How to Easily Prepare Your Crypto Taxes

So you’ve followed fallen down the crypto rabbit hole, started buying and selling some Bitcoin, then bought some Ether, and perhaps even ventured further to buy some other altcoins.

After some time, seeing that you’re profiting massively, you decide to sell some of your tokens. Sometime later, you decide to buy a new token that you believe will revolutionize the world.

The problem is, of course, keeping track of all these purchases and sales. You want to keep track of whether you’re actually turning a profit or not, plus you need to calculate what you owe your country’s taxman at the end of the year.

Crypto taxes are a complex topic, but I’ve done my best to summarise the situation in several major countries, so check out my post on how Bitcoin and other cryptos are taxed around the world.

So what are your options for crypto tax preparation?

You could keep track of things manually using a tool like Excel, but this quickly gets out of hand, especially if you’re trading on multiple platforms or have multiple wallets.

The better solution is to use an online crypto tax preparation tool. Here are the best crypto tax software solutions.

Cointracker

Bitcoin_Taxes__Crypto_Portfolio___Prices___CoinTracker

CoinTracker is a useful platform that is suitable for cryptocurrency investors of all shapes and sizes. For example, you might be a passive investor that buys and sells a few coins each year. If this is the case, you should be fine sticking with the CoinTracker Free Plan, which permits up to 25 transactions.

See also: My detailed review of Cointracker.

I like the fact that you will still have access to the vast bulk of features on the Free Plan – especially capital gains reporting and your choice of accounting standards. At the other end of the spectrum, CoinTracker is especially useful if you actively trade cryptocurrencies,

Although you will need to pay a fee for anything above 25 transactions, the application has the potential to save you countless hours of manual reconciliation. In fact, you will stand the best chance possible of avoiding a mistake that in the long-run, could end up costing you significantly more in tax authority fines.

Sign up to Cointracker and get 10% off your first tax plan

Cointracking

Cointracking

This is one of the most complete services available out there. They have two offerings, one for crypto traders and the other for crypto companies.

Get your 10% discount on Cointracking plans

Tokentax

Tokentax

TokenTax is a crypto tax software platform and a full-service cryptocurrency tax accounting firm. This tool also takes care of tax loss harvesting. If you hold assets at a loss, then you can save money on your taxes. TokenTax’s Tax Loss Harvesting dashboard tells you exactly how much losses you can claim by strategically selling off assets.

Tax loss harvesting is selling off assets you hold at a loss to reduce your capital gains. When you reduce your capital gains, you owe less taxes. And, if you take a loss in crypto, you can offset other capital gains in assets like stocks.

Support for margin trading is also included.

Check out Tokentax

Cryptotrader

Cryptotrader

CryptoTrader.Tax takes away the pain of preparing your bitcoin and crypto taxes. Simply connect your exchanges, import trades, and download your tax report in minutes.

Check out Cryptotrader

What’s your favorite crypto tax preparation tool?

✈️ Can Digital Nomads Legally Pay No Taxes?

digital nomad tax

I spent a good part of my twenties traveling around the world during what was the start of the digital nomad movement.

A recurring theme that I used to hear about was the possibility of optimizing taxes by being a digital nomad.

Just walk in any co-working space in South-East Asia, and a 20 y.o. white guy from the EU or Canada will swear that flying circles in Thailand, Bali, and Vietnam for all year means that nobody has the right to tax his income.

At the time I had decided to keep things simple by just paying tax in my home country where I had always paid as a self-employed person.

When I started to hear all the strategies others were using, however, I started to feel a bit stupid for not having optimized things. So I embarked on a journey to learn as much as possible about all the options available for legal tax optimization.

It turns out that the strategy I had opted was actually one of the safest ways to act as a digital nomad. The “clever” tactics many others were using were grey area legal schemes at best but mostly just plain old tax evasion that would most likely lead them into trouble later.

To this day, as the digital nomad revolution has grown, I still hear many of these strategies bandied around, so I thought I’d have a go at outlining how I think a digital nomad should pay his/her taxes.

[Read more…]

🇪🇺 Most Efficient European Tax Structures for Company Owners in 2021

flag theory

With the growing trend of digital nomadism together with location-independent workplaces, championed by companies like Automattic and Basecamp, we are seeing an increasing number of company owners having the luxury of choosing a country to be tax resident in and also deciding which country to base their company in.

