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Norway Rejects Bitcoin As Currency; Taxes As Asset, Instead

timothy posted about 4 months ago | from the money-need-not-derive-from-the-state dept.

Bitcoin 245

An anonymous reader writes "Norway is the latest country to consider the legal implications of cryptocurrencies like Bitcoin. Norway's director general of taxation has come out and said '[Bitcoin] doesn't fall under the usual definition of money,' which means that it will be considered as assets and charged under capital gains laws. This sentiment was echoed last week by the European banking authority as well, where citizens were warned of using the cyrptocurrency."

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245 comments

How is Norway going to know? (4, Interesting)

FlyHelicopters (1540845) | about 4 months ago | (#45702055)

If someone makes a bunch of profit on Bitcoins, how is Norway going to know if the person doesn't self report?

Also, how are capital gains taxed there? In the US, capital gains are taxed at a lower rate than most normal income, so if the choice is between normal income and capital gains, I'll take the latter every time (since I'm in the US).

Re: How is Norway going to know? (5, Informative)

therealkevinkretz (1585825) | about 4 months ago | (#45702081)

In the US, To be taxed at the lower rate, it must be classified as "long-term" - I.e. the asset must be held for at least a year before it's sold. Other (short-term) gains are taxed at the same rate as income.

Re: How is Norway going to know? (5, Insightful)

alexander_686 (957440) | about 4 months ago | (#45702439)

To follow up, and make the point even more explicitly, the same logic holds for foreign currency. if I hold Euros for more than a year and the Euro gets strong, I have to pay cap gains on that profit.

Re: How is Norway going to know? (4, Insightful)

K. S. Kyosuke (729550) | about 4 months ago | (#45702551)

In case of bitcoins, does that mean that you have to track them individually to keep yourself informed for how long you had each one of them?

Re: How is Norway going to know? (-1)

Anonymous Coward | about 4 months ago | (#45702635)

The most gay crunch.
Dumping Keldo.
Smelly tragedy of the commons.
Lightning nudists.

What do these things mean to you? What say you, hm?

Re:How is Norway going to know? (2)

cdrnet (1582149) | about 4 months ago | (#45702103)

Does it need to? It seems tax systems based on self-reporting and trust can work quite well (provided the taxes are reasonably low and people have a say in how the money is spent, as it should be in any democracy). For example, tax fraud is assumed to be low in Switzerland compared to its neighbor states despite the government having no way to know whether people self-report correctly.

Re:How is Norway going to know? (1)

FlyHelicopters (1540845) | about 4 months ago | (#45702159)

Very little of the US tax system is based on self-reporting.

Employers report wages, capital gains are reported by the big wall street firms, and PayPal reports if you do a lot of online sales.

Beyond that, almost nothing is reported and you can turn in any numbers you want. The IRS does audit some people, but if you keep two sets of books, how are they to know?

The IRS doesn't have access to bank accounts or other private financial transactions outside of a detailed audit.

Re:How is Norway going to know? (1)

Joce640k (829181) | about 4 months ago | (#45702403)

The IRS doesn't have access to bank accounts or other private financial transactions outside of a detailed audit.

That's what they want you to believe, so you think you're getting away with it.

They prefer *everybody* to be a criminal in one way or another. That way they'll have something on you when they need a 'favor'.

Re:How is Norway going to know? (5, Funny)

Anonymous Coward | about 4 months ago | (#45702161)

tax fraud is assumed to be low in Switzerland compared to its neighbor states

Of course it is. Everything that's considered "tax fraud" in the rest of the world is considered a "business opportunity" in Switzerland.

Re:How is Norway going to know? (5, Funny)

oobayly (1056050) | about 4 months ago | (#45702495)

Mod comment:
Interesting: For some that may not know about the Swiss banking system
Overrated: For those that do know about the Swiss banking system
Insightful: Well, it's true
Funny: Made fun of the Swiss - always good
Troll: Winding them up about their dodgy banking system

Re:How is Norway going to know? (5, Insightful)

PolygamousRanchKid (1290638) | about 4 months ago | (#45702189)

For example, tax fraud is assumed to be low in Switzerland compared to its neighbor states.

Tax fraud committed by Swiss citizens may be low . . . but tax fraud committed by citizens of its neighbor states in Switzerland is very high.

Re:How is Norway going to know? (1)

sg_oneill (159032) | about 4 months ago | (#45702105)

Well this applies to anything else. If I aquire a load of highly prized poppies and don't report my acquisitions, how will they know?

In the end thats what tax investigators are for. Fortunately the lack of anonymity in bitcoin (Just look up the blockchain) , makes it easy enough to work out.

Re:How is Norway going to know? (1)

Anonymous Coward | about 4 months ago | (#45702125)

Bitcoin is anonymous in the sense that you don't know who's behind those IP addresses. Of course, you could try to find that out, but how would you know where to start looking for a specific individual who didn't self-report? Even if you have the IP address, that doesn't mean the person didn't take steps to protect themselves (like a VPN).

Re:How is Norway going to know? (1)

Joce640k (829181) | about 4 months ago | (#45702429)

Well this applies to anything else.

Yes.

If I aquire a load of highly prized poppies and don't report my acquisitions, how will they know?

Sooner or later you'll sell them and convert their value to real money.

Poppies are much safer than Bitcoin in this respect. Poppies are physical so can sell them for cash and keep it under the mattress. Bitcoin can only be exchanged for real money electronically, good luck keeping that a secret from the spies.

Re:How is Norway going to know? (0)

Anonymous Coward | about 4 months ago | (#45702107)

If someone makes a bunch of profit on Bitcoins, how is Norway going to know if the person doesn't self report?

Also, how are capital gains taxed there? In the US, capital gains are taxed at a lower rate than most normal income, so if the choice is between normal income and capital gains, I'll take the latter every time (since I'm in the US).

