In recent years, many people have chosen to invest every month in a cryptocurrency. Behind the craze, there is the promise of quick gain… with the share of risk it brings. If successful, the capital gains can be considerable. It is then necessary to declare the income from crypto-currencies.
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What are the tax regulations in this area and what accounting for crypto-currencies? Although the legislation is not yet clear on all aspects, some rules exist to regulate the practice. Understanding cryptocurrency and related tax regulations
A cryptocurrency (or crypto currency) is a digital and virtual currency that is used on a decentralized computer network, peer-to-peer. This currency therefore has no material application (coins, notes) and is not controlled by a government or a bank. Cryptocurrencies exist through cryptography and its users are part of the process of issuing and settling transactions. Cryptocurrencies are based on the use of blockchain technology. How to declare your profits related to crypto-currencies?
If you invest in a crypto-currency, you have the obligation to declare the profits made in particular in case of resale of your crypto-currencies. Indeed, if you have bought € 10,000 of crypto-currencies and you resell them for € 15,000, the profit made – € 5,000 – will be declared. On the other hand, if you only withdraw €2,000 out of the €15,000, you will only be taxed on this amount. The rest is always placed, you will not be taxable on this amount but will still have to present the proofs of these gains.
The Council of State recently decided that the purchase and resale of crypto-currencies were to be attached to the category of capital gains of movable property. In a professional context, capital gains fall under the category of industrial and commercial profits. Moreover, if crypto-currencies are acquired “in return for participation in the creation or operation of the virtual unit of account system”, that is to say mining or issuance, they are non-commercial profits.
Attention: it is imperative to keep the proof of the transactions carried out. They must attest to the initial transactions made from your bank account to the exchange platform, and the history of your purchases and sales of crypto-currencies. These proofs will allow the administration to verify the amount of your initial investment and the amount withdrawn. How are cryptocurrencies taxed?
Depending on the nature of your transactions in cryptocurrencies, the tax regime differs. The latter also depends on your “turnover” achieved by your operations of sale, exchange or withdrawal of crypto-currencies.
For individuals who occasionally carry out transactions, the BNC (non-commercial profits) regime applies. The mode of operation is very simple, you just have to declare your profits in the BNC box when you file your tax return.
Professionals, on the other hand, are covered by the BIC regime (industrial and commercial profits).
- If the value of your “annual turnover” is less than €170,000, the applicable regime is the micro-BIC. It is therefore not mandatory to produce a balance sheet. However, you must register as an auto-entrepreneur. Thanks to this status, you benefit from a deduction on your tax base of up to 71% for the activities of purchase-resale of goods or 50% for service activities. You will therefore have to mention the amount of your profits related to crypto-currencies on your income tax return (form 2042), minus the allowance.
- If the value of your “annual turnover” is between €170,000 and €789,000, the simplified real regime applies. It is also possible to choose this plan, on option, if you initially correspond to the micro-BIC. However, it is necessary to create a legal structure (EURL, SASU …) which exposes you to accounting obligations (balance sheet, income statement …). This scheme allows you to benefit from a reduced tax rate of 15% up to €38,120 of profit made and then 28% beyond.
To summarize: Taxation of bitcoin and other crypto-currenciesParticularsProfessionals: turnover < 170000 € / yearProfessionals: turnover > 170000 € / yearBNC regimeRegime Micro-BICRegistration simplified Real dietHow to account for crypto-currencies?
For micro-entrepreneurs under the micro-BIC regime, there are no accounting obligations. It is simply necessary to declare the profits at the time of the tax return.
On the other hand, persons covered by the simplified real regime must keep rigorous accounts. Therefore, at each transaction, its amount must be converted into euros at the exact time of the operation and recorded as a capital gain of movable property. It is then necessary to produce the accounting and tax documents (balance sheet, income statements, tax package). Finally, as part of the sale of crypto-currencies, your profit is subject to corporation tax (IS).
It is then advisable to get closer to a competent accountant in the field to be able to be accompanied in an optimal way.
For the BNC and Micro BIC schemes, we also advise you to subscribe to an AGM (approved management association), so that your taxable profit is not increased by 25%.
Bénédicte BellangerHolder of the Accounting Diploma, Bénédicte began her career in the consulting department of the international audit firm Grant Thornton. In March 2017, she joined …
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