As a private investor, it is quite easy to buy a cryptocurrency for investment purposes. However, when you enter the market as a company, the whole thing becomes a bit more difficult. Many crypto exchanges allow registration only for private individuals and not for companies. In this article, we will talk about how to buy and invest in cryptocurrencies as a company in Europe.
Can you buy cryptocurrency as a company?
Not all crypto exchange platforms automatically offer an account specifically for entrepreneurs. Here we have listed the most popular ones for you. If you want to use another crypto exchange platform as a business, you need to check directly on their site if this is possible. Usually, this is announced directly under the products section or in the FAQs. If you want to buy Bitcoin as a business, you can open an account with these crypto exchange platforms.
Etoro is a well-known platform for trading CFDs, Forex, and also cryptocurrencies such as Bitcoin and Ethereum.
In total, Etoro offers 18 cryptocurrencies for trading. In addition, Etoro also offers the so-called staking. This procedure is a new way to obtain cryptocurrencies in addition to mining, by blocking existing coins for a certain time and using them for a blockchain.
Particularly noteworthy is the fast opening of a company account. So, you can very quickly already buy the first Bitcoins.
Binance is among the largest crypto exchange platforms in the world. This exchange now has new so-called sub-functions, which makes it very easy and clear for entrepreneurs to invest in Bitcoins here. You can create up to 200 sub-accounts here under the master account. This is important if you want to demarcate different areas and still keep them clear.
Kraken is also a crypto exchange platform that offers accounts for entrepreneurs. This platform is very clearly designed, and you can find access to businesses conveniently and quickly under the institutions’ section. Kraken has very lucrative business solutions and is ideal for trading companies. If you want to buy Bitcoin as a company you are well-advised to use Kraken.
Corporate clients get unlimited access to the so-called OTC desk at Kraken. Personalized service awaits you here and you can reach the dedicated account management team around the clock. You can email, call, or contact this support team via SMS and Messenger at any time. Companies are offered extra onboarding services.
Bitpanda is also a crypto exchange platform that is very suitable for entrepreneurs. The company was founded back in 2014 and is based in Vienna. It has become one of the leading and most stable exchanges in Europe, which is hugely important for entrepreneurs.
Security is a top priority here and is guaranteed for both purchases and sales. The exchange works quickly and reliably and gives you the opportunity to make transactions around the clock. You have many options to pay here and can make your deposits by credit card, as well as via SEPA, NETELLER, GIROPAY, Skrill, or Direct bank transfer
There are companies like Tesla holding cryptocurrencies, Tesla, Inc. holds more than 42,902 BTC, a 0.204% share of the total supply.
Microstrategy (WKN 722713): Microstrategy currently has 71,079 Bitcoins which has a current market value of approximately 2,179,685,516 Euros (as of 02/03/2021). Microstrategy is a multinational software company. The company was already founded in 1989 by Michael J. Saylor and Sanju Bansal.
Square (WKN A143D6): Square holds 4,709 Bitcoins in its corporate assets (as of 02/03/2021). Square is a financial services and mobile payments company. The company is headquartered in San Francisco. By selling software and hardware products, Square has become a popular service provider for both individuals and small businesses.
Bitcoin Group SE (WKN A1TNV9): Bitcoin Group SE has 3200 bitcoins on its balance sheet. Bitcoin Group SE is a holding company that has focused on business models and technologies that revolve around blockchain and cryptocurrency. The company was founded in 2008 in Herford, Germany.
How Can Companies in Germany Buy Cryptocurrency?
First, the initial situation is the intention to generate profits with Bitcoins and other cryptocurrencies that reach the scope of commercial. Regardless of whether one would otherwise generate tax-exempt or taxable income as a private individual, this is the trigger that causes income taxation according to Section 15 EStG. In addition, we assume that the company we are discussing, which operates with cryptocurrencies, should be based in Germany. After all, our article is primarily concerned with the taxation of companies domiciled in Germany and thus with German tax law. Subsequently, however, we also address the question of whether it can make sense to relocate business activities abroad in order to save taxes. After all, it may be possible to set up the company tax-free.
In doing so, we hypothesize that Bitcoin GmbH is indeed generally the best form of company to do business with cryptocurrencies. First of all, we substantiate this with well-founded arguments. At the same time, we also inform you whether and when a holding company can make sense in this regard. Subsequently, we test our hypothesis by discussing the tax circumstances that come to light in the case of a sole proprietorship or a partnership. In this way, we compare Bitcoin GmbH with its possible alternatives, so that you are able to identify the relevant advantages of the appropriate legal form for you in each case.
