The history of bitcoin prices today with bitcoin trading
The history of bitcoin prices today with bitcoin trading
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It is bitcoin that strikes the clock. Thirty percent there, twenty percent off. In a week. Or even one day. People who have invested in it must have a firm hand and a strong stomach. The exchange rate development of most crypto currencies felt like a crazy roller coaster ride last year. And the amount of attention paid to the subject in the media seems to have made the bitcoin a commonplace.
The result is that there are understandably more and more practical questions about crypto currency, especially when it comes to its fiscal, legal and administrative side. Sometimes the impression may arise that these crypto currencies are so new and special that it is impossible to handle them properly when it comes to accounting and paying taxes. I think that many people like to be stupid (or let them) be stupid at this point, because they are under the assumption that the astronomical price rises may cause an unaffordable tax assessment. But is that actually the case?
1. Bitcoins
To find an answer to that question, I will first elaborate on as many aspects of the bitcoin itself as possible. How does a bitcoin work and what is it actually? How do you subsequently sell or sell bitcoins? And how do you determine its value? Based on the answers to all these questions, I believe that a fairly good estimate can be made of how you should subsequently treat this currency - and what legal and tax restrictions you can encounter. And that knowledge is also important for determining how to handle the bitcoin with regard to income tax, sales tax, wage tax and corporation tax.
1.1 What is bitcoin?
Bitcoin runs on so-called block chain technology. A block chain ( blockchain ) is really nothing more than a ledger ( ledger ) in which everyone records all transactions. This ledger is not stored in one central location, but in duplicate with users themselves. Because there is no central storage or verification of the correctness of the block chain, the system assumes that the block chain is correct if it is the same for almost everyone.
Every user can add a new transaction. This transaction is then communicated ( broadcasted ) to other users, who check the transaction. If there are enough users who have validated the transaction, it will be noted in a new block that will be clicked to the block chain. When that is done, the block chain is updated for all users. The ledger is then synchronized with everyone. Transactions that have been entered in the ledger can no longer be changed. So it can be ensured that only the actual owner of the bitcoins can transfer it.
Adding new blocks of transactions to the block chain is called mining . During the mining process, new transactions are checked for accuracy. In this way it is prevented that the same bitcoins are issued twice or that bitcoins are transferred that do not exist. The mining is done by solving difficult cryptographic puzzles with fairly advanced computers. The person who solves the puzzle receives as reward a number of bitcoins and a fee for all transactions within the block.
Incidentally, this is also a possible weak point of the block chain technology in the long term. The block chain must, after all, be monitored, verified and synchronized on more and more devices. And because the number of transactions is only increasing, the size of the block chain on each device is also increasing. Long-term scalability can therefore become a problem.
1.2 How do you use bitcoins?
To receive and spend bitcoins you need a bitcoin wallet ( bitcoin wallet ). If you open the bitcoin wallet, it will download all transactions through other owners of a bitcoincoin wallet. These are so many transactions that it sometimes takes days before everything is on your own computer. It is advisable to make a copy of the wallet file ( wallet.dat ). If you lose it, you will also lose your access to the bitcoins.
You can also protect the wallet with a password. But here too you should not forget it. The password cannot normally be reset in case you have forgotten it. Although nowadays there are websites that focus on cracking your bitcoin password. The question is, of course, to what extent you should want that.
It is possible to take a wallet where the bitcoins or the block chain data are kept by a third party (in the cloud) instead. The disadvantage of this is that you have to trust that the company will manage your bitcoins well. That that is not always the case was clear when in 2013 the Mt Gox went bankrupt .
In order to be able to pay for bitcoins, you need a so-called bitcoin address. You can create this yourself in your wallet. A bitcoin address consists of 26 to 35 digits and letters (for example 1BvBMSEYstVetqTFn5Au4m4GXg7xYesNVN3 ). A bit similar to an IBAN , which nowadays consists of 16 to 34 numbers and letters (for example LC14BOSL123456789012345678901234 ). In that respect, the bitcoin wallet looks a bit like a bank account. Just like with IBAN, there is an internal check on the correctness of each typed bitcoin address with the bitcoin software, but better. The chance that you accidentally type a wrong bitcoin address should be 1 in 4,290,000,000.
1.3 Is bitcoin anonymous?
Bitcoins or crypto currency is often thought to be anonymous, but in fact the bitcoin addresses of the bitcoin wallets are even less anonymous than an email address or a bank account number. An e-mail address is usually not directly linked to a specific person, but as soon as an e-mail address is used more often, it often becomes clearer who belongs to that e-mail address.
In addition, all bitcoin addresses and transactions up to the entire start of the block chain are accessible and searchable for everyone. So if you have ever ordered a game in the Steam Store or a pizza with Home Delivery with bitcoins, you have already dropped a few breadcrumbs.
