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Norway Rejects Bitcoin As Currency; Taxes As Asset, Instead
- sfrechtling 13y agoI'm no economist, but isn't that congruent with how similar things like Gold are treated?
- dualogy 13y agoAbsolutely, in most parts of the world, these days. Essentially, it comes down to two things -- what are taxes paid in (they don't want a 10th of your apples or cattle these days) and what final settlement is enforced by law in contract disputes. Even if you have a contract stating I owe you 4 pork bellies or chunks of gold or bitcoins, if we end up in a court of law, they'll only enforce settlement in currency. So yeah this comes as no surprise. People can (depending on jurisdiction and subject to details and scale and taxability etc) by and large "barter" in other media of exchange all they want, especially on a small peer-to-peer scale. Just don't expect too much legal protection / contract enforcement in anything other than legal tender. ;)
- runarb 13y agoThe issue here is that Norway adds vat (value added tax) on assets when sold to private citizens. Vat is added to most assets, including gold. This makes bartering more expensive when bartering with foreigners. For example if a Norwegian where to trade 1000 USD worth of gold for a new pc with someone in the us, the Norwegian would have to pay 1250 USD for the same gold (1000 USD in gold, 250 USD in vat). Same for BitCoin. One will need to pay vat when buying them. However one can buy 1000 USD in gold coins for 1000 USD because the coins are considered a currency, and thus not subject to vat.
- marvin 13y agoNorwegian here. Would you also have to pay VAT on the product itself? I.e. 250USD in VAT on the gold, 250 on the PC? Or is the latter part dropped? Because if this is the case, it doesn't really matter since you need to pay VAT on products you buy from abroad regardless.
- runarb 13y agoI am not a lawyer. But I think you would pay custom duty of 25% on the pc. It even worse, because your 1000 USD pc is now not a 1000 USD pc, but a 1250 USD pc because that is what you paid for it. I believe it would go something like this: * You want to barter for a 1000 USD pc located in the US and pay 1000 USD worth of gold. * In Norway you then pay 1250 USD for that weight in gold (1000 USD for the gold, 250 USD in vat) and send it to the US. * The pc is sent to you, but is now worth 1250 USD because that was what you paid for it, so you pay an additional 312 (25%) in custom duty. * Making your 1000 USD pc costing you 1562 USD. So bartering with assets like gold and now BitCoin may not be a good idea as a private citizen. Companies of course are exempt from vat, so other rules apply.
- 3825 13y ago> Companies of course are exempt from vat, so other rules apply. If a company buys a 1000 USD computer to sell it, then the ultimate buyer pays the VAT. However, what happens when a company buys a 1000 USD computer to replace a server rack? At what point does "consumption" happen?
- deleted 13y ago[deleted]
- runarb 13y agoOnly private citizen pays vat. In practice it works so that everyone, both private citizen and company’s pays the vat, but companies can fill out a form and get the vat returned if the product was for internal use. They then add vat to their end product. For example: * A company buys a 1000 USD server and pays 1250 USD (server + vat). It sells it to a private citizen for 1250 USD (no profit). It can then keep 1000 USD and must give 250 USD to the state. * A company buys a 1000 USD server and pays 1250 USD (server + vat). It sets it in a rack for internal use, and can then ask for the 250 USD vat back from the state.
- e12e 13y agoVAT is a tax on "value added". So a (VAT registred) company only needs to pay VAT on the value it provides. Eg: you sell services for 1M NOK/year, you then have to claim VAT from your customers, totalling 250K NOK. But, you also pay for hosting, hardware etc, for say a total of 300K NOK -- so you subtract the VAT on that 300K (7.5K NOK) from the VAT you have to pay the government, and pay 250K - 7.5 K in VA tax. (In reality you might do a lot of these deals b2b, and not actually transfer/invoice the VAT -- but that's the basic idea). Oh, yeah, also not a lawyer, but a Norwegian.
- walshemj 13y agoAh interesting so Norway doesn't follow the same rules on VAT from the EU then as they are part of the European Economic Area. What is to stop a Norwegian going to an EU state and buying gold there as the EU treats investments such as gold and stocks and shares as exempt from VAT (sales tax)
- werid 13y agoYou'd have to smuggle it into the country. If you want it to be done legally, you'd have to declare it and pay VAT.