They are going to know the same way they catch money laundering, black market profit, offshore accounts for tax evasion, inheritance that try to avoid tax, etc - eg, you risk getting caught by large unexplained changes in bank accounts (auto-reported to tax authorities) when you cash in gains, or by acquiring major assets that don't match your reported income (houses, cars, etc.). Could you try to fly under the radar? Definitely, as many of the listed criminals already do. But if you get caught you pay a very very stiff tax penalty (on top of risk of prison time) vs. reporting it in the first place. And yes, capital gains are taxed less (at least for most people).

Re:How is Norway going to know? (4, Insightful)

bentcd (690786) | about 4 months ago | (#45702133)

If someone makes a bunch of profit on Bitcoins, how is Norway going to know if the person doesn't self report?

They won't, but if they later find out they'll nail you to the wall.

As an immediate concern, if you're making lots of bitcoins then there's not really that much to spend them on directly and so you'll want to convert them into national currency. At this point the tax man may notice and start asking questions.

When the time comes that you can easily buy a Ferrari for bitcoins they will also have a chance of noticing, and will ask you how you could afford that Ferrari.

If you go to any length to avoid the tax man noticing any of those two scenarios, you're probably guilty of some shade of money laundering which will get you nailed that much harder if they do discover you.

Also, how are capital gains taxed there? In the US, capital gains are taxed at a lower rate than most normal income, so if the choice is between normal income and capital gains, I'll take the latter every time (since I'm in the US).

I think it's much the same thing here. Capital gains is 28% or thereabouts, whereas income tax is progressive from 28% up to 50%, -ish. There may be important nuances I am omitting, being a wage slave rather than a tycoon.

Re:How is Norway going to know? (1)

FlyHelicopters (1540845) | about 4 months ago | (#45702173)

When the time comes that you can easily buy a Ferrari for bitcoins they will also have a chance of noticing, and will ask you how you could afford that Ferrari.

How or why would they ever know I bought a Ferrari? Are such purchases reportable in Norway? (they aren't in the US)

You're right, if they do catch you cheating, the penalties are harsh... the question to ask is, what are the odds of being caught?

Re:How is Norway going to know? (1)

Wootery (1087023) | about 4 months ago | (#45702237)

Vehicles are registered to individuals, though. Even if the vehicles database and the tax database aren't unified now, they probably will be some day.

Re:How is Norway going to know? (1)

FlyHelicopters (1540845) | about 4 months ago | (#45702271)

Vehicles can be, but don't have to be... A business can own a vehicle...

Even if the IRS had access to the state DMV databases (Ha, they can't get healthcare.gov to work, try making 50 different DMVs talk to the IRS properly!), what would they do with all that info?

Look for people with a Rolls Royce registered who also claim to earn little money? Then what? Perhaps it was a gift from family, perhaps it was purchased with savings, perhaps the person doesn't report a lot of income because of business losses or other tax deductions?

It would be a ton of work for very little gain. Plenty of people have plenty of stuff, yet don't actually make that much money after expenses.

I own my own business, if you saw my house, then my tax return, you'd think I was cheating... but I'm not, I report every penny of gross income, then take every legal deduction that I can. The tax laws favor business owners, this is not a secret.

Re:How is Norway going to know? (4, Interesting)

Captain Hook (923766) | about 4 months ago | (#45702521)

Look for people with a Rolls Royce registered who also claim to earn little money? Then what? Perhaps it was a gift from family, perhaps it was purchased with savings.

The point is, an automated database query is cheap and gives a shorter list of people to investigate compared to everyone in the tax durisdiction.

If you have a car whose purchase price is $40000 and you withdraw $30000-35000 from savings in the months before I think the database query could reasonably file you under the low priority investigation list. If you have a car whose purchase price is $40000 and no transactions which match up with it, then you get filed under the medium priority investigation list.

And if you have multiple houses and no income or savings to account for the purchase costs then you get filed under high priority and a human taxman will start an investigation.

You use the cheapest method available to create ever shorter lists of people with anomalies to pass to the next, slightly more expensive filter.

Re:How is Norway going to know? (0)

Anonymous Coward | about 4 months ago | (#45702243)

If my expertise was in fraud, and fraud was my business, I'd be asking what is the risk vs reward ratio. If the risk is low and the reward big, it may be worth going for it. On the other hand if the risk is high and the reward low then no. Every business opportunity involves some sort of risk. Even being a wage slave involves a risk (downturn in the economy, layoffs, etc).

Re:How is Norway going to know? (3, Informative)

mysidia (191772) | about 4 months ago | (#45702251)

How or why would they ever know I bought a Ferrari? Are such purchases reportable in Norway? (they aren't in the US)

If you pay cash, or other currency; the dealer is required to file a CTR to report the Large cash transaction.

If you trade something for the ferrari, the dealer had to fill out a 1099B. If you take out a loan or pay by check, your banks will record a transaction.

Large transactions in or out of your bank account are covertly reportable in the US behind your back -- your bank is required to report due to the Bank Secrecy Act and forbidden from informing you that they have reported.

If you bring $100,000 into your bank account, or take out a loan for $250k on a car, or you engage in new unusual spending habits, the tax authorities definitely will almost certainly be made aware that you did that.

Re:How is Norway going to know? (1)

FlyHelicopters (1540845) | about 4 months ago | (#45702299)

You need to reread the Bank Secrecy Act... It applies to cash transactions, non-cash transactions don't count unless the bank has a reason to suspect you're committing a crime.

http://www.ehow.com/about_4672449_transactions-do-banks-report-irs_.html [ehow.com]

A CTR is required for every deposit, withdrawal or exchange over $10,000 in cash. Wire transfers or transactions by check and non-cash means are not subject to the CTR filing requirement.

