Cryptocurrency trading by companies is considered speculation. This means that gains are only taxed upon resale according to the realization principle, and not continuously according to stock taxation.
However, there are some types of cryptocurrency, such as stablecoins and bookcoins, which are taxed according to the storage principle.
Realization principle vs. inventory principle
Realization principle: Taxation only occurs when the sale is completed.
Stock principle: Taxation is done once a year, based on the value at the end of the financial year.
Most cryptocurrencies, including Bitcoin and Ethereum, are taxed according to the realization principle.
Calculation of gains and losses
When calculating winnings and losses, the FIFO (First In, First Out) method is used. This means that you always sell the earliest purchased coins first. A loss cannot be offset against a gain from another cryptocurrency, only in the same type of currency and in the original order of purchase.
Also keep in mind that transaction costs and trading fees can be offset against profits.
Professional help with crypto taxation
If you’re not sure how cryptocurrency should be accounted for and taxed in your business, we can help. At Accountview, we have experience with both personal and business crypto investments, so you can get your documentation right and avoid errors in your financial statements.
