There is quite a lot of information on the internet regarding the cryptocurrency tax, i.e. who should pay it, when and according to what rules. Still, I have a feeling that the information was conveyed in a way which is not straightforward at all. This is why I decided to make this article a collection of the key fundamentals of the 2020/2021 cryptocurrency tax.
Obviously, by the ‘cryptocurrency tax’ I mean the personal income tax (PIT). So, the article regards a ‘man in the street’. I do not refer to companies/corporations dealing in cryptocurrencies, nor to entrepreneurs, who are institutions whose business is governed by the anti-money laundering and terrorist financing act – the latter are bound by some other settlement practises.
1. TAX ON CRYPTOCURRENCIES IN POLAND FOR 2020/2021: YOU ONLY PAY THE TAX ON YOUR INCOME
PIT is an acronym for Personal Income Tax. It means that you are only liable for it if your cryptocurrency transactions yield an income. Income, on the other hand, is nothing more than a difference between revenue (which is all you obtained from cryptocurrency sales or its exchange into a good or a service) and the cost of purchasing cryptocurrencies in a given year.
If you had sold no cryptocurrencies in a given year (nor had you used them to pay for, e.g., an excavator or a service), no revenue will be shown. And no income will be shown, either.
Also, if you had bought cryptocurrencies for more than you sold them in a given year, you will show no income, and you will not be liable for tax.
And remember: cryptocurrency-to-cryptocurrency exchange transactions are tax neutral.
2. TAX ON CRYPTOCURRENCIES IN POLAND FOR 2020/2021: YOU SHOW ALL PURCHASE AND SALE TRANSACTIONS
Your annual return should show all your transactions of purchasing and selling cryptocurrencies in a given year. What I mean by sale is both the sale where payment is in so-called FIAT money (PLN, USD, EUR, etc.), as well as the use of cryptocurrency to pay for, suppose, an excavator.
To arrive at the deductible expenses, we sum up all the cryptocurrency purchase transactions in our annual PIT return. The “sold” cryptocurrencies summed up will make our gross revenue. In the return form’s separate column we also show the costs of cryptocurrency purchases in previous years we never disclosed before. We show the old (“stashed away”) costs in the column for: “deductible expenses not settled in previous years.”
3. TAX ON CRYPTOCURRENCIES IN POLAND FOR 2020/2021: YOU FILE PIT-38 RETURN
We report cryptocurrency transactions in PIT-38. It is the same form in which income on the sale of shares, derivatives, etc., is disclosed.
There is, however, a special part in the return for cryptocurrency transactions – part E (Income/Expenses – Article 30b(1a)).
Click here[S1] to download the 2020 PIT-38 return: [S1] https://www.podatki.gov.pl/media/6618/pit-38-14-_v1-0e_2020_.pdf
4. TAX ON CRYPTOCURRENCIES IN POLAND FOR 2020/2021: YOU FILE THE RETURN EVEN IF YOU ONLY BOUGHT CRYPTO
Remember that the tax return should be filed even if you only bought cryptocurrencies. In such an event you only show the expenses incurred. In this way, you will be able to settle them in the years to come.
5. TAX ON CRYPTOCURRENCIES IN POLAND FOR 2020/2021: THE RATE IS 19% PLUS EXTRA 4% FOR CRYPTOMILLIONAIRES
The tax rate is 19% on income (i.e. the difference between gross revenue and deductible expenses).
Remember that you will pay an extra 4%, the so-called solidarity surcharge, if your income exceeds PLN 1,000,000.
For more on the solidarity surcharge, please go here.
I hope you will find this article useful. If you want to know more about the 2020 cryptocurrency tax, please read this article: “How to save on 2020 cryptocurrency taxes.” It is a record of my webinar of 30 December 2020 – unfortunately it’s in Polish only, but you may ask your Polish friends to translate the most important issues. You can also try this solution.