What taxes are there on cryptocurrency transactions What if I lose money

What taxes are there on cryptocurrency transactions? What if I lose money

When an individual earns income, taxes such as income tax are levied.

This is no exception to the case where profits are made through virtual currency trading.

Therefore, when trading virtual currencies, it is necessary to have a solid understanding of taxation.

Therefore, I will explain what kind of tax will be imposed on the profit generated by virtual currency trading, and how much tax will be imposed at what timing.

*This article is for reference only, and we recommend that you consult with your tax  office or tax accountant for more information What are the 4 types of cryptocurrency?

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1. What is the classification of cryptocurrency income? When is taxabl

Income tax, special income tax for reconstruction, and inhabitant tax are levied when income is generated from virtual currency transactions.

These taxes are classified by income category, and the taxation relationship varies depending on the income category.

In principle, income from virtual currency trading is classified as “miscellaneous income”.

However, income generated from virtual currency trading as a business may be classified as business income Which crypto is best to invest?.

One of the points to be correctly understood in the taxation of virtual currency is the timing of taxation.

If you buy virtual currency and hold it without selling it, you will not be taxed even if you have unrealized gains.

Taxable timing is when you sell virtual currency, when you make a payment in virtual currency, when you exchange one virtual currency for another, and when you get a reward from mining virtual currency What is cryptocurrency and how it works?.

Taxable income amounts are sales gains and exchange gains.

For example, if you buy bitcoins for 100,000 yen and sell all of them for 500,000 yen, the difference of 400,000 yen is taxable income when there are no necessary expenses.

2. Criteria for tax on virtual currency

If an individual earns income from virtual currency, they may be required to file an income tax return.

The cases in which a final return is required are different for salaried workers and non-salaried workers, so it is important to correctly understand the criteria for each.

Here, we will explain the criteria for requiring a final tax return for salaried and non-employed income earners Is cryptocurrency a good investment.

 

2-1. If you are a salary earner

First of all, it is about the case where salaried workers such as salaried workers earn income from virtual currency transactions.

Employment income earners must file a final tax return if their non-employment income exceeds 200,000 yen.

With the exception of certain cases, salaried workers have a system in which the company withholds the necessary amount of tax on salary income and retirement income and pays the tax on behalf of the employee.

For this reason, if you only have salary income or retirement income, you are not obligated to file a final tax return.

However, if your other income exceeds 200,000 yen, you will be obligated to file a final tax return.

If the salary income earner exceeds 200,000 yen from virtual currency transactions, it is necessary to file a final tax return, but it is also necessary to note that even if the income is 200,000 yen or less, there may be a tax return obligation.

For example, if there is affiliate income that falls under miscellaneous income other than cryptocurrency trading, we will determine if the total amount exceeds 200,000 yen.

If the total is 200,000 yen or less, you do not need to file a final tax return, and miscellaneous income is not taxed.

2-2.If you are not a salary earner

Next is the case of non-salary income earners.

In principle, people other than salaried workers, such as salaried workers, are required to file a final tax return.

However, if the amount of income is less than the basic deduction, which is an unconditional income deduction, the taxable income after the basic deduction will be zero, and as a result, there is no need to file a final tax return.

Therefore, students, full-time housewives, and househusbands do not have to file a tax return if their income from virtual currency transactions is 480,000 yen or less.

If you have income other than virtual currency trading, we will judge whether the total is 480,000 yen or less.

In addition, for sole proprietors, whether or not the total business income and miscellaneous income generated from virtual currency transactions is 480,000 yen or less will determine whether or not they are obligated to file a final tax return.

Furthermore, if you are eligible for an income deduction other than the basic deduction, no tax burden will be incurred if the total income amount is less than or equal to the deduction amount, even if it is 480,000 yen or more.

The basic exemption for resident tax is 430,000 yen.

In cases where the spouse is subject to support, such as a full-time housewife, it will be necessary to pay attention to whether or not they are excluded from the support.

If the amount of income from virtual currency transactions increases, you will become a taxpayer yourself, and your spouse will not be able to apply the deduction for dependents.

It is also important to consider the tax burden on the entire household budget.

3. First of all, what is a “tax return

If an individual earns more than a certain amount of income from virtual currency transactions, it is inevitable to file an income tax return.

Knowledge of tax returns is therefore essential.

However, many people are unfamiliar with final tax returns. So let's talk about what a confirmation is. 

3-1. What is a tax return

In principle, the self-assessment system is adopted for income tax, which is subject to individual income.

The self-assessment method is a method in which taxpayers themselves calculate their income and determine their taxable income and tax amount.

