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Finnish Tax Administration: Instructions on Bitcoin income tax

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Re: Finnish Tax Administration: Instructions on Bitcoin income tax

#21

Post by jsnell »

zokier wrote: post #13

The example 2 in section 2.1.2 is curious. It essentially says that the value of goods purchased with bitcoins is determined by the eur-btc exchange rate at the time of purchase. I find that idea problematic because there afaik is no official exchange rates for bitcoin.

It doesn't need to be an official exchange rate, it's what I guess would be best translated as a "fair market value". If there appears to be no fair market value for the virtual currency, one would need to be agreed upon by the parties. (I base this on the accounting rules listed for the receiver of the virtual currency).

What I find curious is the asymmetric handling of realized exchange rate profits vs. losses. Profits are taxed as capital gains, but unlike with e.g. shares, you can't use realized losses to offset the profits.

Re: Finnish Tax Administration: Instructions on Bitcoin income tax

#22

Post by zurn »

hannibal5 wrote: post #9
andrewgjohnson wrote: post #4

Is there a one sentence TLDR in English to summarize?

BTC is not currency or security. BTC is treated as any other asset outside currencies and securities. Person must pay taxes for capital gains but they can't do tax deductions from losses. Taxes hit every time BTC is used to buy something. Mined bitcoins are taxed as earned income.

A firm doing currency speculation with bitcoin is treated differently though and then bitcoins are taxed like current assets.

Re: Finnish Tax Administration: Instructions on Bitcoin income tax

#26

Post by ksherlock »

hannibal5 wrote: post #9
andrewgjohnson wrote: post #4

Is there a one sentence TLDR in English to summarize?

BTC is not currency or security. BTC is treated as any other asset outside currencies and securities. Person must pay taxes for capital gains but they can't do tax deductions from losses. Taxes hit every time BTC is used to buy something. Mined bitcoins are taxed as earned income.

"Mined bitcoins are taxed as earned income."

Depending on the specifics, that has the potential to be a massive problem. Let's say you mine $1,000,000 in bitcoins but at tax time, the BTC market crashes and they're now worth $100,000. Do your tax bill now exceed your income?

This isn't a hypothetical scenario - During the .com 1.0 boom, some people cashed in their stock options but kept the stock (to get long-term tax rates on stock that could only go up). A year later, they owed income tax (historical market price - strike price) on stock that was now worthless. (capital losses are limited to $3,000/year but carry forward).

Re: Finnish Tax Administration: Instructions on Bitcoin income tax

#27

Post by benajnim »

PeterisP wrote: post #17
zokier wrote: post #13

The example 2 in section 2.1.2 is curious. It essentially says that the value of goods purchased with bitcoins is determined by the eur-btc exchange rate at the time of purchase. I find that idea problematic because there afaik is no official exchange rates for bitcoin.

It's simple, you do it just as for any other freely traded currency pair, like EUR-USD - assign some body (central bank or some dept in ministry of finance) a duty to publish 'official accounting rates' and make a procedure on how to calculate such rates such as average rates of multiple large trading bodies. It doesn't mean an offer to buy/sell at those exact rates (e.g., EUR/USD spot rates at every second will defi…

Sounds like another LIBOR scandal waiting to happen.

Re: Finnish Tax Administration: Instructions on Bitcoin income tax

#28

Post by JoshTriplett »

hannibal5 wrote: post #9
andrewgjohnson wrote: post #4

Is there a one sentence TLDR in English to summarize?

BTC is not currency or security. BTC is treated as any other asset outside currencies and securities. Person must pay taxes for capital gains but they can't do tax deductions from losses. Taxes hit every time BTC is used to buy something. Mined bitcoins are taxed as earned income.

> Person must pay taxes for capital gains but they can't do tax deductions from losses.

That hardly seems fair. What possible reason could justify that?

Re: Finnish Tax Administration: Instructions on Bitcoin income tax

#29

Post by mongol »

parennoob wrote: post #23

Offtopic; possibly interesting -- is the average word in Finnish far longer than the average word in English? I ran `style` over that piece of text, and it told me that the average word had a length 6.74 characters. That seems pretty long to me.

No doubt.

Re: Finnish Tax Administration: Instructions on Bitcoin income tax

#30

Post by capisce »

mongol wrote: post #29
parennoob wrote: post #23

Offtopic; possibly interesting -- is the average word in Finnish far longer than the average word in English? I ran `style` over that piece of text, and it told me that the average word had a length 6.74 characters. That seems pretty long to me.

No doubt.

Epäilemättä.
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