The taxman wants his share on your Bitcoin gain!

Happy with your 2020 crypto gains? Do not forget to report them before the 30th of April 2021.

If you happen to be a Polish tax resident, you may need to report your cryptocurrency profit. It does not matter what currency exchange you keep it at and where it is domiciled. Coinbase, Binance, Kraken, BitBay, Etoro and even your Revolut crypto wallet, they all count.

But can Polish tax authorities know about my foreign accounts? Yes, they can. First, all trustworthy exchanges collect your personal data and are compliant with anti-money laundering and tax information exchange laws. Second, one day you will want to cash out and buy real things. Then the tax authorities will know.

The tax is 19% of your gain. Your gain is the difference between what you paid for the crypto and what you sold it for. Additionally, you can deduct certain costs of buying or selling your crypto from your gain. This includes brokerage fees payable in fiat money.

Although, tax rules on your crypto gains are fairly straightforward, the computation of the tax usually is not, and it is easy to make a costly mistake. Consider following rules:

  • Taxed are only exchanges to fiat money (USD, EUR, PLN, etc.). All operations between cryptos are not taxable. This also concerns exchanges to stablecoins such as Tether (USDT), USD Coin (USDC), TrueUSD (TUSD).
  • All exchanges from and to fiat money need to be shown in Polish currency converted with exchange rates by Polish National Bank, from the day preceding the transaction. If you had hundreds of transactions it may be technically challenging;
  • You cannot deduct losses from previous years, but you can carry forward costs of buying the coins;
  • You can deduct foreign withholding tax up to 19%.

A long-term HODLER? You hold on to your coins and had no income in 2020? You still need to report.

Showing what you paid for your coins in your tax statement will enable a deduction in coming years. Even if you do not plan to sell your coins in the nearest future, make sure that once you decide to do so, there is a cost you can deduct to lower your taxable gain.

Also, if you spent more on buying the coins that selling them in 2020 and made no profit, you need to report it. This way you can show your costs at the tax report that can be carried forward for next years and deducted from previous years sales.

 

Useful tips for your crypto trading in 2021 that can make your tax filing in Poland easier:

  • Try to limit your exchanges to fiat currencies or use stablecoins instead;
  • If you need to exchange to fiat money, consider choosing PLN pairs (BTCPLN, ETHPLN, etc.);
  • File your yearly tax statement also when you had no income.

Remember to include your crypto gains on your tax return for 2020!

 

Author:

Jerzy Gaweł
Partner – Tax Advisor