In addition to the above, banks can file for an exception from the CTR for a customer.

Once you get above a given amount of money in the bank, you move from the tellers to the private banking dept and receive a higher level service rep who handles things for you.

Or do you really think Bill Gates has every transaction he does reported to the IRS? I would imagine whatever bank he uses has an exemption on file for him.

Re:How is Norway going to know? (1)

fnj (64210) | about 4 months ago | (#45702453)

non-cash transactions don't count unless the bank has a reason to suspect you're committing a crime

If you are trying to induce me to laugh, you succeeded. Anybody can suspect anybody of anything for any reason. I bet there is no penalty for "false suspicion" either.

Re:How is Norway going to know? (1)

teg (97890) | about 4 months ago | (#45702255)

When the time comes that you can easily buy a Ferrari for bitcoins they will also have a chance of noticing, and will ask you how you could afford that Ferrari.

How or why would they ever know I bought a Ferrari? Are such purchases reportable in Norway? (they aren't in the US)

The car must be registered and insured. Also, Norway has a wealth tax and you'd have to list it there. Of course, you could try to find a way around all of these but the harder you try, the more likely they'd get for money laundering etc. instead if they actually caught you.

Re:How is Norway going to know? (0)

FlyHelicopters (1540845) | about 4 months ago | (#45702313)

The car must be registered and insured.

I'm actually starting to like the USA again...

Cars are registered and insured in the US at the state level, the federal government isn't party to it. Frankly, even at the state level, insurance is not filed with the state unless you have prior convictions of lacking required insurance (then you have to file a SR-22, at least in Texas).

My auto insurance is between me and my insurance company, I have a card to show a police officer if pulled over that I carry at least the minimum required coverage, but the government doesn't know how much, only that I have "enough".

As for a "wealth tax", are you serious? Blah... if it is taxed when I earn it, then you can't have another go at it, that is the whole idea of no double taxation. We fought a war of independence to rid ourselves of such nonsense. Of course, we have the death tax, which is clearly unconstitutional, but seems to be ignored anyway, so perhaps I shouldn't talk. Stupid government not following its own rules.

Re: How is Norway going to know? (1)

LastSaneMan (222217) | about 4 months ago | (#45702419)

If your state has VAT, I'd consider that double taxation.
We have it even better tho, we're tripple taxed.
- Income tax (33%+)
- VAT (25%)
- Wealth tax (Unknown, since the first 2 prevents me from acquiring number 3)

On a positive note, my cancer treatment is free.

Re:How is Norway going to know? (1)

teg (97890) | about 4 months ago | (#45702501)

The car must be registered and insured.

I'm actually starting to like the USA again...

Cars are registered and insured in the US at the state level, the federal government isn't party to it. Frankly, even at the state level, insurance is not filed with the state unless you have prior convictions of lacking required insurance (then you have to file a SR-22, at least in Texas).

My auto insurance is between me and my insurance company, I have a card to show a police officer if pulled over that I carry at least the minimum required coverage, but the government doesn't know how much, only that I have "enough".

As for a "wealth tax", are you serious? Blah... if it is taxed when I earn it, then you can't have another go at it, that is the whole idea of no double taxation. We fought a war of independence to rid ourselves of such nonsense. Of course, we have the death tax, which is clearly unconstitutional, but seems to be ignored anyway, so perhaps I shouldn't talk. Stupid government not following its own rules.

As far as insurance goes - you only need to have liability insurance. If you want to insure your car for theft and damages, that's voluntary - but being able to pay for damages caused by you isn't. And as Norway is a rather small country, rather than a federation of states, expect it to have information and powers that you'd usually think would would be separated by "federal" and "state". You get a sticker every year showing that the yearly road fee is paid, and that liability insurance is OK.

Wealth tax has some bad side effects - like most taxes - and fortunately, the new government is working towards removing it. However, the Norwegian tax system is in general more sane than the US system - lower rates and less loop holes - so it isn't all bad. And more importantly, Norway has a healthy budget surplus - the key to any sane tax cut.

Re:How is Norway going to know? (0)

Anonymous Coward | about 4 months ago | (#45702289)

How or why would they ever know I bought a Ferrari?

Unless you keep your Ferrari in the garage at all times, they will know.

I'm not in Norway nor in the US, but here the police sometimes discovers crime (mostly illicit drug trade) by going after owners of expensive cars who cannot reasonably justify how they can afford it.

If you want to drive a car on public roads, you have to have it checked in an official control center every X year(s) or every Y kilometers. When you request a licence plate, you need a document which proves that the car has been homologated for use on public roads.

Re:How is Norway going to know? (1)

FlyHelicopters (1540845) | about 4 months ago | (#45702329)

I'm not in Norway nor in the US, but here the police sometimes discovers crime (mostly illicit drug trade) by going after owners of expensive cars who cannot reasonably justify how they can afford it.

What country do you live in?

In the US, driving an expensive car is not a crime and you're innocent until proven guilty in a court of law, so the police have no right to inquire as to how you can afford an expensive car. They do have the right to check to make sure it is registered to you, assuming of course they had some other reason to stop you (you were speeding in your nice new Ferrari). But if it is registered to you and you are insured, then they'll just write you a ticket.

How and why you purchased the car is of supreme indifference to them.

Now, if you're pulled over in a nice new Ferrari and you don't have your paperwork in order (valid drivers licence, valid registration sticker, and valid insurance), then they will either write you a ticket for all that, or if they suspect funny business, they might arrest you and find out if you own the car or not or if it is stolen.

But the police aren't in the tax enforcement business, that is about 5 levels removed from their job.