To somewhat guarantee your anonymity, it is recommended that you create a new bitcoin address for each transaction. After all, if someone knows a bitcoin address, that person can view all transactions carried out at that address via the public ledger. If you create a new address for a new transaction, only that transaction with that address will be visible.
You might therefore be able to compare bitcoin addresses more with the serial numbers on banknotes . The only difference is that banknote transactions do not usually record which banknote with which serial number went from hand to hand with each transaction. Paper money is actually more anonymous.
But even if you do everything you can to remain anonymous, others can still betray your identity through their (payment) behavior. After all, at least two parties are involved in every transaction, and the degree of anonymity depends on the weakest link. Through relatively simple analysis of all transactions (which are, after all, public), researchers have already been able to deanimize significant parts of the bitcoin network . You can therefore not automatically assume that you cannot be traced by using the bitcoin network.
1.4 Is bitcoin money?
Opinions are divided as to whether bitcoin is money, but for legal and fiscal reasons the answer seems to be: no. So there is no physical coin that you can hold. It is really nothing more than a piece of software. Is it perhaps digital money?
From a legal point of view, bitcoin is not regarded as money in the Netherlands within the meaning of the Dutch Financial Supervision Act (Wet op het financieel toezicht) , because it does not meet all the legal conditions that have been set for this. For example, bitcoins are not issued in exchange for money received and there is no claim on the bitcoin publisher. Bitcoins can only be made by mining (mining) bitcoins.
In 2016, the Arnhem-Leeuwarden Court also ruled that it is not money in the sense of the law, but a means of exchange. It can be seen as a "case with the daily price" according to 7:36 BW or a "property right" according to 7:47 BW . The court found that trading in bitcoin had similarities with the way that happens with, for example, silver or gold . Precious metals are seen as an investment and not as common money or legal tender.
A judgment of the European Court of Justice does recognize the bitcoin more or less as a traditional currency in the fiscal sense, at least in terms of sales tax. For the income tax, the Ministry of Finance seems to assume for the time being a valuation according to that of a LETS ( Local Exchange and Trade System ). The annoying thing about this qualification is that in the case of bitcoin there is no LETS organization and therefore the value cannot be determined centrally. The European Central Bank believes that there is a virtual currency scheme (and not digital or electronic money), due to the lack of real currency equivalent.
1.5 How do you get bitcoins?
To get bitcoins, you can try to extract them. That costs a lot of computing power, but hopefully you will have a number of bitcoins in your wallet after a very long time. However, the chance of this is very small. If your mining software were to run in the background on your laptop, it could take you hundreds of years before you dug a bitcoin.
To be able to dig properly, you actually need a computer with so much computing power that the chance of solving the necessary cryptographic puzzles comes within reach. The amount of heat that is released during the mining process is so high that some people are now trying to use that heat to bring their home up to temperature.
But if buying such an expensive computer setup is not an option, you can also join a sort of mining collective (mining pool). In addition, different people use their individual computers to collectively mine bitcoins and then distribute the mined bitcoins in proportion to the deployed computing capacity. It is estimated that no less than 80% of all blocks are mined by these types of collectives in China.
If mining in any way is not an option, you can always buy it at a bitcoin exchange office (bitcoin exchange) but you must check out bitcoins price today first. There are now a lot of them. Coinbase in the United States is the largest, but also in the Netherlands and Europe many companies are now making many bitcoin trading platforms, such as Coinbase (US) , Litebit (NL) , Bitrush (NL) , BTCDirect (NL) , Satos (NL) , Bitcoin.de (DE) , Cryptopay (GB) or Spectrocoin (GB) .
1.6 What are bitcoins worth?
How much you get for a bitcoin at sale or how much you have to pay for a bitcoin at purchase depends on who you ask. The value of a bitcoin and the bitcoin prices today is in fact determined on each bitcoin trading platform separately by supply and demand. Because the amount of supply and demand is not the same on every trading platform, the bitcoin is also not worth the same everywhere. Nevertheless, I believe that these value differences need not stand in the way of a good valuation.
One of the easiest ways is to use the dollar value of, for example, Coinmarketcap . This organization is an authority in this area and is therefore cited as a source in (American) government documents, such as the SEC , the Accountability Office, the House Committee on Small Business and the US tax authorities . The handy thing about Coinmarketcap is that they determine the value of the bitcoin based on a weighted average of around 400 different bitcoin exchange offices .
Because Coinmarketcap expresses the value of the bitcoin in US dollars, the value only needs to be converted to euros. This can be done on the basis of the official exchange rate list of the European Central Bank ( every working day ) or the Tax Authorities (every first of the month ).
There are also a number of good alternatives, such as Coinbase , BitcoinAverage or WorldCoinIndex . These websites all use a similar method of valuation, namely by taking a weighted or unweighted average of the prices on different platforms, whether or not based on qualitative criteria.
