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Cryptocurrencies are becoming increasingly popular – not only as a form of payment (in some countries or industries, it is already possible to settle debts with them, e.g., Bitcoin), but also as a way of investing or storing capital. Due to the high volatility of exchange rates, it is difficult to talk about the stability of such investments, but in many cases, trading in cryptocurrencies can bring real profits. This naturally raises the question: how are cryptocurrency transactions taxed and how much is the tax?
What are cryptocurrencies and how are they defined by law?
Until recently, Polish regulations did not contain a statutory definition of cryptocurrencies, unlike EU regulations. The situation is gradually changing, mainly due to EU legislation such as the MiCA regulation, which introduces the general concept of “crypto-assets.” These are defined as a digital representation of value or rights, secured cryptographically, which can function in the form of a token, coin, or other digital medium, stored and transferred using blockchain technology or similar solutions.
In Poland, the definition appeared in 2021 with the amendment to the Act on Counteracting Money Laundering and Terrorist Financing. According to this definition, a virtual currency is a digital representation of value that is not, among other things:
- legal tender issued by the National Bank of Poland or foreign central banks,
- an international unit of account,
- electronic money,
- a financial instrument,
- a bill of exchange or a check,
and at the same time it can be exchanged for official legal tender, serve as a medium of exchange, be stored in electronic form, and be traded.
However, it should be emphasized that the concept of “virtual currency” is broader than “cryptocurrency” – it also includes, for example, tokens or loyalty points in programs and games.
Cryptocurrency tax – general principles
Income from cryptocurrency trading in Poland is treated as income from capital, i.e., similarly to profits from shares or securities. The tax rate is 19% and is fixed, regardless of the amount of income. However, if the taxpayer’s total income exceeds PLN 1 million per year, an additional 4% solidarity tax is applied.
Only transactions resulting in income are subject to taxation, including:
- exchange of cryptocurrency for traditional currency (e.g., PLN),
- purchase of goods or services for cryptocurrencies,
- acquisition of property rights other than virtual currencies,
- settlement of liabilities in cryptocurrencies.
However, exchanging one cryptocurrency for another does not give rise to a tax liability.
How is tax calculated?
The tax base is income, i.e., revenue minus the costs of obtaining revenue. Costs may include, among others, documented expenses incurred for the purchase of cryptocurrencies and transaction fees for exchanges and intermediaries. However, the costs of financing the purchase, such as loans or credits, cannot be deducted.
If the costs exceed the income earned in a given year, the surplus is carried over to the following year. As a result, the final amount of tax depends on many factors, so if in doubt, it is worth seeking an individual interpretation to avoid the risk of a dispute with the tax authorities.
Examples:
- Selling cryptocurrency and immediately buying another one – does not generate income, so there is no tax liability.
- Buying a car with cryptocurrency – generates income and requires tax settlement, which can be reduced by the cost of purchasing the currency.
Tax settlement
Income (or even the costs of purchasing cryptocurrencies) must be reported in the annual PIT-38 tax return. The return must be filed regardless of whether you made a profit or incurred a loss. The document can be submitted electronically via the e-PIT service, filed in person at the tax office, or sent by mail. It can also be done by a representative, but a stamp duty is required for the power of attorney.
Key takeaways
Regulations concerning cryptocurrencies are still evolving, both in Poland and in the European Union. Tax liability arises for many types of transactions, and the amount of tax depends on revenue, costs, and the method of settlement. Due to the dynamic changes in regulations, it is worth monitoring new regulations on an ongoing basis and, if necessary, seeking advice from specialists in the field of fintech and tax law.