Re:How is Norway going to know? (0)

Anonymous Coward | about 4 months ago | (#45702399)

Now, if you're pulled over in a nice new Ferrari and you don't have your paperwork in order (valid drivers licence, valid registration sticker, and valid insurance), then they will either write you a ticket for all that, or if they suspect funny business, they might arrest you and find out if you own the car or not or if it is stolen.

OK, so you are telling me that you are going to buy a Ferrari and not insure or register it?

Sure, we can play theory-games all day long.

Re:How is Norway going to know? (1)

alexander_686 (957440) | about 4 months ago | (#45702443)

I will point out this was one of the ways that Al Capone was nailed. He declared a very low personal income yet lived a lavish lifestyle. Questions were asked.

Re:How is Norway going to know? (3, Insightful)

bentcd (690786) | about 4 months ago | (#45702457)

How or why would they ever know I bought a Ferrari? Are such purchases reportable in Norway? (they aren't in the US)

It would need to be reported one way or the other. The easiest way to try to get around it is possibly not to register it but then you won't have a number plate (unless you fake one) and so couldn't use it on public roads. Maybe you could drive it on foreign plates and hope no one notices/cares that you've been doing so for far too long. You'd still be required to list it as wealth but if you choose not to there may not be any obvious ways for the tax man to find out on his own.

What will happen from time to time though is that someone you pissed off at some point reports you and then you may be in trouble again.

You're right, if they do catch you cheating, the penalties are harsh... the question to ask is, what are the odds of being caught?

If you want to drive the car on public roads it's probably very difficult to avoid registering it. Cheating one's way around this is probably possible but if you ever have an accident or otherwise end up in the spotlight it's game over.

Re:How is Norway going to know? (2)

Vintermann (400722) | about 4 months ago | (#45702507)

How or why would they ever know I bought a Ferrari? Are such purchases reportable in Norway? (they aren't in the US)

You're not in Kansas anymore, friend! Not only is the Ferrari dealership (I think there is a single one) obliged to report purchases over a certain amount, but how much you're taxed is a matter of public record. They used to print them in the newspaper, even, though there's slightly more restrictions on them these days. Want to know how much I made in 2009? be my guest [www.nrk.no] ! (Spoiler alert: I'm not rich :P)

So when your neighbors see you driving a Ferrari, jealousy and/or civic duty might compel them to check the tax records, and if you're listed with zero in income and assets, the tax authorities might get a tip.

Re:How is Norway going to know? (0)

Anonymous Coward | about 4 months ago | (#45702437)

When the time comes that you can easily buy a Ferrari for bitcoins they will also have a chance of noticing, and will ask you how you could afford that Ferrari.

It is usually quite amusing to wander round the social housing estates in the UK, and viewing the somewhat expensive vehicles parked outside some of the houses of people with allegedly no source of income other than their state handouts, it's almost as if they've some sort of highly profitable side business going on (maybe something supply chain related) and they're not even taking any pains to hide from the powers that be.

I've found that the authorities can be more than a wee bit blind to things like this, that is, until it suits them..

I hate quoting from anything by Rand, but I was always fond of this passage from Atlas Shrugged..


“Did you really think we want those laws observed?" said Dr. Ferris. "We want them to be broken. You'd better get it straight that it's not a bunch of boy scouts you're up against... We're after power and we mean it... There's no way to rule innocent men. The only power any government has is the power to crack down on criminals. Well, when there aren't enough criminals one makes them. One declares so many things to be a crime that it becomes impossible for men to live without breaking laws. Who wants a nation of law-abiding citizens? What's there in that for anyone? But just pass the kind of laws that can neither be observed nor enforced or objectively interpreted – and you create a nation of law-breakers – and then you cash in on guilt. Now that's the system, Mr. Reardon, that's the game, and once you understand it, you'll be much easier to deal with.”

They've not made bitcoins illegal yet, but they've already stated slinging mud at the concept by making it the de rigueur currency of choice for criminal enterprises in the media (screw the fact that the biggest criminals are still making their transactions using the good old U$D, and in millions of the blighters to boot...)

Re:How is Norway going to know? (1)

TheLink (130905) | about 4 months ago | (#45702139)

My advice is if you want to avoid (not evade) tax in a big way you should consult a real pro.

I don't know much about tax stuff but if I understand correctly the Tax arms of many governments are able to use the "guilty till proven innocent" approach.

e.g. if one day your undisclosed profits amount to something significant and you have a more lavish lifestyle, more expensive house and car than explainable by your tax filings the Tax Dept may require you to prove yourself innocent or get in big trouble.

I don't know whether this is also true for Norway.

Re:How is Norway going to know? (1)

FlyHelicopters (1540845) | about 4 months ago | (#45702185)

e.g. if one day your undisclosed profits amount to something significant and you have a more lavish lifestyle, more expensive house and car than explainable by your tax filings the Tax Dept may require you to prove yourself innocent or get in big trouble.

Maybe I should stop complaining about the US government, maybe it isn't so bad if such nonsense happens in Europe.

How I live is none of the government's business, unless they have cause to investigate, most private financial transactions are out of reach of the IRS.

The only real exception would be the NSA looking for national security reasons, but frankly the NSA doesn't care about tax cheats, they are concerned with terrorism. Since I have zero intention of ever being a terrorist, I'm not really worried about the NSA.

Re:How is Norway going to know? (1)

Joce640k (829181) | about 4 months ago | (#45702479)

the NSA doesn't care about tax cheats, they are concerned with terrorism. Since I have zero intention of ever being a terrorist, I'm not really worried about the NSA.

Really?

The NSA generates (and stores) data.

The trouble with having mountains of data is that sooner or later a politician will think "I could use that for...XXXX".

Or some police department will request it. Or the IRS.

If you build it, they will come.