2. Bitcoins and sales tax
It has been unclear for some time whether or not VAT had to be calculated on the purchase and sale of bitcoin. In 2013, the Minister of Finance took the position that turnover tax should simply be calculated on the purchase and sale of bitcoins.
At the end of 2015, however, the European Court of Justice ruled that a bitcoin should not be seen as a good or service, partly because that "Bitcoin has no other use than for making payments" . Bitcoin transactions have since been exempt from sales tax. Therefore, no invoices need be issued and no records need to be kept for VAT. However, this means that you are therefore not entitled to a refund of VAT on investments or purchases made.
However, the latter is only the case insofar as it concerns bitcoin sales within the European Union. After all, you can still get VAT back in proportion to your bitcoin sales outside the European Union. So if you are a bitcoin delver and sell all mined bitcoins to a non-EU party, you may then also deduct all VAT paid on your purchases and investments as withholding tax .
This gives Bitcoin a separate status . After all, it is not considered to be money, but is nevertheless exempt from VAT within the EU due to the fact that bitcoin only fulfills the function of money.
3. Bitcoins and payroll tax
As an employer and employee, the only way in which bitcoins and payroll tax meet each other is to agree on a wage in bitcoin or euro and then decide to pay it as much as possible in bitcoin. In both cases, the employer will have to make both the declaration and the payment in euros, but paying the wage can in principle, if by mutual consent of course, be done in bitcoin. This is seen as wage in kind . There are, however, a number of practical, legal and tax restrictions.
If the employee agrees to receive the wage in bitcoin, it can no longer be unlimited. From January 1, 2015, it is mandatory that the wage equal to the statutory minimum wage is transferred by bank transfer. Only wages that exceed the statutory minimum wage may be paid in a different way, for example in bitcoin. Although this scheme was actually intended to prevent false constructions, it indirectly also has consequences for a possible wage (part) payment in bitcoin.
It is also possible that the wage itself has been agreed in bitcoin. Because the rate of the bitcoin can go up and down quite violently, it could therefore happen that the agreed wage in the event of a huge fall in prices leads to an income that - in euros - is lower than the minimum wage. In that case, the employer cannot suffice with the lower bitcoin equivalent, but the (higher) minimum wage will have to be paid and wage tax must also be withheld on this. Moreover, the above-mentioned anti-shine construction measure still applies, which means that in such a case the entire wage must be paid in euro.
An additional disadvantage may be that the employer must always hand over a new payslip, even with a fixed wage. After all, a different amount of bitcoin will always be transferred due to the changing exchange rates. After all, normally the employer does not have to make a new payslip , if there are no changes in the amounts to be paid compared to the previous payslip. For the conversion of the value from bitcoin to euro, the end date of the last day of the tax return period is the reference date .
In practical terms, it can have another annoying consequence for the employee. The European Mortgage Directive makes banks reluctant to accept wages as collateral if that wages are not paid in euros . This is because the directive obliges banks to value the (future) currency risk and can therefore reject mortgage applications on the basis thereof.
4. Bitcoins and income tax or corporation tax
It can be tempting to think that it is impossible for the tax authorities to find out how many bitcoins someone has and that you can therefore easily get away with withholding bitcoin income or capital. Think again .
Certainly if the number of bitcoin accepting companies continues to increase, my estimation is that the increased use of the bitcoin will also make it easier and easier to link people and companies to bitcoin addresses. But legal means can also be used to find out the identity behind bitcoin addresses. In the United States, the Tax Authorities already won a case where they subsequently had access to around 14,000 bitcoin accounts in order to be able to send post-clearance assessments.
That is also possible in the Netherlands. In principle, the tax authorities can send an additional assessment for up to 5 years after that date (or in some cases even up to 12 years). If it can still be determined from whom advanced bitcoin addresses have been provided by advanced techniques or legal scope, the Tax Authorities can claim additional and impose a fine of up to 300% depending on the type of income.
4.1 Bitcoins prices today and income tax (box 1)
It is a misconception that if you, as a private individual, trade in or lose out to bitcoins, the profits (and losses) automatically belong in box 1 of the income tax. That is not the case. But even if that is the case, there is still no automatic profit from business . It can also be taxed as a result of other activities without entitlement to all kinds of fiscal entrepreneurial facilities .
As soon as there is no so-called 'normal' asset management, the income from trading in or mining for bitcoins must be stated in box 1. If there is active trading or mining, there must be a prospect of a source of income . If this is not the case, the profit on the bitcoins is not taxed in box 1, but its value in box 3 as 'other assets' ( see 4.3 Income tax on bitcoins as private assets (box 3) ).
If you yourself lost bitcoins and accidentally mined bitcoins, this is not considered an income, partly based on the pyramid scheme judgments . This has to do with the fact that - under normal circumstances - independent mining for bitcoins provides such a low chance of success that it can not be regarded as something that can be used to achieve a foreseeable advantage. Even then it belongs in box 3.
