Priorities
Worrying about crypto taxation has not been my problem lately, have had some idea about what's going on regarding the matter but I thought it's time to know what exactly my government has set up for us. What I have found out is not surprising me at all.
2020 is the year the treasury is expecting to collect crypto taxes from Romanian cityzens. According to the Fiscal Code, if a a citizen obtains annually over 600 lei from cryptocurrency transactions, he/she has to pay income tax at a rate of 10%. 600 lei is around $145, in other words it's nothing if you're into trading or just want to cash out some crypto to help with the expenses. 600 lei is enough to die of hunger as you can't even pay your rent with that amount, let alone live off it.
If your earnings exceed the amount of one year minimum wage, which is 26760 lei at the moment, $6500 you have to pay health insurance as well at the rate of 10%. Your crypto earnings are obviously added to your other incomes and in this case there's no escape, paying taxes is mandatory. The problem, according to the government is that it's hard to track crypto earnings.
It's clearly visible Romania's first priority is to collect taxes and not to attract crypto investors by creating a favorable fiscal environment for them. Crypto is treated pretty much as any other income, the tax free threshold is way too low to favorite crypto enthusiasts.
Looking around in the world to see how we're doing, my country is somehow in the middle I believe, although this taxation system is far from being ideal. There are countries banning cryptocurrency but there are countries that are creating a good environment to crypto enthusiast and what must not be neglected, in some counties the school program provides cryptocurrency education. Now that's what I call progress. The sooner education starts, the better for the younger generation. No matter how hard some government are trying to fight crypto, there's no way they can ban it forever.
Right now I believe you can get away without paying taxes but if paying with crypto will be accepted and implemented, the situation will change. However, I'd be happy to see some statistics about how much has been collected.
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https://twitter.com/nobordersNB/status/1327204331997831168
I think the deal you have in Romania is not too bad. 10% income tax is low compared to my home country the Netherlands. In my country, normal income tax rates do apply to crypto earnings. We also need to include crypto holdings to our financial assets on which we pay a set capital gains tax, regardless if gains are there or not. Income tax rates varies between approx 30% and 50%. Capital gains tax is about between 3 and 4% per year on the sum of all financial savings/holdings.
Income from hobby is exempted from taxes though. Still wondering if eg income from crypto based blogging can be classified as hobby. The definition is not too clear when something is hobby and when it becomes taxable work. Guideline is: When income is created by selling once so often, and other taxable income is generated, hobby income could apply.
That said, we need to spend 1.200 hours per year working to be classified as a company, from legal perspective as well as from tax perspective. My argument will then be, that when we spend less hours on crypto blogging than the 1.200 per year, it should be classified as income from hobby. Since when not classified as a company, than we don't get the perks a company gets, eg deduction of costs and all.
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That's why I said we're kind of in the middle as this is not too good but not too bad either. The problem is the law is from last year, so this is the first year to apply and as I know this lot, it can change in a split second.
The other thing I see can be a problem is that usually the law is not explicit, especially with new things like crypto, it can be interpreted in many ways. There's even a joke, they say if there are three jurists in the room, there are 5 opinions on the same matter. Tax officials are always interpreting everything so they can tax you and fighting the government is basically a lost cause from the beginning. When they show up to audit, they make it clear they need to fine you as otherwise there's no trace of them being at your company :) It would be great to be able to trust authorities but it's difficult this way. As about crypto, they are going to smarten up and make it more complicated, I'm pretty sure of that.
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One good thing in my countyr is that Tax office not always fine you when making errors. When they feel the tax payer done his/her best to provide all relevant documentation, they usually dont fine. That said, when they feel the tax payer is trying to undermine the rules, fines are applicable.
Yea, at some point in time, crypto will be valued the same as fiat from tax point of view. And at some point in time the tax offices will get all the data they require right from the sources, eg exchanges anbd crypto services, as they get this already from banks and exchanges in the fiat world. The laws are there, the agreements as well. The question is still: how to deal with all these new information flows. Am pretty sure some of them in crypto space is not automoated yet from the tex office point of view.
I don't know now, but there was a period when tax officers had a share of the fine pool, as bonus or incentive. Can you imagine what this means? Do I need to go into details? Obviously they had every reason to give you a fine.
In many cases they also have the option to give out warnings, but they are not eager to use it when they have more powerful tools in their hand.
I'm pretty sure there will come a time the tax offices will get all the data they require right from the sources.
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WOW! Such system should've never been created! Pffff. Fortunately, we dont have such system in my country. Hope the system in your country will progress more and more to the good side of things.
I agree, such system should've never been created! I also hope things will go in the right direction, but can't be very optimistic.
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That's awful, 30-50% income tax! At what point do people even make any profit to keep themselves going at the end of the year? With a capital gains tax of 3-4% it's clear who is benefitting from all of that.
In the end the whole society in NL is benefiting; If you ever been to my tiny country, you'll notice everything you can think of is arranged for everybody whether rich or poor. High quality education open for all (low costs to the student); Great infrastructure which is very well maintained; Suppor to all those who can't work for whatever reason; High level of medical care; Solid and good pensions etc etc. Every year when the reports are drown up looking at most happy nations; NL is in the top. I think we have such high level of hapiness in our NL community because eveything is arranged. To arrange all of this, cost money, hence our tax levels are at the high end.
Well that sounds like you are happy with it so as long as you are, that’s what matters.
I would not be unhappy when tax levels will be lowered :) I also would not be unhappy when the less rich countires in the EU take less money from NL. But its clear to me, when one is rich, one is more or less obligated to support those who is poor. Unless the majority of the tax money is not used for the greater good and good causes, I'm more or less happy. Though I believe those who try to 'steal' benefits shall be hunted down and managed in ways they will never try to abuse the system again.
It's good to hear someone talk about taxes, not too many people like to talk about it. I think is kind of taboo!
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I know and can understand why.
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