Re:How is Norway going to know? (2)

fnj (64210) | about 4 months ago | (#45702531)

e.g. if one day your undisclosed profits amount to something significant and you have a more lavish lifestyle, more expensive house and car than explainable by your tax filings the Tax Dept may require you to prove yourself innocent or get in big trouble.

Maybe I should stop complaining about the US government, maybe it isn't so bad if such nonsense happens in Europe.

How I live is none of the government's business, unless they have cause to investigate, most private financial transactions are out of reach of the IRS.

The only real exception would be the NSA looking for national security reasons, but frankly the NSA doesn't care about tax cheats, they are concerned with terrorism. Since I have zero intention of ever being a terrorist, I'm not really worried about the NSA.

Why do you evidently believe the circumstances are any different whatsoever in the US? It's the same with the IRS. They can suspect via exactly the same kind of observations that you are living beyond your means, they can audit you for that, and in that audit you will have to account for how you acquired your extravagant toys. Otherwise it's going to be a charge of tax evasion and that can be sustained in court through simply making a convincing case against you which you fail to take part. How do you think they nailed Alphonse Capone?

Yes, you are innocent until proved guilty, but that proof of guilt doesn't have to be mathematically perfect. Innocent people are locked up pending trial all the time. Not all of them can make bail. Then they might be freed by winning at the trial, or they might not. Innocent people are convicted at trial and locked up all the time. We might like to think that things have improved since Hitchcock's The Wrong Man [wikipedia.org] , and they may have (or maybe not), but the same type of thing still happens. It is certain that if you are actually guilty, you have even a lot better chance of being convicted.

Re:How is Norway going to know? (1)

Captain Hook (923766) | about 4 months ago | (#45702567)

How I live is none of the government's business, unless they have cause to investigate

The have cause to investigate, you've claimed a certain level of income but publically have assets which would be hard to afford at that stated level of income.

Re:How is Norway going to know? (1)

gnasher719 (869701) | about 4 months ago | (#45702145)

If someone makes a bunch of profit on Bitcoins, how is Norway going to know if the person doesn't self report?

If you spend the money eventually, and it is enough money, they might figure out that there must be income, and then they can ask you what the income is. And you might be in trouble for not telling them without being asked. If you have income that is tax free, you better keep proof of that income.

Re:How is Norway going to know? (1)

mysidia (191772) | about 4 months ago | (#45702211)

If someone makes a bunch of profit on Bitcoins, how is Norway going to know if the person doesn't self report?

How they'd do it in the US --- when you cash out your Bitcoins for US Dollars; the exchange or other organization you sell more than $100 Bitcoins to as an individual, has to fill out a 1099B or other 1099 information return, showing the proceeds of the transaction, with what you traded for the money.

In Norway; you may very well be on your honor to report, at least, until the enforcement authority inspects your bank records, or your personal records, after finding suspicious purchases that they can't explain given your reported income

Re:How is Norway going to know? (1)

FlyHelicopters (1540845) | about 4 months ago | (#45702253)

A 1099B is for stock transactions from a broker, I doubt one would be filed for Bitcoin. Even less likely if it is an overseas exchange.

A 1099 Misc is for paying contractors, and the requirement there is $600.

A 1099-K is required for accepting payments via credit cards, like with PayPal or a merchant account.

It is possible that at some point, major US Bitcoin exchanges might start reporting the transactions somehow, but that is just a transaction, it isn't "income" or "profit".

There is a world of difference between "income" and "exchanging currency from one form to another".

For example, if I want to convert $1,000 from US Dollars to Euros, the Euros that I receive are not "income", it is just a currency exchange.

Re:How is Norway going to know? (1)

rasmusbr (2186518) | about 4 months ago | (#45702327)

If someone makes a bunch of profit on Bitcoins, how is Norway going to know if the person doesn't self report?

Also, how are capital gains taxed there? In the US, capital gains are taxed at a lower rate than most normal income, so if the choice is between normal income and capital gains, I'll take the latter every time (since I'm in the US).

If someone sells Bitcoin for currency there is really nothing different about it from any other asset trading.

The tax authority will do research, create a list of Bitcoin exchanges and than request information from each exchange about any and all Norwegian citizens that trade and about any and all trades that they have made.

Re:How is Norway going to know? (1)

FlyHelicopters (1540845) | about 4 months ago | (#45702387)

The tax authority will do research, create a list of Bitcoin exchanges and than request information from each exchange about any and all Norwegian citizens that trade and about any and all trades that they have made.

Ok, fair enough... So what do you do with that information? Just trading currency between Bitcoins and another currency does not make any of it income.

What if you just move the money back and forth, every day, for a year? Each transaction is not "income". Any profit or loss is income, and probably would be reported the same way stock gains and losses are reported (since those are assets as well). But the original money is not income.

Re:How is Norway going to know? (1)

fnj (64210) | about 4 months ago | (#45702575)

Erm, did you miss the part where Norway declared Bitcoins an asset rather than currency? That's the whole point. So you're NOT just trading currency between two different forms. Not in Norway.

Arbitrary regulations are a bitch.

Re:How is Norway going to know? (0)

Anonymous Coward | about 4 months ago | (#45702357)

This is you expecting a government to understand modern technology. Just let that sink in for a minute.

Re:How is Norway going to know? (1)

Joce640k (829181) | about 4 months ago | (#45702497)

When it comes to getting money from citizens, you might be surprised how well they can mysteriously understand technology.

Re:How is Norway going to know? (0)

Anonymous Coward | about 4 months ago | (#45702367)

You mean exactly like normal profits, where the person is guilty of tax evasion and thus jail time if they fail to do so. Audits happen periodically as spot checks to pick that sort of thing up.

Re:How is Norway going to know? (1)

Joce640k (829181) | about 4 months ago | (#45702411)

how is Norway going to know if the person doesn't self report?

