Don’t you think that you don’t have to pay taxes on virtual currencies such as Bitcoin because, as the name implies, they are “virtual currencies”?
In fact, that is not true. Profits made with virtual currencies, such as Bitcoin, must be declared and are subject to taxation.
So, let’s take a closer look at when and how virtual currencies are taxed.
Are virtual currencies subject to taxes?
As I mentioned at the beginning of this article, there may be many people who think that virtual currency is a data-based currency and therefore not subject to taxes.
In reality, however, virtual currencies are subject to taxes as well.
If you make a profit on virtual currency, you must properly declare it and pay taxes on it, or else you will be evading taxes.
In September 2017, the National Tax Agency issued a statement stating that “Profits generated by using bitcoin are subject to income tax and, in principle, are classified as miscellaneous income.
In conclusion, simply holding virtual currency is not taxable, but selling bitcoin or other virtual currency, or using virtual currency to make purchases, is.
Taxes related to virtual currency profits are income tax and inhabitant tax.
So what types of taxes are associated with virtual currency profits?
There are two types of taxes: income tax and inhabitant tax.
Income tax is a national tax and is paid to the tax office.
Income from your main job, such as your salary from your company, is adjusted at the end of the year, so you do not need to go through any special procedures.
However, if you have income other than from your main job, you need to file a tax return.
On the other hand, local taxes are levied by prefectures and municipalities, and are filed at the municipal office.
You are only required to file a local tax return if you do not have to file a tax return for income other than your main job.
What are the conditions for filing a tax return?
When do you need to file an income tax return?
You need to file an income tax return in the following cases.
(1) Your annual salary income is 20 million yen or more.
(2) Income other than salary income and retirement income is more than 200,000 yen per year.
(3) You work at two or more places and have income other than your main salary of 200,000 yen or more per year.
There are more.
There are others, but if you make a profit from virtual currency, you fall under (2) and (3).
Cases in which virtual currency is subject to tax include
Selling virtual currency for a profit
You make a profit by trading virtual currency.
Shopping at a store that accepts virtual currency.
Shopping at stores that accept virtual currencies.
Simply holding virtual currency is not taxable, but if you buy another virtual currency or convert it into yen or dollars, you must pay income tax if your profit is 200,000 yen or more, and you must file a tax return.
On the other hand, if your profit is less than 200,000 yen, you do not need to file an income tax return.
In other words, you do not have to pay income tax.
However, you are required to pay local taxes even if your profit is less than 200,000 yen.
Even if your profit is less than 200,000 yen, don’t forget to file your inhabitant tax return.
summary
This is an explanation of taxes related to virtual currencies.
If your virtual currency profits are over 200,000 yen, you will need to file a tax return and pay income tax.
Those who trade in virtual currencies should also acquire the proper tax knowledge and be careful not to evade taxes.
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