How important is the translation of income tax reports when trading cryptocurrency?

April 13, 2022 Specific Translations

With governments legalising cryptocurrency, this form of payment is becoming more popular by the day. It is now accepted by a growing number of companies worldwide and constantly appears on every social media platform. As its presence grows, it is becoming more accessible to people from all over the globe. Individuals are trading this digital currency on multiple platforms in different languages, and when doing their tax reports, many find they might need translation services.

Taxes and cryptocurrency around the world 

In the United States, cryptocurrency investments are treated like any other trade, where the trigger for a taxable event is when the trade is completed. So if crypto is bought, the owner of the wallet will be taxed when the crypto is sold and the trade is closed.

The amount of tax you pay will depend on how long you have held onto that initial investment. If the holding period was less than a year, then this is treated as a short-term capital gain. This means your cryptocurrency will be taxed at the same rate as the rest of your income for that year.

Alternatively, your cryptocurrency will be treated as a long-term capital gain if bought and sold across a holding period of more than one year. These tax rates are much lower at either 0%, 15% or 20% depending on your household income.

The figure you need to report on your tax return is the difference between the initial purchase price and the sale price. For example, if a wallet owner bought Bitcoin for $500 and sold it for $800, they would only be taxed on the $300 profit. This is known as a capital gain. However, if your Bitcoin lost value and you sold it for $400, you would face a $100 capital loss. Any losses can be used to offset your income tax by up to $3,000.

The United Kingdom, Canada and Australia have a similar taxation system, where all cryptocurrency trades are subject to either capital gains taxes or income taxes. This depends on the types of transactions you made with your crypto. If you’re earning crypto, this is classed as an income and subject to income tax. However, if you sell or swap your crypto, then any profits will be subject to capital gains tax.

In the Netherlands, the taxation system is a bit different. They use what is known as a wealth tax system, which means that there is no capital gains tax. Instead, crypto is classed as an asset and you only pay tax on the total of all your declared assets over €50,000. 

As shown above, tax rules vary between different countries. Although taxpayers can access this information easily on the internet, it will need to be properly translated to avoid any legal issues. Having a professional translation is especially important since legal documents contain specific terminology and phrasing, and if translated incorrectly, this can have severe consequences. Read on to find out why it is so important to translate such documents correctly. 

Cryptocurrency tax forms and translation

Tax forms are used by individuals or organisations to report their income, profits and losses. In the crypto world, they are to be taken very seriously just like any other tax report. Tax forms are different for each country, but the basic content is very similar. You must describe the asset or type of income, date of purchase and purchase price, and date of sale and sale price. You will also need to state any gains or losses made during the trade. 

Numbers generally have a universal language of their own, which makes this part of the return fairly straightforward. However, there are some differences and in Europe, a full stop is used for larger numbers instead of a comma. So instead of writing 1,000 like in the UK, someone in France would write 1.000.

The rest of the language on tax returns is also relatively simple and non-native speakers might be able to understand it to a certain degree. But a small mistake can turn into a big legal issue, and putting one figure in the wrong box could lead to large penalties. Even the difference between a full stop and a comma could cost thousands in the long run.

To avoid making any mistakes, it is smarter and safer to get a legal translation of the documents in your native language. For just a small price, this can help you avoid future legal problems and costly fines. When translating your texts, use a translator who is both a native speaker of your target language and a financial expert. They will be able to understand specific terminology in both languages, delivering an accurate and professional translation of high quality.

For an even more cost-effective approach, we also offer machine translation services. Our advanced neural machines have been trained using thousands of documents translated by professional human translators. Each of our machines specialises in certain sectors, meaning they can deliver high-quality translations of subject-specific terminology. To ensure the accuracy of your translation, this can then be checked over by a professional linguist during an additional post-editing phase.

From human translation and machine translation to post-editing, there are a number of solutions readily available to give you quality translations at the right price.

Broker-Customer

With its rise in popularity, more and more people are talking about cryptocurrency in the news and on social media. We hear about new millionaires each day, and everyone wants to get on the train before it is too late.

However, not everyone has the time or the skills to trade and manage crypto, so they turn to private investors and companies instead. For an agreed fee, they will invest your money and manage your portfolio. The private investor would be considered the broker, who would become the middleman between their client and the company.

Choosing a private investor or a company to invest your money is not easy and there are a lot of options to consider. When it comes to financial investments, some degree of trust first needs to be established before making any deals. If you are based in a foreign country and pay taxes there, you would benefit from hiring a translator to translate your documents properly. That way, you can understand how the broker is managing your money and what will need to be reported to the government as taxable income.

Globalisation also means there is a high chance that the broker is based somewhere else or comes from another country. If that is the case, then they might speak or use a platform in a different language to your own. As well as linguistic differences, they may even have different ideas about taxable trades.

You need to trust whoever you hire to manage your investments, and being able to understand each other is the key. With this in mind, make sure to have a professional translator go over the portfolio and legalities. They will be able to deliver an accurate translation of the documents, allowing total transparency and building trust between the broker and the customer. With a clear understanding of how your crypto assets are being handled, you will also be able to complete your tax returns with confidence.

The bottom line

If you are planning to trade cryptocurrency and file taxes in a country that speaks a different language from your own, it is best to hire a professional translation agency. They will translate the necessary tax documents so that you can accurately report any taxable gains or income acquired through cryptocurrency. This will help you to complete your tax returns correctly, avoiding any legal issues in the long run. 

Make sure to be thorough when going through your trades for the year and report all taxable income. It is also worth researching local tax requirements and any available allowances that will help to legally reduce your taxable income.

Paying to translate your documents will help with filing your taxes accurately. This is a small fee compared to any potential financial penalties or having to pay back large sums when you least expect it.

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