The crypto business is becoming more popular every year. Many investors choose Poland as the most favorable jurisdiction for business expansion. But the question arises – how much taxes will you pay after receiving a Poland crypto license, since profit is almost always related to taxation, and everything is only sometimes clear with cryptocurrency income?
What is Cryptocurrency Income?
Before you begin tax calculations, you need to determine for what income the tax will be calculated. Transactions will be considered income from using electronic money to exchange digital coins for fiat funds, products, services, etc. If one type of electronic coin is exchanged for another, then no tax is charged on such transactions. It is independent of where the exchange was carried out: on a crypto exchange or individually. Income generation occurs when digital coins are exchanged for fiat money or products with monetary value.
Cost accounting principle
The amount subject to taxation is the income received minus the expenses associated with obtaining this income. There may be uncertainty in this aspect. The fact is that these expenses must be confirmed by documents for the purchase and sale of electronic coins (for example, the commission percentage on the purchase/sale).
Difficulties arise when it comes to mining e-money. Are technical equipment and electricity costs considered expenses that should be deducted from the taxable amount? Based on Polish tax law, costs incurred for purchasing technical equipment are not considered expenses when determining crypto profits. This is because it is impossible to correctly calculate the costs for each operation that generated income (sales of electronic coins). It is worth noting that there have been rare cases when, in court, the miner was able to prove that if these costs had not been incurred, then generating income would have been impossible. In addition, the costs associated with electricity consumption can always be confirmed by bills paid for it.
Despite disputes and disagreements, the tax service still believes that technical equipment costs for mining and electricity should not be deducted from the taxable amount for transactions with electronic coins.
Taxation of transactions
Let’s consider what taxes are charged for activities. In Poland, there are two types of tax for cryptocurrency:
- the corporate tax rate is 19% (preferential 15%); tax deductions are not taken;
- taxation on exchange transactions ranges from 17 to 32% by the progressive tax scale.
In addition, all cryptocurrency income must be included in the income tax return. Therefore, cryptocurrency taxation is calculated separately from other types of activities. For example, if the head of an organization has a parallel business selling computer equipment, then tax will be separate for each type of activity. One revenue declaration is filled out but in different sections for different taxation.
Profit is recorded in zlotys. But when an entrepreneur sells crypto for foreign currency (dollars, euros, etc.), the income statement indicates the amount in zlotys based on the transfer of the received foreign currency by the current exchange rate of the National Bank of Poland. The income declaration is submitted to the tax service in paper or electronic form annually on April 30.
The principle of paying taxes
In Poland, taxes on transactions are paid not monthly but annually in a single payment. For example, if an entrepreneur made a profit from selling digital coins in April and May, the costs exceeded the income. All this will be equalized in the final calculation at the end of the year in total from all revenue transactions and expenses incurred.
In the case when, at the end of the year, costs exceed income from trading digital coins, then prices will be increased, which are not taxed in this category in the next year. The difference between the expenses that exceed revenue will be considered in the next year’s calculation and subtracted from the taxable amount.
Each year is considered a whole and not divided into separate periods. If desired, the head of a company may not feel the difference in excess costs from the previous year. They have the right to take into account only those costs that were in the accounting year. It is considered correct. Poland is a favorable jurisdiction with a stable economy and transparent legislation.