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Disclaimer: this is not legal advice, and this varies from country to country.

If you accept bitcoins as payment, do you have to pay taxes on that? And would you have to write an invoice? Since they are not an official currency, such a trade would be considered a barter or what?

I.e. what's the legal status of someone accepting bitcoins as payment, and what is him required to do?

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In Denmark (Europe) I have looked into this with a friend of mine, and we came to this conclusion.

Here, you will have to pay tax and do an invoice regardless of the currency. It is trade taking place within Danish borders, and therefor tax applies.

Although, these are rather old laws, and not very well updated. For example, a trade between two Danes going through a PayPal service, should technically be treated as a foreign trade, since the payment leaves Danish borders.

But modern day lawyers have no need to go after this, and as far as I can tell, no one have ever been "caught in trouble" with the legislation like this.

A interesting ruling was that the Danish tax authority once started creating accounts inside the game Second Life, and demanded tax cuts on the currency, even though it was "fictitious" and digital...

Although, they did not have much success with this.

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  • So you would have to pay actual bitcoin to your government, according to that law? – o0'. Jan 28 '12 at 12:30
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    That was our conclusion. – Nils Munch Jan 28 '12 at 17:23
  • @NilsMunch How? – gerrit Mar 29 '13 at 13:16
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    @NilsMunch what exchange rate do you use? – o0'. Apr 29 '13 at 10:26
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    Actually the payment between two danes is taxable irrelevant because the contract counts, not the money flow. So 2 danes with paypal is still 2 danes. Paypal is never part of the taxable legal contract. – TomTom Dec 6 '13 at 12:41
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In the United States, I believe you can treat Bitcoins held as commodities and Bitcoins traded as like-kind exchanges.

Your tax basis in your Bitcoins is the fair market value of whatever you gave to get them. So if you buy some Bitcoins for $50 and then sell them for $75, the $75 is taxable income. You can deduct your $50 tax basis.

If you buy or sell something for Bitcoins, that's a taxable exchange. Business can defer the taxes (under IRC code 1031).

We're pretty much all just guessing though. If you plan large transactions in Bitcoins, I'd recommend getting a written, legal opinion backing up your planned tax treatment for the transactions. Failing that, at least have a tax professional prepare your taxes.

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  • What do you consider "large"? – halfbit Nov 22 '12 at 18:58
  • Large enough that the amount it affects your taxes is sufficient to trigger the IRS policies on "substantial understatement of income". Essentially, 25% of your gross income. – David Schwartz Nov 22 '12 at 20:27
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I recently (as in April 18, 2013) asked the Swedish Tax Agency how they view Bitcoins. This is the answer I got (the original swedish answer is at the end):

--- ENGLISH TRANSLATION ----

I short, Bitcoin is not considered a currency, but rather a commodity. Taxation on the commodity value is 30%. You you create bitcoins and the sell them, you make a capital gain equal to the value of that commodity on the market (if you buy a comodity, the capital gain is that commoditys market value). The tax basis is zero and the entire gain is taxable.

If you bought bitcoins then the cost equals the amount you paid for them. If you sell for more vaule than you bought, you make a make a capital gain on the difference. Correspondingly, you make make a capital loss if they fell in value.

---- URSPRUNGLIGT SVAR ----

Sammanfattningsvis ses bitcoins inte som en valuta utan som en vara. Beskattning sker i inkomstslaget kapital med en skattesats om 30%. Om du själv skapat bitcoins och säljer dem gör du en kapitalvinst motsvarande ersättningen (om du köper en vara är vinsten varans marknadsvärde). Omkostnadsbeloppet är noll och hela ersättningen är skattepliktig.

Om du köpt bitcoins är omkostnadsbeloppet det du betalat för dem. Får du en större ersättning när du avyttrar dem jämfört med ditt inköpspris gör du en kapitalvinst på mellanskillnaden. Motsvarande gör du en kapitalförlust om de sjunkit i värde.

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  • Then, if you mine them but do not sell them, no tax incurs? This might be implied in this answer but I'm not sure. – o0'. Apr 19 '13 at 9:10
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    That is also my interpretation of the answer I got. Make sense, since from the Tax Agency's point of view you are doing nothing but letting equipment waste electricity. "Stupidity" is not taxable on Sweden, for now... – Micke Apr 19 '13 at 9:30
  • Wow 30% tax! That is insane. I guess you pay through the nose for that welfare state you got running. – Abdussamad Dec 6 '13 at 12:46
  • What if you buy/sell in exchanges in other countries? Still should pay taxes in Sweden? – coffeMug Mar 11 '18 at 12:08
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This applies to the UK and is not advice.

My opinion is that Bitcoin is not recognized as a currency, but may be recognized as an asset with a non-zero value. So you should pay the kind of taxes associated with assets.

Example: you buy BTC with GBP, the value of the BTC increases, and you sell it for GBP, making a profit. You pay capital gains tax on the profit.

Example: your employer pays you in BTC. This is a benefit-in-kind and you pay income tax on it.

Example: somebody gives you BTC. You may pay inheritance tax on it.

Example: you sell goods or services for BTC. This is bartering. You pay income tax on the fair market value of the asset received.

Good luck to HMRC collecting though...

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    Just thought I'd add that this is roughly equivalent to the current tax law in the U.S. - since BTC isn't legally recognized as currency (at least not yet) the same basic rules apply as if you'd traded gold, silver or stock certificates. – David Perry Jan 28 '12 at 19:50
  • In the UK though trading on markers (such as spread betting) is considerd gambling and taxation does not apply. – MaxSan Jan 29 '12 at 23:48
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    I spoke to my tax advisor, and he said that here in Italy likely they should be treated like commodities too. – o0'. Mar 25 '12 at 14:25
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as of 2017 here is IRS answer on Currencies vs taxes:

https://www.irs.gov/pub/irs-drop/n-14-21.pdf

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