Active mining within a mining collective makes the chance of success a lot bigger and profits are foreseeable. The mined bitcoins will then at least be taxed as a result from other activities. On the other hand, all relevant costs may also be deducted. If you meet the entrepreneurship criteria, it is taxed as profit from a business and you can also make use of deductions for entrepreneurs.
As soon as bitcoins can be regarded as a source of income, the question arises how they should then be included in the company's balance sheet, how any profits and losses should be accounted for and how they are subsequently taxed.
Since bitcoins are not money, it appears that cash withdrawals are excluded. However, there are some accounting programs, such as Moneybird, that support bit-point transactions as if they were foreign currency or otherwise cash. In my opinion, that is a problem with the fact that bitcoin is not money for the law. However, it can be a quick solution to easily book at least exchange rate differences.
In my view, the bitcoin on the balance sheet belongs under Securities or otherwise under Stocks (raw and auxiliary materials). According to the generally accepted accounting principles in the Netherlands ( Dutch GAAP or Generally Accepted Accounting Standards ), these items may be chosen for both booking these items for
[*] the cost price or the lower realizable value or
[*] the current value.
The law is based on the principle of prudence, which argues in favor of the first option. The result is that only realized (exchange rate) profits on bitcoin sales fall into the profit. The value can be determined on the basis of the value as published on, for example, Coinmarketcap or Bitcoinaverage and possibly converted into euros via the exchange rate list of the ECB or the Tax Authorities .
It may be useful to keep in mind that (a lot of) mined, but otherwise unused bitcoins within the company can be classified as surplus investments over time. The consequence of this could be that the value of the bitcoins then at some point move from business to private capital. In that case, it is still necessary to make a fiscal settlement for the change in value of the bitcoins in box 1, while the bitcoin balance then counts for box 3 the following year.
4.2 Bitcoin prices today and corporation tax (box 2)
For private limited companies, the profit is simply taxed with corporation tax and then with income tax in box 2 when the remaining profit is distributed as a dividend.
The valuation and processing are in principle the same as with an IT entrepreneur ( see 4.1 Bitcoins and income tax (box 1) ). The difference is that due to the fact that the BV is a legal entity of its own and that there are no entrepreneurial facilities at stake, there is no problem with the possible re-qualification of the bitcoins held. These will therefore remain on the company's balance sheet. A small disadvantage could be that the size of the credit eventually becomes visible to the outside world due to the publication obligation for the annual figures.
In that light, for the sake of caution, it may be useful to value at the cost price or the lower realizable value instead of the market value. Strangely enough, a crazy legal overlap between micro-BV and financial statements on a commercial basis makes it impossible to make a choice. This is because it is prohibited to value investments at market value. Incidentally, valuing the bitcoins at cost price or the lower realizable value is also mandatory if work is carried out in accordance with International Financial Reporting Standards ( IFRS ).
4.3 Income tax on bitcoins as private assets (box 3)
If there is a private bitcoin wallet, it will have to be entered in box 3 . This is in line with the same decision of the American tax authorities in 2014. The Dutch tax authorities charge the value as ' other assets '. The value can also be determined here based on the value on Coinmarketcap or Bitcoinaverage with conversion via the exchange rate list of the ECB or Tax Authorities .
Day-trading or bitcoin trading in bitcoin as a private person deserves a special mention, because it is often mistakenly assumed that this must be specified in box 1. That is not true. No special knowledge is required to trade in bitcoins because of the high level of speculation. Day trading in bitcoins is therefore seen as a form of (speculative) investment and is therefore burdened with it in box 3. "Having experience and expertise in the field of option trading cannot be equated with having prior knowledge." , according to the Supreme Court in a similar case about day trading in options.
The reference date for the declaration of the value in box 3 is exactly 1 January of the tax year at 0:00 a.m. Dutch time. It is possible to justify using the closing price on the last trading day before this reference date (as with securities ). The latter will not often apply, since the trade in bitcoin is global and the trade is not really tied to time. In most cases, therefore, a rate will be known at this exact fiscal reference time. If foreign websites are used, the time zone must also be carefully considered. The rate to be used is not the rate at 0:00 am in the relevant time zone, but the rate at the time that corresponds to the rate of 0:00 am Dutch time (Central European Time plus one hour or CET + 1 ).
Conclusion
All in all, I think there are sufficient legal and tax clues to include the bitcoin neatly and fully in the business administration. However, this also means that this new currency is simply included in all relevant taxes, as is the case with all other matters. For the home-garden-and-kitchen investor the blow will not come really hard, certainly not now that the new cabinet has decided to increase the exemption in box 3 and reduce the notional return. But even for the entrepreneurial investor or investor, things will not go as smoothly as they only have to pay for actual realized gains.
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