Taxation of cryptocurrency transactions is a problem that is being addressed around the world. Since the World Bank and the financial regulator SEC do not have a unified vision for digital money, each country solves this problem individually, at its own discretion.

Germany: bitcoin is a subject

The Federal Ministry of Finance (Bundesministerium der Finanzen) determines the position on the taxation of any transactions involving digital assets.

In 2018, the BMF adopted and enshrined in law the following provisions:

- The purchase and sale of cryptocurrencies is an income-taxable transaction, but is not subject to VAT.
- Digital and electronic money that is used solely to pay for goods and services is equated to fiduciary money (i.e., circulating within the state payment system).
- Transactions of game tokens, which do not have the attributes of traditional means of payment, are excluded from the list of VAT-exempt transactions.
- Mining is an ancillary service to keep the blockchain running, so it is not subject to value added tax. The transaction fee that miners receive is a voluntary donation from network users and is not subject to income tax.
- Sales of hardware cryptocurrency wallets are subject to income tax and VAT. Local, exchange and paper wallets are not included in the list of taxable wallets.

It is important to understand that cryptoassets are not officially considered a means of investment or payment in Germany. Digital money is equivalent to tangible objects. Therefore, their purchase and storage are not subject to any mandatory commissions. Their sale is considered the alienation of personal property.

However, there is an important nuance.

Any sale (furniture, real estate or digital coins) is considered by the tax authorities in Germany as speculation, if the period between the purchase and sale is less than 12 months. That is, only the net profit from the sale of cryptoassets that were purchased and sold within one year should be entered on the tax return.

How to calculate returns if, for example, bitcoins were bought through exchangers between 2015 and December 2020 and then sold in one batch in January 2021 (at their peak) is unclear. Also, regulators don't explain how to distinguish between a VTC bought on an exchange in 2016 and one bought in 2020 through an exchanger if one of them is sold in 2021.

Income tax for individuals in Germany is calculated on a progressive scale: from income over €56 000 Germans give the state 42% and profit below €600 is not declared at all. Legal entities pay to the budget from 14 to 17% of net income (the amount is set by municipalities, where companies register the address of their head office).

UK: bitcoin is a payment token

The amount and types of taxes on cryptocurrencies in the UK are worked out by Her Majesty's Revenue and Customs.

In 2019, HMRC issued guidance for tax agents on cryptocurrencies. It consists of two parts: "Cryptocurrencies: individual taxation" and "Cryptocurrencies: business taxation".

All digital assets in this guide are divided into 3 groups.

- Exchange tokens (allowing the exchange process). These are currencies that use ledger technology (blockchain), can act as a means of payment and do not provide ownership of goods and services.
- Utility tokens (service or service). Blockchain-based tokens that give owners ownership of tangible and intellectual assets. Utility tokens cannot be used as payment.
- Security tokens (secure, secured). These are tokenized stocks and securities. They are created on the blockchain as a means of investing in a project. Owners of security tokens receive ownership shares in the project in proportion to the number of digital shares purchased. Can be sold, but cannot act as a means of payment.

British owners of crypto-assets must pay CGT (Capital Gains Tax). This applies to both individuals and businesses.

Any income derived from mining, exchanging or selling Group 1 and Group 3 tokens is taxed at the regular rate:

- Transactions with capital gains below 12.3 GBP are exempt.
- Income between 12.31 and 37.5 GBP is subject to a 10% contribution to the UK budget.
- All income above this limit will require payment of 19-28% CGT tax, depending on the amount of growth in the reporting year.

Transactions with utility tokens are taken into account in the declaration, but are not considered to generate direct income. It is up to the taxpayer to specify the type of token, wallet address, bank statement, date of transaction and value of the transaction.

Italy: Bitcoin is a foreign currency

In Italy, the State Revenue Agency (Agenzia delle Entrate) deals with cryptocurrency issues.

As of 2019, regulations came into force here that equate digital money with money held in foreign banks. The jurisdiction determined by the custodian of the cryptocurrency is, according to the tax authorities, the country where the custodial wallet or cold storage of the exchange is registered.

In this case, the value of bitcoin is determined once a year as of December 31 in euro equivalent.

Naturally, this approach is puzzling because it does not take into account the two main features of cryptocurrencies: extraterritoriality and volatility.

But Italian regulators do not intend to retreat from their decision and threaten a 15% fine on the amount of undeclared funds.

However, Italy has always been famous for absurd laws. For example, there is a "tax on shade" (if the shadow of the canopy over a cafe or store goes beyond the purchased land and enters the public domain), or the "tax on the maintenance of nuclear power plants," which is included in all electricity bills, although there is not a single nuclear power plant in Italy.

Taxation, according to the law, is subject to storage of cryptocurrencies worth more than €51,000 for longer than 7 days a year. If an Italian was foolish to show in a declaration that he keeps 2 BTC from 2019, he will pay 25% of their value to the Italian budget.

The absurdity of regulations adopted in Italy is compensated only by the fact that none of the crypto-enthusiasts bothers to enforce them.