Tax laws tend to change quite frequently, as do the relations between countries. For example, the big countries tend to have a blacklist of countries they consider tax havens, and of course you don’t want to base yourself or your company there. I believe the European Union currently provides the best flexibility with moving around and building an efficient tax strategy.

See also: Is it possible for digital nomads to pay no tax?

No EU country can blacklist another country, so you have the security of countries playing nicely. You would perhaps be surprised to know that within the EU tax rates vary between countries in a very significant way.

Before we dive in to discuss some of the available structures, I’d like to spend some time talking about flag theory, tax planning and offshore companies to make sure we have the basics dealt with.

Flag Theory is all about diversifying your life and staying protected. The Five Flags deal with residency, citizenship, banking, assets, and business. It’s a strategic internationalization process designed to increase your freedom, protect your privacy and grow your wealth in leading jurisdictions.

I learned about flag theory many years ago in my days as a digital nomad, and it has influenced my choices ever since. As I mentioned in my thoughts about nationality, I think we are moving towards a future where people actively choose where they want to live and do business.

This is totally contrary to the traditional view that you are born in a country and being patriotic to that country (even to the point of dying for your country!) forever. I think that many countries are not run efficiently and put an ever-increasing burden on their citizens due to their politicians’ ineptitude and abuses, and that is not acceptable.

The modern workforce is becoming increasingly mobile, and if you’re an entrepreneur especially, you have a lot of freedom that you might not have considered before.

If you want to learn more about flag theory I suggest you open these blogs and just read as many of their blog posts as possible. I bet they will change the way you think about things in a significant way.

A good forum worth visiting on the topic is Offshorecorptalk.com.

[Read more…]

How P2P Lending and Property Crowdlending is Taxed in Spain

Crowdlending is very popular in Spain, and I have written about my experience with property crowdfunding platforms in Spain before. For the purposes of this article, crowdlending and crowdfunding are interchangeable as they are treated the same for tax purposes.

This includes P2P lending platforms in Europe; as a Spanish resident this income will also be taxed according to the savings rates.

Any interest obtained is declared as benefits from movable capital. This is pretty much the same as profits obtained from deposits or dividends from stocks. You need to declare interest even if that same interest has been re-invested or never withdrawn from the crowdfunding platform. If you receive dividends in 2020, you will declare them in 2021; always one year later.

In the IRPF form, look for box number 23, where you will need to insert the total amount of profits, without discounting any retenciones imposed by the platform.

If you are receiving dividends from foreign crowdlending platforms, they will be declared in the same way as the Spanish ones. Remember that in the IRPF you declare your worldwide income. There is no other obligation to comply with when investing in foreign platforms.

Most Spanish crowdfunding platforms will automatically deduct 19% from your profits and declare them to Hacienda. Once you access your Hacienda account, you will be able to see all your retenciones.

Income from property crowdfunding is classified as savings income in Spain. There are the following tax bands in place:

  • Spanish tax rate on savings income up to €6,000: 19%
  • Spanish tax rate on savings income from €6,000 to €50,000: 21%
  • Spanish tax rate on savings income over €50,000 to €140,000: 23%
  • Spanish tax rate on savings income over €140,000: 27%

You might have noticed that the lowest band is 19%, and that is why the Spanish crowdfunding platforms automatically pay tax of 19% on your behalf. If your income from such platforms is higher than €6,000, you will have to pay additional tax according to the bands above.

If you are participating in property crowdfunding on platforms that are based outside of Spain, they will normally send you the full proceeds from any dividends or capital gains due to sales of property. You will then have to declare the income on your IRPF tax form, which is due for submission between April and June of the following year.

I hope that helps you understand what taxes you typically have to pay after investing in property crowdfunding platforms.

Note that you will also have to take into consideration the Modelo 720 when thinking about taxation and reporting. While modelo 720 does not require the declaration of any loans given out to thid parties, you might have idle cash sitting in your platform’s accounts and sometimes these need to be declared.

For example, in the case of October, they store your cash balance in a Lemonway account that is personally identifiable and located in France, hence you need to report it within the modelo 720.

If you have any further questions let me know and I’ll do my best to answer them.

You can find more information about paying taxes in Spain on this site.

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Please note that I am not an accountant or financial advisor, the above is the fruit of my personal research, and might contain inaccuracies. Before you submit any tax returns, I highly recommend you contact a tax consultant or accountant to check your numbers.