German newspaper Die Welt reports that Bitcoin has been recognized for legal and tax purposes in Germany. Thus, Germany is the first country which will officially be accepting Bitcoin and classifying it as a private currency, which has great implications as it will mean that some commercial profits on Bitcoin related endeavors may be taxable.
However, German newspaper Die Welt also reported that though commercial profits may be taxed, people using Bitcoin for personal use will remain tax-free. The recent developments for Bitcoin have been quite appreciating despite Thailand government’s outright rejection of the crypto-currency; even, a court in the U.S.A. accepted that Bitcoin is a currency like dollar, yen, and euro.
Bitcoin is a Currency Unit, Private Money
Finance Ministry responded to a query from Frank Schaeffler, a member of the parliament’s Finance Committee, about the stance of the government which answered that Bitcoin is a currency unit and private money. Schaeffler told the media organizations that for the first time, the federal government recognizes Bitcoins as private money.
Bitcoin in Germany
It was recently in July 2013, that the first trading platform for Bitcoins in Europe was set up. The Financial Supervisory Authority regulated the operation and Bitcoin Deutschland GmbH agreed to convey Bitcoins on its platform as an intermediary through the German web 2.0 bank Fidor. Bitcoin is now being recognized in one or another form by governments like Germany, the U.S. that shows it may someday become a mainstream currency.
The German government’s recognition would mean that Bitcoin can be used in multilateral clearing circles. It is not that the government has taken this decision wholly on the interest of people but for its own purpose i.e. taxes which it imposes on them. As citizens are liable to pay capital gains tax, if they profit from Bitcoin by sale or purchase within a period of one year, they will be taxed.
Experts believe that the German government will tax earnings from Bitcoin trade as it taxes on the profits by selling stock, bonds or other forms of security. The latest decision will also expand the ambit of taxation.
Though it will be interesting to see how the finance ministry would come to know of a person’s Bitcoin holding as it is a decentralized currency, it is highly likely that the government will ask its citizens to declare their Bitcoin while filing their annual tax return.
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