Same way as they do for every other exchangeable item - sooner or later you have to turn it into real money to be able to use it.

Re:How is Norway going to know? (1)

StripedCow (776465) | about 4 months ago | (#45702469)

how is Norway going to know if the person doesn't self report?

They just look in the bitcoin transaction log (and link it to you via stuff you bought)

You thought bitcoin was anonymous?
Think again.

It is the wet dream of the IRS (and NSA, etc.)

Re:How is Norway going to know? (1)

Karmashock (2415832) | about 4 months ago | (#45702539)

Bitcoins record every transaction. If you know who owns a given wallet... who paid what for which bitcoins... you can follow the money.

Bitcoins are not an anonymous currency. They are a peer to peer free of middle men currency.

They are absolutely traceable unless you interface with them using totally anonymous money. Then they can't track you because you're turning the bitcoins into cash or cash into bitcoins. But if like most people you're transferring money from your bank account into bitcoins... easily tracked.

Use the banks and you're tracked.

Better than full taxes (0)

Anonymous Coward | about 4 months ago | (#45702057)

paying the few percentages of capital gains tax every year should be better than paying sales tax. Though I don't think it's realistic, in time all bitcoin transactions will probably have to pay sales tax.

cyrptocurrency (0)

Anonymous Coward | about 4 months ago | (#45702063)

"cyrptocurrency"

Even the summary is encrypted.

Re:cyrptocurrency (0)

Anonymous Coward | about 4 months ago | (#45702519)

you mean encyrpted

Real enough to tax. (0)

Anonymous Coward | about 4 months ago | (#45702067)

Sounds like a currency to me.

Re:Real enough to tax. (0)

Anonymous Coward | about 4 months ago | (#45702119)

Sounds like a currency to me.

It is taxed the way you tax gains from stocks, are stocks currency? (and the extreme value volatility is also very much like speculative stocks).

Re:Real enough to tax. (1)

penix1 (722987) | about 4 months ago | (#45702181)

are stocks currency?

No but they are treated as such. Just ask every CEO who is paid with stock.

Re:Real enough to tax. (0)

Anonymous Coward | about 4 months ago | (#45702141)

Taxes is counted in dollars and cents, yes, but dollars and cents themselves are not taxable.

What is taxable is income, assets, transactions, inheritance.

Re:Real enough to tax. (1)

Joce640k (829181) | about 4 months ago | (#45702505)

Sounds like a currency to me.

It's far too unstable to be a real currency. It's more like, eg. gold - something with limited supply that has a value to other people.

Except that right now it's far too unstable to even be compared to gold. It's more like a stock in a smallish company - the value goes up and down wildly every day.

What is the cost basis? (1)

SuperKendall (25149) | about 4 months ago | (#45702073)

So if I am mining bit coin, and it costs me more in electricity than I am getting in return from the bit coin I make, does that mean I get to write off my electric bill?

Or lets say I am making money, is my electric bill the cost basis for the bit coin? But I also needed a computer to mine, can I factor that into the basis?

I don't think they realize there are other legal ways to get bit coin besides buying it. Or perhaps then they just figure the basis is $0 and tax you 100% on the actual value.

Re:What is the cost basis? (0)

Anonymous Coward | about 4 months ago | (#45702109)

Am I wrong, but isn't it in most places, you don't get taxed on assets until you sell them? Actual realized gains and not just theoretical....

Re:What is the cost basis? (0)

Anonymous Coward | about 4 months ago | (#45702179)

Sometimes it's both. There is Capital Gains tax when you sell something (if you made money on it).

And there is also Property Tax for just owning something, such as annual real estate tax on the value of your house. A lot of places collect an annual tax on the value of cars, boats, etc.

http://en.wikipedia.org/wiki/Property_tax_in_the_United_States

Re:What is the cost basis? (1)

alexander_686 (957440) | about 4 months ago | (#45702593)

But never investments.

All states have a property tax for land.

Some states have a yearly registration tax based on the value of cars and boats. Some states do it based on weight, number of axis, etc. But no matter how the taxes are calculated they are 1. all about the same and 2. go towards roads, boat docks, etc. So it is more of a method of calculation rather than a true wealth tax.

Re:What is the cost basis? (1)

GuB-42 (2483988) | about 4 months ago | (#45702301)

In France we have a somewhat controversial tax called ISF (Impôt de solidarité sur la fortune).
People owning more than 1.3M€ in assets can be taxed up to 1.5% of their net worth annually.

Re:What is the cost basis? (1)

gnasher719 (869701) | about 4 months ago | (#45702167)

So if I am mining bit coin, and it costs me more in electricity than I am getting in return from the bit coin I make, does that mean I get to write off my electric bill?

Are you asking seriously?

If you run it as a business, all profits are taxable, all costs are tax deductible. However, if you claim to run a business and lose money all the time, the tax office will say they believe this is a hobby. Same as someone with a farm raising race horses who loses money every year and probably does it not as a business but as a hobby.

So you don't get to deduct anything, but you keep all the invoices, and if eventually you make money, you can offset your profits with your losses from previous years.

Re:What is the cost basis? (1)

mysidia (191772) | about 4 months ago | (#45702273)

If you run it as a business, all profits are taxable, all costs are tax deductible. However, if you claim to run a business and lose money all the time, the tax office will say they believe this is a hobby. Same as someone with a farm raising race horses who loses money every year and probably does it not as a business but as a hobby.

That's a bit hard to claim "this is a hobby", if your entity that is losing money is incorporated and has multiple beneficial owners.

I suspect if you hired good accountants and tax attorneys for your business, and managed it appropriately, you wouldn't much need to worry about the possibility of claims of "It's just a hobby"

Re:What is the cost basis? (0)

Anonymous Coward | about 4 months ago | (#45702169)

No, they understand it quite well.