- runarb 13y agoThis is a common problem. When the gold crosses the border it becomes 25% more worth. Just in March this year someone was arrested for smuggling in 421 kilo of gold: http://www.aftenposten.no/nyheter/iriks/Politiet-Nettverk-smuglet-over-500-kilo-gull-inn-i-landet-7141130.html http://www.aftenposten.no/nyheter/iriks/Politiet-Nettverk-sm... (in Norwegian). I guess one could also melt gold coins to obtain the gold without paying vat.
- justincormack 13y agoThese rules are fairly new, the UK used to tax gold too. Presumably there would be a tax on reimport to Norway if you bought in EU.
- Cthulhu_ 13y agoI don't blame them; you can't buy much with bitcoins, everyone treats it as an asset whose value is entirely determined by the current exchange rate / buy/sell prices, and that exchange rate is so unstable, no sane bank would want to offer services for it.
- VMG 13y agoIt's very unwise to categorize at this early stage of development. Artificially restricting the use as a currency because it doesn't work as a currency at the moment makes it a self-fulfilling prophecy. Just imagine how sensible strong internet regulations would have been in 1992
- salient 13y agoExactly. If they don't really know what it is, then they should've left it alone for now.
- PeterisP 13y agoWhat do you mean 'leave it alone' ? You have to pay tax on any deals, and if something new appears, then the longest you can leave it alone is a few months, until people have to fill out the tax filings and need clarification on how to treat it.
- deleted 13y ago[deleted]
- Millennium 13y agoPerhaps, but I don't see any way around it: you've got to call it something. At the moment, bitcoin is a lot more like bullion than currency: it's possible to store and exchange raw value with it, but except in a very few cases, you're not able to walk into a store and buy something. Laws can be changed. If Bitcoin starts acting more like a currency, then the laws can be changed to suit. Right now, it is not very currency-like, and that is unlikely to change very much in the next five years or so, and so treating it as one doesn't make a lot of sense.
- sergiosgc 13y agoAre we linking to Slashdot now? Why not submit a link to the original article? (http://bitcoinsalot.com/?p=8 http://bitcoinsalot.com/?p=8)
- gaius 13y agoGovernment in tax maximizing shocker, film at 11.
- panacea 13y agoBeing sensible about asset valuation. Libertarian scorn at dawn.
- GoldfishCRM 13y agoAs I understand it bitcoin will be treated like a stock. Which means that you can use the loses you made on bitcoin and balance then agains your wins=) Make sense since the bitcoin fluxiate so mush right now.
- runarb 13y agoNo. As I understand it, BitCoin will be treated like a physical asset. For example the same as a gold bar. In Norway assets are subjected to value added tax, but currencies are not. This makes bartering problematic. For example a 1 oz gold bar will cost about 10000 NOK in Norway (8000 NOK for the gold, and 2000 NOK in vat). But a 1 oz gold coin will only cost 8000 NOK because the coins are considered a currency, and thus not subject to vat. If you are going to barter 1 oz of gold for something it is thus better to use a gold coin, then a gold bar.
- tim333 13y agoIn the UK you pay capital gains tax on buying and selling anything pretty much including regular currencies, bitcoin or stocks. I imaging most countries are similar.
- nemoniac 13y agoWhy would you imagine that? Here in the Netherlands there is no tax on capital gains.
- dschiptsov 13y agoWhy, it is an asset. Virtual asset. It is possible to use the technology to make payments, but you see, everyone longs it, and the price drifts downward slowly on almost no volume. Edit: if something looks like an asset, being traded like an asset and has a bubble like an asset..
- hmottestad 13y agoThis is actually rather funny, a professor from the law department said to the media that bitcoins are treated as two different things. First as a physical product and given 25% VAT when bought, then as a financial instrument when you sell it because you have to pay taxes on anything you earn (you can also get a tax deduction if you loose money when you sell it).
- PeterisP 13y agoHow is that 'treating as a financial instrument' ? If you earn money on resale, then it's taxed, no matter if it's a piano, a house, a bar of gold or a virtual coin.
- hmottestad 13y agoIn Norway when i private person sells their jewellery and makes a profit they don't have to pay taxes on that profit. Same way that they can't reduce their taxes because they lost money when they sold their jewellery. Same for house (if owned for >1year), and car, and boat, and all other physical things.
- Expez 13y agoThe title is pretty misleading. Even if they wanted to the tax authorities in Norway don't have the authority to determine what is and what isn't a currency. The only thing they've determined, once and for all, is that you have to pay taxes when you profit from trading in bitcoins (like everything else!).
