Cryptocurrency tax is becoming an increasingly popular topic, especially as the number of transactions in the cryptocurrency market grows. If you’ve bought or sold cryptocurrencies, you should understand the rules for reporting tax on this type of asset. In Poland, trading cryptocurrencies like Bitcoin, Ethereum, Litecoin, and others is subject to specific tax regulations. This article will guide you step-by-step on how to correctly fill out the PIT-38 form, which expenses you can deduct, and how to tax your cryptocurrency income.
What is Cryptocurrency, and How Does It Function in the Financial Market?
A cryptocurrency is a virtual currency that operates on a decentralized ledger system. It exists digitally and does not have a physical form, like coins or banknotes. In the blockchain system, each cryptocurrency is secured using cryptography, which ensures transaction security. Various types of cryptocurrencies are available on the market, each operating on similar principles. When you sell cryptocurrencies, it involves exchanging virtual currency for legal tender, which requires paying tax.
Who Needs to File Cryptocurrency Taxes?
A taxpayer who earns income from cryptocurrency trading must include it in their annual tax return. In Poland, cryptocurrency income must be reported using the PIT-38 form, intended for individuals earning income from capital gains. This means that anyone trading in cryptocurrencies, whether in small or large transactions, should report their income and expenses in their tax declaration.
How to Calculate Cryptocurrency Tax in Poland?
Generally, calculating your income is not complex. However, you must remember the following elements to do it correctly.
PIT-38 – Form for Cryptocurrency Income
The main document you’ll use is the PIT-38. This declaration covers income from capital gains, including from the sale of virtual currencies. This income is taxed at a 19% rate on the profit, which is the difference between income and acquisition costs. Note that cryptocurrency income is not eligible for other tax reliefs, such as those applicable to other income sources.
Which Transactions are Subject to Tax?
The tax on cryptocurrencies primarily applies to sales transactions. When you sell your cryptocurrencies for traditional currency, you earn taxable income. Besides cryptocurrency sales, other forms of transactions are also taxed, such as exchanging cryptocurrency for goods, services, or other property rights. In such cases, income is calculated based on the value of the received benefit. Exchanging one cryptocurrency for another remains tax-neutral – you do not owe tax until the exchanged cryptocurrency is sold.
Which Costs Can Be Deducted in the PIT Declaration?
One of the key elements in cryptocurrency tax reporting is the cost of acquisition. These are the expenses incurred to acquire cryptocurrencies and the costs related to their disposal.
Cryptocurrency Acquisition Costs
Acquisition costs for cryptocurrencies include all expenses directly associated with their purchase. These may include:
- the cost of acquiring the cryptocurrency itself,
- fees charged by cryptocurrency exchanges,
- expenses related to mining cryptocurrencies, e.g., electricity, and equipment costs.
Cryptocurrency Disposal Costs
Cryptocurrency disposal costs cover all expenses related to selling them, which may include:
- transaction fees,
- advertising costs for the sale,
- drafting the sale agreement,
- commissions paid to intermediaries.
Cryptocurrency Tax Rate
The cryptocurrency tax rate is 19% of income. Income is the difference between revenue from cryptocurrency sales and the costs of earning that revenue. It’s worth noting that tax is paid only at the end of the year, not after each transaction.
When Should You File the PIT-38?
You must file the PIT-38 by the end of April of the year following the tax year. For instance, cryptocurrency income earned in 2024 must be reported in the PIT-38 by April 30, 2025. Remember, the declaration can be submitted in paper form or electronically, which is faster and more convenient.
How to Fill Out the PIT-38 Step-by-Step?
Completing the PIT form can be challenging. Therefore, we also recommend consulting an accounting office.
Step 1: Collect Documents
Before starting the form, gather all necessary documents to confirm your cryptocurrency transactions. These may include:
- exchange transaction confirmations,
- bank statements,
- receipts for purchasing mining equipment.
Step 2: Calculate Income and Costs
Calculate your earnings from cryptocurrency sales and the expenses you incurred. Remember, income is the amount received at the time of sale, while costs include all expenses related to acquiring and selling the cryptocurrency.
Step 3: Fill Out the PIT-38 Form
When completing PIT-38, go to the section on virtual currency sales. Enter the revenue and acquisition costs. The system will automatically calculate the difference, which forms the basis for tax calculation. If you incurred higher costs than income, you may carry over the difference to the next tax year.
Step 4: Submit the Declaration
After filling out all required fields, you can submit your declaration electronically or deliver it to the tax office in person. If you file online, you will receive an Official Confirmation of Receipt (UPO), confirming that your PIT has been successfully submitted.
Key Points to Consider When Filing Cryptocurrency Taxes
If you will be filing cryptocurrency taxes, consider the following aspects:
Tax Loss and Carrying Forward Costs
If in a given tax year you incurred higher costs than income, you can carry forward the excess costs to the next year. This means that the following year, you can deduct these costs from your cryptocurrency income, reducing your tax.
Cryptocurrencies, Taxes, and Business Activity
Remember that if you operate a business and conduct cryptocurrency transactions, you cannot report these earnings within the business framework. Cryptocurrency transactions are always reported within PIT-38, not PIT-36 or PIT-28, which are for business incomes.
Cryptocurrencies and Barter Transactions
If you conduct barter transactions, where you exchange cryptocurrencies for goods or services, you must report income based on the value of the received good or service. These transactions are also taxable, and you must report the income in PIT-38.
Tax on Cryptocurrency Exchange
Exchanging one cryptocurrency for another is tax-neutral, meaning you do not owe tax until you sell the cryptocurrency for currency. Only then will the income be subject to taxation.
Do I Need to Report Cryptocurrency Income?
Failing to report cryptocurrency income may lead to its classification as income from undisclosed sources. The tax authority has the right to audit your transactions and compare declared income with actual expenditures and asset changes. If they find that funds used to purchase property, vehicles, or other goods do not match declared income, they may request explanations. If you cannot document the origin of these funds, they will be treated as undisclosed income, incurring a penalty tax of 75% on the undeclared amount. For cryptocurrencies, it is crucial to keep accurate transaction records and report them in the correct tax forms, such as PIT-38. Failure to report income from cryptocurrency sales or exchanges for goods or services may be considered hiding income. In this case, the tax authority can impose financial penalties and take legal action to enforce owed taxes. Therefore, regular and accurate reporting of cryptocurrency transactions is essential to avoid consequences related to undisclosed income.
Summary
Filing cryptocurrency taxes may seem complex, but following a few key principles will help you avoid issues with the tax office. Above all, remember to collect documents confirming transactions, calculate income and expenses, and submit the PIT-38 on time. It’s also advisable to stay updated on changes in cryptocurrency regulations to ensure compliance. Remember that any cryptocurrency transaction generating income is taxable. Whether you’re selling cryptocurrencies, exchanging them for other assets, or conducting barter transactions – correctly reporting in PIT-38 is crucial to avoid issues with the tax authorities.
