The start of a new year is a period of financial summaries for the previous 12 months. We know that we are obliged to account for traditional financial assets in our possession. However, how does the situation look in the case of more ‘exotic’ (from the point of view of the Polish system ) digital currencies?
We will answer right at the outset: yes, a taxpayer is obliged to account for income and expenses incurred on cryptocurrency transactions in the case of an annual tax return. How? You will find more information below!
As of 2019, accounting for cryptocurrencies is conducted on the basis of different standards than in previous years. The changes relate to the rules for classifying income and accounting for expenses. These categories are settled via the PIT-38 return (“Capital gains”) until 30 April 2023 – if we are talking about an individual wishing to settle for 2022.
It is worth using the example of Kanga Local at this point. Locals is precisely an individual, like a user of an exchange trading cryptocurrencies, doing so irregularly, from time to time. With that said, Locals doesn’t do trades every week, and does a dozen or so trades within a month – so it is by no means a business entity.
Some accounting offices do not do stock adjustments on an ongoing basis. The Tax Office indicates that this should be done in accordance with accounting periods. The Accounting Act itself recommends doing this process at least at the end of the year.
Let us assume that the Locals in question did not pay too much tax during the year. At the very end of it, accounting offices are obliged to take this out of Locals’ costs. In short, the value of the Locals’ omega zloty (oPLN) holdings will cause them to be taken out of deductible costs. Consequently, there will suddenly be an income tax, despite the continued trading of omega PLNs.
Is there a method to eliminate this tax? Let’s assume Locals accounts for capital gains. His income will reach £1,000,000 and his expenses will reach £900,000. If he decides to buy cryptocurrencies for £100,000, his cost will equal his income and he will not have to pay income tax.
The information contained in this post is only a fraction of the knowledge presented in the tax webinar “Taxes and accounting in crypto”, organised at the end of last year on the Kanga Exchange channel and hosted by Maciej Grzegorczyk and Marta Grzegorczyk from the KGH Law Firm located in Wrocław. Those wishing to learn more about taxes in the case of cryptocurrencies are cordially invited to the screening. In the next article, we will focus on the issue of accounting for digital currencies for business activities.