Though some countries have banned Bitcoin, some others are trying to regulate the digital currency. The new entrant to the list of the countries that regulate Bitcoin is Sweden as the country has brought in Bitcoin regulation that sets guidelines for imposing income tax on those who are doing Bitcoin mining.
Nonetheless, the latest regulation by the authorities in Sweden at least shows it is not going to be banned anytime soon. In a release, Library of Congress says that on April 24, 2015, just days before the May 4 tax filing deadline, Sweden’s Tax Authority published guidelines on how to declare income from Bitcoin mining.
Titled, ‘Guidelines on the Taxation of Mining of Bitcoins and Other Virtual Currencies’ this instrument of communication from the government says that mining of Bitcoins, or of other virtual currencies, is generally set up so that it can be done from a server; because there are only a limited number of Bitcoins that can be mined.
It further says that there is a race to mine them before another party does and successful Bitcoin mining is therefore not guaranteed. However, it makes clear that under Swedish tax law there are three main forms of income: income from employment e.g. income from hobby activities; income from economic activity e.g. personal business; and income from capital.
Interestingly, income is considered to be derived from employment if it is not considered income of the other two types. However, economic activity must be carried out “professionally and independently.” It is also interesting to note that taxing Bitcoin mining would not really be easy as the law makers had not imagined such thing can also be there.
Definition of Economic Activity, Whether Bitcoin Mining Falls into It?
Even the Tax Authority explains that because of the limited potential for profit in light of the cost of the equipment needed, it is unlikely that income from Bitcoin mining can be considered economic activity. He also admits that it is not consistent over time for a sufficiently long period as prescribed by the legal provisions characterizing such activity.
However, he makes it clear that if the person mining the Bitcoins or other digital currency carries out the mining in a professional and cost efficient manner over a longer period with appropriate equipment, or if the activity is expected to create a surplus as measured over the full financial calculation period, it can be called economic activity.
Further, the computing capacity can be expected to generate more than 25 Bitcoins a year or the equivalent value in form of transactional fees or other virtual currency.
To contact the reporter of this story: Deepak Tiwari at email@example.com