Norway Rejects Bitcoin As Currency; Taxes As Asset, Instead 245
An anonymous reader writes "Norway is the latest country to consider the legal implications of cryptocurrencies like Bitcoin. Norway's director general of taxation has come out and said '[Bitcoin] doesn't fall under the usual definition of money,' which means that it will be considered as assets and charged under capital gains laws. This sentiment was echoed last week by the European banking authority as well, where citizens were warned of using the cyrptocurrency."
How is Norway going to know? (Score:5, Interesting)
Also, how are capital gains taxed there? In the US, capital gains are taxed at a lower rate than most normal income, so if the choice is between normal income and capital gains, I'll take the latter every time (since I'm in the US).
taxed as asset? (Score:3, Interesting)
to clarify further: for an asset to be taxed, in my small world of financial analyst, it must either produce a taxable financial income, which is then taxed, or it must be an acceptable mean of exchange with no or negligible frictional costs. Houses are only an indexation parameter in taxes, since no tax authority whatsoever accepts a lien on 10 square feet as payment: they want hard cash. If the owner-occupier of a house had the opportunity or willingness to put the house in a separate company, it would be clearer still: the company would never make one cent, and it would be taxed on a fictional rent, which by itself is part of the owner's income. Therefore, the owner's income is taxed twice.
So, on bitcoins, the problem is magnified: if it is a mean of exchange, like banknotes, by itself it should not be taxed. the relevant transactions could be taxable, but not the means of exchange: after all, if I buy a car by bank draft or money transfer I do not pay either X or Y depending on how I paid. the effort of the authorities is to preserve the monopoly on fiat currency, that's it.
Re:What is the cost basis? (Score:5, Interesting)
So if I am mining bit coin, and it costs me more in electricity than I am getting in return from the bit coin I make, does that mean I get to write off my electric bill?
Or lets say I am making money, is my electric bill the cost basis for the bit coin? But I also needed a computer to mine, can I factor that into the basis?
I don't think they realize there are other legal ways to get bit coin besides buying it. Or perhaps then they just figure the basis is $0 and tax you 100% on the actual value.
If they are treating it as an asset then you would be a manufacturer and presumably would benefit from all the usual tax breaks. Whether this would include making your electric costs tax deductible in Norway I don't know, but it should be the same as if you were manufacturing shoes, ships, or anything else.
Re:How is Norway going to know? (Score:5, Interesting)
Look for people with a Rolls Royce registered who also claim to earn little money? Then what? Perhaps it was a gift from family, perhaps it was purchased with savings.
The point is, an automated database query is cheap and gives a shorter list of people to investigate compared to everyone in the tax durisdiction.
If you have a car whose purchase price is $40000 and you withdraw $30000-35000 from savings in the months before I think the database query could reasonably file you under the low priority investigation list. If you have a car whose purchase price is $40000 and no transactions which match up with it, then you get filed under the medium priority investigation list.
And if you have multiple houses and no income or savings to account for the purchase costs then you get filed under high priority and a human taxman will start an investigation.
You use the cheapest method available to create ever shorter lists of people with anomalies to pass to the next, slightly more expensive filter.
Re: How is Norway going to know? (Score:3, Interesting)
I don't see why, average price per share is good enough for stocks and would be good enough for bitcoins.
Keep track of all your purchases and you know what you've paid for them, then inform the right authorities about any sales (of coins, a.k.a. also purchases of other things using them) giving the numbers sold, at what exchange rate and your average price paid for the ones you hold.
Which of course will get pretty tricky if you buy an item which have no value set in NOK, USD, Euro or such.
Re:How is Norway going to know? (Score:5, Interesting)
Everything that's considered "tax fraud" in the rest of the world *was* considered a "business opportunity" *by certain Swiss banks*.
FTFY
As a Swiss citizen I'd like to point out that many (if not most) Swiss people don't agree with those business practices and are fed up with the bad reputation it has earned all of us. Much like not all Americans agree with US foreign policy (i.e. dropping bombs on innocent people)