More and more countries are currently figuring out what to do with the Bitcoin, as the cryptocurrency has become more mainstream and being traded more and more places online. While some countries seem to take the approach of banning the Bitcoin simply because they do not understand it, other countries are looking at it from a different perspective.
To show how big a difference there can be between the countries regulating the Bitcoin, we can compare Denmark and the USA. Both countries have just had important announcements regarding the taxation of Bitcoin's and both decision are very far apart, due to the governments looking differently at what a cryptocurrency really is.
In the US the IRS have just announced that they see Bitcoins as a property and not a currency and therefore have to be taxed on the same way as a property normally would. This means that all profits made with Bitcoins are to be paid taxes of, which came as a bit of a shock to some of the Bitcoin enthusiasts in the US.
"In some environments, virtual currency operates like ‘real’ currency – i.e., the coin and paper money of the United States or of any other country that is designated as legal tender, circulates, and is customarily used and accepted as a medium of exchange in the country of issuance – but it does not have legal tender status in any jurisdiction. The notice provides that virtual currency is treated as property for U.S. federal tax purposes. General tax principles that apply to property transactions apply to transactions using virtual currency.” The IRS said in a statement.
In Denmark however they have taken a completely different approach to the cryptocurrency are deemed all Bitcoin profits tax-free, which was well received in the Danish Bitcoin community. This means that any losses encountered by trading the cryptocurrency is not subject to tax deductions, however any profits gained are not subject to taxes either.
The decision regarding Bitcoin's taxation levels in Denmark has been a long time underway and the community has been waiting for a long time to hear what the official statement would be. With increasing popularity in the small Scandinavian country, taxation levels became an important question as Denmark is already well known for paying very high taxes.
“They have postponed this decision since December and were originally supposed to come to a conclusion in January. Today is the first time they have made a decision, and I think that’s a sign that the Tax Board was unsure how to approach bitcoin.” Michael Popp-Madsen, member of Denmark's Bitcoin community said to Coindesk.com.
“We see the outcome of bitcoin transactions as a result of something purely private. Therefore, any gains on bitcoin are tax-exempt, and losses are not deductible.” Hanne Søgaard Hansen from the Danish tax department explained to the press. They don't see the Bitcoin as a physical currency, but only as a online currency and therefore cannot be seen as real money, thus not being eligible for tax payments.
So while the Danish community is celebrating the good news from their tax department, the Americans are feeling blue. Americans will now have to report all profits made from work, trades and as extra payments to the IRS and pay taxes accordingly.