When you think about taxes, there are a couple of things that immediately come to mind. The first is, obviously, that taxes are connected to currency, and the second is that those taxes are controlled by the governments that put those taxes into action. A much more elusive tax-related issue is that the crypto currencies that are becoming ever more popular and people have already started using them for major purchases.
Why Are Crypto-Currencies so Hard to Track?
These types of currencies are not classic in any way. They do not follow the same rules as traditional currencies do and they do not belong to a specific country. The fact that crypto currencies do not follow normal systems means that tax systems have to work to keep up with the changing landscape.
Israel’s Crypto-tax Rules
Israel has recently drafted a set of rules that will help their tax department collect taxes on crypto-currencies such as Bitcoin. The most prevalent of these rules is that crypto-currencies are to be seen as assets which aren’t classified as money but as wealth in another sense. Based on this classification, taxes are paid when people sell their holdings.
The IRS in America Still Mulling it Over
The IRS still has not come up with a hard and fast set of rules regarding the taxation of crypto-currencies, but they seem to be leaning towards considering them as capital gains which is similar to the way that Israel is thinking about them. Of course, if this happens, interest rates and taxes would be more like those for property rather than currency.
As with anything new we are bound to see some changes in the near future, but for now we can see some examples of how countries are responding to the new realities that govern online spending.