- user24 13y ago> like everything else! Is the same true for currency conversions? If I convert my Krone to Dollars and then back again when the exchange rate is more favourable, will I have to pay taxes? Genuine question, I don't know how forex trades typically work.
- yebyen 13y agoI don't know about Norway, but this great article was posted on HN about US tax implications of Bitcoin once before: http://www.bitcointax.info/ http://www.bitcointax.info/ The main point I understood was that when you deal with bitcoin (and I am not an accountant, and this fellow is not your accountant) there's a "realization" event where your asset is realized into a gain, I think it's called a capital gain, and like selling your business after putting your own capital into it for many years, that is the moment where you owe taxes. It's not any point of withdrawal, since you might argue "it's not realized, it's just numbers on my screen until it hits my bank account" but this accountant would argue more conservatively that even if you are a US customer of Mt.Gox (and therefore can't get access to your USD without paying a bribe or taking a trip to Japan? I think that was the last story I heard, not claiming firsthand knowledge)... If you pay $100 for 1BTC and sell it for $1250, and buy 1BTC at $850, you have $1250 of income and $950 of expense to offset. You will not be able to claim only $400 of income and you may not be able to defer that tax payment (on $1250 minus whatever percent of $950 expenses you can claim against your business' net income.) This is not exactly how forex works and I believe the US situation wrt. Bitcoin is exactly like the Norway situation given this news, from my limited understanding. Hopefully someone with more background will be able to give a better explanation that actually answers your question, and point out if I'm wrong on something.
- cLeEOGPw 13y agoI think this is good, because it will discourage speculation and encourage direct bitcoin trade, since they can't tax that.
- exelius 13y agoI don't understand how Bitcoin is considered a currency in the slightest. Currencies are generally a mere representation of production, not the output of production itself. Let me explain: If a worker on an assembly line in South Carolina makes a window motor for a car, he is paid in USD. But the USD he is paid is not the output of his labor; the output of his labor is a window motor that is eventually put into a car, that some software engineer may drive on his way to work creating other productive (albeit non-physical) things. It's the economic web. Bitcoin is an economic dead-end. It takes CPU cycles to make a Bitcoin, and those cycles aren't used for anything else. It is an output of production that has no intrinsic value. Well, that's not ENTIRELY true: Bitcoin has had some fleeting value as a loophole that allows the economy to reclaim some dead weight loss from government regulation, but as those loopholes close, the economic value of Bitcoin diminishes. Bitcoin is different from other stores of value that behave like currencies (such as gold) because it has no use other than as a store of value. Gold has industrial uses due to its physical and chemical properties, and it is desired in the consumer space as a material to make jewelry out of. But Bitcoin is not an input to production: its sole purpose and use is as a store of value. The price of Bitcoin will never stabilize for this reason: even if people decide to stop using gold as a store of value, it will continue to have a price floor based on its industrial and consumer use. Thus my position that Bitcoin is not truly a currency, and the way it's being traded today is much more akin to something like a junk bond. It is an asset because it is limited by the factors of production: it is the exclusive output of production. Currency is different than an asset specifically because there is a central authority that can issue new currency without increasing production. This is necessary because they issue new currency as a reaction to increased production; not the other way around. Currencies like the USD and EUR are stable because the central banks control the conversion rate of those currencies by manipulating the supply of currency.
- nc 13y agoSurely paper money has 'production' as well by that logic. Printing, distributing it and preventing counterfeiting all count as 'production' for paper money. I think you're essentially comparing fiat currencies guaranteed by governments with the fixed supply of Bitcoin that isn't guaranteed to be stable. That doesn't mean it's not a currency, just an unstable one with fixed supply.
- ww520 13y agoCash, aka currency, is part of the asset class.
- lectrick 13y agoThis is a nonevent. In the US, on the advice of my accountant, I have been treating Bitcoin gains (for "sold" BTC) as capital gains for tax reasons for over a year now. I don't think the IRS would have a problem with this.
- crb002 13y agoWould you also write off mining servers as a business expense?
- sliverstorm 13y agoThat's only if he spends more than 2% of his income on mining hardware, right?
- alixaxel 13y agoGold is mined. It's limited. It's an asset. Bitcoin is mined. It's limited. It's an asset. Currency is not mined. It's unlimited. It's currency.