The main thing that isn't sorted, at least in the US, is exactly which rules apply, e.g. should it be treated as ordinary income or capital gains?

But still, the rules are still there, e.g. what can be deducted as a business expense, how to split costs when something is shared between personal an business use, how to deduct costs of equipment, etc.

The only thing is: if the IRS happens to disagree with your interpretation, you could get audited and end up with a higher tax bill and penalties to either pay or try to challenge in court.

Re:What is the cost basis? (4, Interesting)

Chrisq (894406) | about 4 months ago | (#45702197)

So if I am mining bit coin, and it costs me more in electricity than I am getting in return from the bit coin I make, does that mean I get to write off my electric bill?

Or lets say I am making money, is my electric bill the cost basis for the bit coin? But I also needed a computer to mine, can I factor that into the basis?

I don't think they realize there are other legal ways to get bit coin besides buying it. Or perhaps then they just figure the basis is $0 and tax you 100% on the actual value.

If they are treating it as an asset then you would be a manufacturer and presumably would benefit from all the usual tax breaks. Whether this would include making your electric costs tax deductible in Norway I don't know, but it should be the same as if you were manufacturing shoes, ships, or anything else.

Re:What is the cost basis? (1)

Andtalath (1074376) | about 4 months ago | (#45702205)

That is actually the problem with counting them as assets.
This means that you can't count expenses, notably the power and the card against the profit.

Basically this means that gross instead of net will be taxed for BC-miners.

Re:What is the cost basis? (1)

afxgrin (208686) | about 4 months ago | (#45702475)

I'd try filing it as a capital expense and see what happens. Just prepare for them to laugh at you.

Re:What is the cost basis? (1)

jonbryce (703250) | about 4 months ago | (#45702499)

If you run a business mining bitcoins, then the sale of bitcoins is your revenue, and electricity is one of your expenses. So yes, you would be able to write off your electric bill. Depending on which tax juristiction you live in, you may be able to claim depreciation, capital allowances, investment allowance or similar on the cost of the computer.

taxed as asset? (2, Interesting)

gadget junkie (618542) | about 4 months ago | (#45702079)

It's a common error in European fiscal policy that assets can be taxed. In reality only financial savings and income are taxed, and the final percentage applied is variously disguised as "capital gains tax", or other quibbles.
to clarify further: for an asset to be taxed, in my small world of financial analyst, it must either produce a taxable financial income, which is then taxed, or it must be an acceptable mean of exchange with no or negligible frictional costs. Houses are only an indexation parameter in taxes, since no tax authority whatsoever accepts a lien on 10 square feet as payment: they want hard cash. If the owner-occupier of a house had the opportunity or willingness to put the house in a separate company, it would be clearer still: the company would never make one cent, and it would be taxed on a fictional rent, which by itself is part of the owner's income. Therefore, the owner's income is taxed twice.
So, on bitcoins, the problem is magnified: if it is a mean of exchange, like banknotes, by itself it should not be taxed. the relevant transactions could be taxable, but not the means of exchange: after all, if I buy a car by bank draft or money transfer I do not pay either X or Y depending on how I paid. the effort of the authorities is to preserve the monopoly on fiat currency, that's it.

Re:taxed as asset? (1)

Anonymous Coward | about 4 months ago | (#45702233)

What's "European fiscal policy" got to do with a country that is not in the EU? Or are you making a incorrect blanket statement?

Re:taxed as asset? (0)

Anonymous Coward | about 4 months ago | (#45702303)

The grandparent made no reference to the European Union, just "Europeans" in general. And last time I checked, Norway is still considered part of the geographic and cultural entity known as Europe.

Re:taxed as asset? (0)

Anonymous Coward | about 4 months ago | (#45702401)

So there is a "fiscal policy" common to this geographic and cultural entity?

Re:taxed as asset? (1)

paskie (539112) | about 4 months ago | (#45702477)

To a degree, there is some common "fiscal policy" in the European Economic Area (EU+Norway+Iceland+...).

Re:taxed as asset? (0)

Anonymous Coward | about 4 months ago | (#45702493)

I keep getting told we're socialists.

Re:taxed as asset? (1)

jonbryce (703250) | about 4 months ago | (#45702503)

Norway is in the EEA, and is known as a "fax democracy". The EU sends all the latest directives by fax to the Norwegian Parliament and they are required to implement them as part of Norwegian Law.

Re:taxed as asset? (1)

sourcerror (1718066) | about 4 months ago | (#45702339)

In reality only financial savings and income are taxed, and the final percentage applied is variously disguised as "capital gains tax", or other quibbles.

Real-estate is already taxed in most places in America. Most European countries also tax cars based on their engine's size.

Re:taxed as asset? (0)

Anonymous Coward | about 4 months ago | (#45702629)

Therefore, the owner's income is taxed twice.

So? Most places already have multiple layers of tax in place. Income tax, VAT, GST, etc. If tax is considered a conflict between society and assholes who want to use public services but not contribute to the costs, then multiple layered taxes is probably a good move. Insisting on a single tax is insisting on a single point of failure waiting to be circumvented by freeloaders.

I do not pay either X or Y depending on how I paid.

If you buy anything by credit card as opposed to cash, you'll find there is an extra cut that goes to the credit card company.

The article is a bit flawed (5, Informative)

TyFoN (12980) | about 4 months ago | (#45702175)

What really happened was that the norwegian IRS said that the bitcoin does currently not have any status as a currency in Norway and will be taxed as an asset.

They very clearly state that bitcoins have not been banned as a currency, only that it's status still has to be decided by Finanstilsynet (almost like SEC, but with a broader mandate).

