this now instead of years from now incase taxes did apply.
Man! Thanks for looking in to this!
If can only imagine the smile on your face when you heard you might be able to deduct the money you paid for your green egg. Ultimately, everything you use in your videos adds to the blogging experience and hence could be deducted.
That is just amazing!
You certainly would owe tax for trading crypto although this may well be capital gains tax as you buy an asset (coins) then sell it for a profit, hence you have a capital gain. You are likely to be liable for tax on the difference
In the uk you have a capital gains tax free allowance of approx £11,300, so I believe that as long as your profits are below that you should be fine.
If you are trading a lot, record keeping will be a nightmare but that's your issue. HMRC won't care. With crypto going up and becoming more popular it's going to be a big issue shortly!
There's a huge problem with valuing Steem, or any crypto, at the time of earning. Let's take the example of a fully powered up post that earned 100SP, for simplicity's sake.
Once you earned that 100SP, you can't cash it out for 13 weeks. Who knows what the price will be then?
Also, who decides what the price is? If you go to any exchange and sell large amounts of Steem (but, relatively small amounts compared to any other financial market), you will crash the price. You will never get $1 per Steem if you have to sell a lot at once. It is unfair to value all that Steem at the last traded price of $1.
What should be done, or is ethical, is probably immaterial. But it seems to me that it is basically property you create from nothing. As if you picked up a stick and whittled it into a tool. That is not a taxable gain. Nobody has paid you, both because no money has been exchanged, and there is no party to do the paying.
It seems reasonable to call it an asset with a cost-basis at the time you earned it, but it gets more complex when you consider the power-down aspect. I Would value 1/13th of it at the 1 week price, 1/13th at the 2 week price, etc on up to 13 to get a fair taxable gain/loss (and it's definitely possible to have losses).
But, again, the governments have the guns and interpret the rules whatever way they like. I doubt they will know enough about this to comment intelligently, but we do it a disservice if we call it "mining". It's creating something from nothing.
I think I'll try to work up a post on this that expands on this idea a bit more.
I would be very interested to read your post. With my post, I just conveyed what I learned today. It's not 100% set in stone of course. I would advise any blogger though to not spend all earnings just in case tax plays a role.
I think you got good advice. That is my interpretation on how most governments would currently want it done. (Coincidentally, it maximizes your tax liability...)
I am going to update a little of my research on the topic, and I'll try to post something on it this week. The good news is that in some jurisdictions, such at the US, clearly ambiguous situations like cryptocurrency create a presumption of good faith, as long as you create a system for paying your taxes that is consistent and internally logical. I believe pro-rate-valuing it as a capital asset based on powering-down would make sense for Steem, and is ethically and legally justifiable. However, it would like be audited and back taxes may be assessed with little in the way of "due process". In the US, the IRS gets silly leeways like "guilty until proven innocent", for example. However, the presumption of faith means no criminal charges and no penalties, so worst case, you may retain access to more of your capital for longer before remittance.
Be proud my freund, my 2000 comment is yours, Ka-Pow!
Wow, thanks, man! and congrats!
I honestly think that since payout is in SBD & steem and not FIAT, your safe from Tax up to the point when they actually decided how to treat cryptocurrency. They can't tell you to pay tax all the way back to when (now) there is no law saying being payed for blogging in crypto falls under labor. so the way I see it, worst case you pay property tax for crypto converted to fiat.
I know they are the accountants, but I really think (hope) that Cryptocurrency being different from Fiat is the key here.
It's all theory here for me too, but let's say your boss pays you in SBD instead of Euro. Would that mean no income tax applies? I doubt that. Of course, Steem from blogging is 'new' SBD. that would be a difference.
All I can say is, I don't know and I want people that know all the rules to figure it out for me.
if you put it that way ... then again, there might be laws dictating he has to pay me in Fiat ... as in, I am by law required to be payed in Fiat money and not in goods so they can actually tax me. Cc might still be considered 'goods' at this point.
Interesting topic to say the least and great idea to go and find out.
Hope you get to hear back from them soon.
Interesting. This has made me think, if you buy steem and power up plus earn steem consistently and power up, how do you know how much to allocate as income v investment when you power down?
I think this is confusing and really hard to work out because the income you powered up a year ago is going to be worth more than income you powered up yesterday. So how do you work that out from a tax perspective?
Or is the income only based on your payouts when they occur and everything you power up is then investment? Is steem power payouts considered investment or income since you can't access it straight away?
Does this make any sense? I don't know if I've done a good job at explaining it.
You make perfect sense. And I can't give you an answer really. It's why I contacted this firm in the first place. But I do feel that it's smart to think about it now. Just in case.
Yeah, I guess it wasn't really a question for you specifically. Just something we need to be able to answer if governments want to tax us. Maybe your accountants have an answer (although I expect it's not a straight forward answer).
That is a good deal you got from them which I am sure will be beneficial to both sides!
How will you determine its value? The market value in EUR based on the time it was claimed into your wallet?
I thought about that and I guess it's something like that. The moment you get 'paid' those Steem tokens have a value in dollars/euro. That is what you earned.
But to be honest m8, it's also mighty confusion for me. So many variables here. That's why I asked these guys to look into it. I learn more as I go.
This a very, very important subject and one I imagine quite a few members haven't given proper consideration. I have also consulted with my accountant regarding income from Steemit and he advised all blogging profits would be considered income and taxed accordingly, but gains on Steem would more than likely be considered as taxable income in the first year as long as you hold the asset and do not sell. He advised that if I sold Steem, I would more than likely have to pay capital gains tax. He advised that's he's not 100% positive of this, but more than likely this would be the case. He's simply viewing Steem as holding a stock. I asked if Steemit earnings could be viewed as daily dividend earnings and he said definitely not b/c you are being paid in essence for work tendered(your blog posts/comments) and that this is income, not dividends.
I've made a spreadsheet and keep track of daily Steem Power and SBDs earned and then simply use the average daily price of Steem and SBDs to calculate the total daily earnings. If anyone has any questions about this, please respond to my comment and I'll gladly post the spreadsheet layout I use to keep track of daily payouts.
Great points you bring up regarding deductions ala the Green Egg since you use it in blog posts. I'll have to consult with him again to see what deduction options I have here in the US. I will let everyone know what I find out.
Great post again. We have a great thing here with Steemit, no need to cause ourselves unnecessary grief or hardship by trying to avoid the tax man. Have a great night and Re-Steemed.
Ik heb hier recentelijk ook over nagedacht en voelde al een
Box 1 - Resultaat uit overige werkzaamheden --> progressief belastingstelsel 32-42-52%
op komen borrelen helaas...
money from steemit upvotes is not earned income, not even capital gains. The reason is that you are not paid for your blogging with currency, but rather new shares (steem) generated by "Steem company".
Only after you change those shares to Euro, it becomes capital gains, which has different tax rate than regular income from work as well.
Perceive your blogging rather as marketing activity. That is investment and investment is a under expenses, not revenues.
As long as you pay taxes from your regular job, you give value to society and pay some share to NL government.