More and more companies are seeing potential in the opportunities offered by blockchain. This is not only about trading in various cryptocurrencies, but also about all kinds of other solutions based on blockchain. Companies that specialize in crypto often get paid in cryptocurrency. Since cryptocurrencies still have an extremely uncertain fiscal status, and the coins can also be quite volatile, the question arises of how to deal with cryptocurrencies in the annual accounts.
The starting point is that the accounts are basically kept in Euros. This means that when two parties agree that certain activities can be invoiced in a certain cryptocurrency, this is leading. However, for the annual accounts and the resulting tax return, this must be converted into Euros. This raises two questions. How do you determine the value of an invoice drawn up in cryptocurrency? How are certain currency fluctuations treated? When an invoice is drawn up in cryptocurrency, it must be converted into Euros, as mentioned. It is important to use a reliable source to convert the cryptocurrency into Euros at the daily value. There are several platforms for this, such as exchange-rates.org.
Suppose you send an invoice for 10 Ethereum, then you must book this in the administration at the daily rate of that moment in Euros. In case the value of Ethereum for the payment of the invoice rises or falls, this means that you get paid more or less in Euros when converted. What are the tax implications of this? These exchange rate differences must be taken as gains or losses. Suppose the invoice was €100 in Euros, but in the end you receive €110 due to an increase in the exchange rate, then you will also be taxed on €110. It is therefore important to keep good records of which exchange rates you use.
If you have sent invoices in cryptocurrencies and you have them stored in your crypto account (your wallet), there can obviously also be fluctuations in value. Since cryptocurrencies are not yet a legal tender according to the law, I believe that holding cryptocurrencies should be treated in the same way as holding securities in the company. This means that they should be valued at cost or lower fair value. This is tax advantageous, as you can take losses when the securities (in this case, the cryptocurrencies) decrease in value, but you do not have to take the profit when they increase in value. This is only mandatory when the profit is actually realized, which is the case for cryptocurrencies when they are exchanged for Euros.
As mentioned, holding cryptocurrencies does not necessarily lead to unreasonable administrative burdens; there are actually two valuation moments. The first moment is receiving the cryptocurrency, and the second moment is selling the digital coin.It becomes a bit more complex when actively trading in cryptocurrencies. In that case, every transaction should be reported and taken into account for tax purposes. It is essential to use a consistent valuation method. In my opinion, the most convenient approach is to use the first in, first out (FIFO) system. This means that the first purchased currency is sold first for administrative purposes. This ensures that there are as few different purchase prices as possible.
It is important to note that the administration of a company that actively trades in cryptocurrencies can become very extensive. It is certainly relevant that this is a new area for the tax authorities, where the nuances and exact practical implementation still need to be determined.
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