The Norwegian IRS does not have the authority to claim it is a currency or not, only Finanstilsynet. All they do is tax what they see as an asset until Finanstilsynet gives other directions.

Nettvalutaen Bitcoins beskattes [dagensit.no]
Translated [google.com]
Quite different heading than the /. heading.
Translated it just means "Bitcoins are to be taxed".

Re:The article is a bit flawed (1)

rasmusbr (2186518) | about 4 months ago | (#45702351)

What really happened was that the norwegian IRS said that the bitcoin does currently not have any status as a currency in Norway and will be taxed as an asset.

They very clearly state that bitcoins have not been banned as a currency, only that it's status still has to be decided by Finanstilsynet (almost like SEC, but with a broader mandate).

The Norwegian IRS does not have the authority to claim it is a currency or not, only Finanstilsynet. All they do is tax what they see as an asset until Finanstilsynet gives other directions.

Nettvalutaen Bitcoins beskattes [dagensit.no]

Translated [google.com]

Quite different heading than the /. heading.
Translated it just means "Bitcoins are to be taxed".

Yup, this is basically good news for Bitcoin since it means it won't be regulated as a currency. And Norway is a tiny, tiny market so it's fairly inconsequential.

And yet the price of Bitcoin is falling on this news. Talk about a nervous market!

Re:The article is a bit flawed (0)

Anonymous Coward | about 4 months ago | (#45702491)

I suspect that if it were being treated as a currency instead of an asset, people would still claim that it was good news for Bitcoin, since that would prove that Bitcoin is being recognized as a legitimate medium of exchange.

So what would be bad news for Bitcoin?

Re:The article is a bit flawed (0)

Anonymous Coward | about 4 months ago | (#45702523)

At this time?
There is no bad news. Bitcoin needs one thing more than all else at the moment: Attention, a lot of attention so that regular people who don't read slashdot know what it is.

Re:The article is a bit flawed (0)

Anonymous Coward | about 4 months ago | (#45702377)

I think you are confused. It could be treated like money (like gold) but it is not! The article never claims it is 'banned', merely taken as an 'asset'.

Re:The article is a bit flawed (0)

Anonymous Coward | about 4 months ago | (#45702417)

"Tax Administration has decided that Bitcoins is neither a currency or a financial service. Thus, trade with the popular online currency strike out on your tax return."
Exactly as what the article says.

Re:The article is a bit flawed (1)

TyFoN (12980) | about 4 months ago | (#45702627)

The headline say that it has been rejected, but the Norwegian article sais the status is not yet decided by the proper governing body. Quite a difference I'd say :)

Value Added Tax (1)

Alain Williams (2972) | about 4 months ago | (#45702227)

If it is not an asset and I were to sell some bitcoin, would I need to charge VAT (I am VAT registered as I am self employed) ? VAT is 20% in the UK at the moment, so it is a large cut. The person buying the bitcoin could reclaim VAT but only if they are VAT registered ... it is getting complicated.

Re:Value Added Tax (1)

lxs (131946) | about 4 months ago | (#45702345)

I suppose so. Here in the Netherlands you pay VAT on silver bullion but not on gold bullion. (Silver is treated as a commodity, gold is treated as money.)
I'm not 100% sure what our tax authorities think about cryptocurrencies, but if there is another price spike like the ones in April and November, I suppose I need to find out soon. And hire an accountant.
This Monopoly money is quickly turning into serious business.

Re:Value Added Tax (1)

jonbryce (703250) | about 4 months ago | (#45702517)

Unless you can find Bitcoin on one of the lists of things that are exempt from VAT, outside the scope of VAT, or chargeable to VAT at 0% or 5%, then yes, you have to charge 20% VAT on Bitcoin, just like you have to charge VAT on the sale of silver coins.

However, if you bought the Bitcoins from someone who is not VAT registered, you can use the second hand margin scheme so that you only pay VAT on 20% of the profit. If you do that, then the person buying them can't claim the VAT back even if they are VAT registered. You can't deduct any expenses when working out the margin, but you can claim VAT on the expenses separately subject to the usual rules, and if you sell at a loss, you don't get a refund.

Uhm, "Norway's economy:" (0)

Anonymous Coward | about 4 months ago | (#45702321)

I love how they have a section with "Norway's economy:" and then proceed to show an infographic that contains all the nordic countries BUT Norway.

Re:Uhm, "Norway's economy:" (1)

game kid (805301) | about 4 months ago | (#45702397)

It's an infographic. Were you actually expecting it to be terse, accessible, or relevant?

Seriously, I'd love to chat with any makers and fans of those things, and by "chat with" I mean "throttle".

Surely no suprise? (0)

Anonymous Coward | about 4 months ago | (#45702423)

I think in the uk you have to pay capital gains tax on profits from trading currencies anyway so what difference does it make?

But surely everyone already knew they would have to pay capital gains tax on bitcoin profits if they were large enough? Just as you have to on beeny baby trading profits, and comic books or whatever?

I agree vat is an interesting question. I would assume they are exempt like stocks and shares but who knows.

Alternative currencies (1)

Akratist (1080775) | about 4 months ago | (#45702585)

I've followed the alternative currency movement off and on for some time, and it's interesting to see how governments take issue with them. What is more interesting here is that, while Norway obviously doesn't necessarily recognize a legal bucket a bitcoin can easily fit into, it's nevertheless viewing them as having some worth or profitability, and not participating in the normal flow of currency exchanges. In that sense, at least bitcoins seem to be taking on an intrinsic worth that isn't necessarily a characteristic of fiat currencies. While I don't have experience using bitcoins, this is definitely an interesting development.

For Now (1)

MrKaos (858439) | about 4 months ago | (#45702633)

it will be interesting to see how much pressure inevitabley gets placed on them by citizens using bitcoin to purchase.
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