A tax return is a declaration made by a taxpayer to the tax office regarding the calculation of taxable income and the amount of tax paid.

Income tax returns are for income earned during the year from January 1st to December 31st of the year.

The final tax return period is from mid-February to mid-March of the following year.

Salary income earners do not need to file a tax return for salaried income and retirement income, except in certain cases, as the company performs year-end adjustment and tax is paid by the withholding system.

However, if the income from virtual currency transactions exceeds a certain amount, a final tax return will be required.

3-2. What happens if you don't file a tax return and pay taxes?

Even though you are obligated to file a final tax return, you will also need to know what will happen if you do not file a final tax return.

Even if the income obtained from virtual currency trading is slightly over 200,000 yen, if it is not a larger amount of profit, it will not be known to the tax office even if it is not declared, and there is no problem.

There may be However, it is necessary to be fully aware that such cases constitute violations of reporting obligations and tax obligations.

If you do not file a tax return even though you are obliged to file it, you will be subject to penalties such as delinquency tax and additional tax for non-reporting.

In addition, even more severe penalties may be imposed if it is regarded as malicious tax evasion.

The tax office has a mechanism to receive reports on information related to virtual currency transactions from virtual currency exchange operators that operate exchanges, and it is certain that there was income.

In addition, investigations may also obtain information from bank accounts. When there is income to be declared, it is important to file a final tax return without thinking that it will not be found out.

4. What is the tax rate?

Income tax is a system in which the tax rate varies depending on the income category and tax amount.

When trading cryptocurrencies, it is also important to know the tax rates imposed on income and how the tax amount is calculated.

In the calculation of income tax, miscellaneous income including virtual currency income is considered income subject to comprehensive taxation.

Income tax on the income amount subject to comprehensive taxation is a mechanism to determine the tax amount by "taxable income amount" x "tax rate" - "deduction amount".

 “Taxable income amount” is calculated by adding up income subject to comprehensive taxation, such as employment income and miscellaneous income including virtual currency income.

Excessive progressive tax rates are applied to the "tax rates" subject to comprehensive taxation.

A super-progressive tax rate is a tax rate system in which the higher the amount of income, the higher the applicable tax rate.

You can see the "tax rate" and "deduction amount" in the "income tax quick calculation table".

In addition, a tax amount calculation tool for calculating virtual currency income is provided for those who conduct virtual currency transactions.

If you are unsure if the amount of tax you have calculated is correct, you can use these tools.

5. What can be expensed in virtual currency trading?

Income from virtual currency trading is obtained by subtracting necessary expenses from trading margins and exchange margins.

Therefore, if you deduct all necessary expenses, you can reduce your income and save tax.

When conducting virtual currency transactions, it is necessary to have a firm understanding of what is subject to necessary expenses.

Necessary expenses are expenses that are directly necessary to generate income.

Specifically, it includes the price of the PC or smartphone used for the transaction, communication charges such as Internet connection related to the transaction, electricity consumption, and various fees related to the transaction.

In addition, necessary expenses include books purchased to study the mechanism of virtual currency and trading methods, seminar fees attended, and transportation expenses to the seminar venue.

However, for computers and smartphones, if they are used for purposes other than virtual currency transactions, only the amount corresponding to virtual currency transactions will be subject to necessary expenses based on reasonable standards. If you are unsure whether your expenses are covered by the necessary expenses, you should consult a tax accountant or other expert.

Remuneration for the consultation is also subject to necessary expenses.

6. What if there is a loss? carry over?

When trading cryptocurrencies, there are cases where not only profits can be obtained, but also losses can be incurred.

If there is a loss, there is no tax liability as no taxable income is generated. On top of that, be aware that losses from cryptocurrency trading may be offset against other income.

If you can offset your cryptocurrency losses with other income, you can compress your total income and save tax.

However, the only other income that can be offset with virtual currency losses is certain income that is classified as the same miscellaneous income.

It cannot be offset against employment income or business income.

In addition, even if the income is classified as the same miscellaneous income, the income generated by FX (foreign exchange margin trading) is taxed separately as FX-related income, so virtual currency loss It is also important to note that set-off with is not allowed.

In addition, unlike capital gains from stocks, etc.

you should know that virtual currency losses that cannot be offset with other miscellaneous income cannot be carried forward to the next year.

Correct tax payment with the help of professionals

What did you think. Virtual currency transactions are inseparable from taxes.

If you have never filed a final tax return, you may be worried about whether you will be able to calculate it correctly when you need to file a final tax return.

If you have any questions, it is important to consult with a tax office or a tax accountant in order to deal with them correctly.

File your tax returns and pay your taxes correctly with the help of a professional. You can also use calculator tools.