How Can Companies in the Czech Republic Buy Cryptocurrency?
In the Czech Republic, cryptocurrencies are not considered as means of payment, but as intangible assets. They are not subject to payment system legislation and do not require a special permit to operate. Profits in the form of cryptocurrencies are subject to capital gains tax, and VAT is also levied on cryptocurrencies. Payments in virtual currencies must be recorded in the electronic revenue accounting system, among others.
According to the Central Bank, digital money operations are not subject to licensing and additional taxes. However, profits made by companies in the form of cryptocurrencies are subject to the usual capital gains tax. In the Czech Republic, cryptocurrencies are equated to goods, which are not considered payment instruments. However, if a company or individual makes a profit (suffers a loss) on the purchase or sale of cryptocurrencies, it is imperative that this is reported in their tax reports and the corresponding tax is paid.
The corporate income tax rate in the Czech Republic is 19%. Income tax for individuals and sole proprietors in the Czech Republic is 15% and applies to the following types of profits: Wage labor, business, income from rent, and other activities. Income from the purchase of shares, the donation of real estate, and inheritance is not taxed. Annual tax returns must be filed by all citizens and foreigners who have lived in the Czech Republic for at least 183 days at regular intervals or continuously.
How Can Companies in Hungary Buy Cryptocurrency?
A few years ago, investment opportunities based on blockchain technology became more widely known in Hungary. The probably tens of thousands of early investors, day traders, and miners in Hungary are informed about new developments, promising projects, and “pump trends” via Twitter, Facebook, or telegram, minute by minute, through the terabytes of information generated by the industry.
In the almost unfiltered information noise, it is only recently that the average domestic crypto investor has become actively concerned about the tax treatment of investments. The question is not a simple one, not least because in the case of cryptocurrencies it is not yet clear what cryptocurrency is in legal terms.
In the Hungarian legal system, however, there are – for the time being – no specific rules on the legal treatment of cryptocurrencies.
As is the case in many other areas of technology, it is particularly difficult for legislators to keep up with the pace of developments in the world of cryptocurrencies. This lack of regulation, however, entails serious risks for law enforcers and investors indirectly in terms of the tax treatment of the profits generated.
The tax authority’s position papers, issued in response to individual requests back in 2015, have already been made available and assessed in a number of fora. The position of the authorities is, in short, that profits earned on investment activities as an individual are, in the absence of specific rules, considered as “other income” and subject to a tax of almost 30%. A similar tax burden is imposed on the value of assets acquired in the form of “coins” from “mining”. By way of comparison, the capital gain on a share may incur at most a limited amount of e-tax in addition to the 15% tax. If the detailed rules on cost accounting are taken into account, the tax treatment of cryptocurrency investments is clearly disadvantageous for individuals.
If the activity is not carried out by an individual but by a company, the tax burden is lower (9% corporate tax and possibly 2% local business tax), but the majority of investors do not hold their cryptocurrency savings through a company. And the transfer of existing cryptocurrency investments to a company itself raises serious tax issues.
In the context of the tax treatment of trading on crypto exchanges, it is not uncommon to find solutions that attempt to “optimize” Hungarian tax liabilities through complex structures with a foreign element. However, we would caution against the use of such precarious structures of dubious origin, as they are often in fact a pseudo-solution. In addition, because of the information exchange systems between tax authorities in different countries, these techniques are now easily seen through by the tax authorities.
How Can Companies in Poland Buy Cryptocurrency?
If a virtual currency is acquired in the course of a business activity consisting of trading in cryptocurrency, then it should be considered a tradable good constituting a current asset. This means that if the subject of the business activity is trading in virtual currency, the entrepreneur applies the same rules for tax-deductible expenses as those applicable to commercial goods. This position has been confirmed several times in tax interpretations issued in 2018.
The principles of recognition of cryptocurrencies as in the case of trade goods impose an obligation on the entrepreneur to show unsold cryptocurrencies in the inventory of nature drawn up as of 31 December. This means that cryptocurrencies purchased in 2018 that have not been sold will not be tax-deductible in 2018, which may consequently result in the obligation to pay tax despite, large losses related to the decline in value of cryptocurrencies. Additionally, the entrepreneur will be required to prepare a physical inventory as of January 1, in which they will not be able to recognize previously purchased cryptocurrencies.
Income from monetary capitals
Starting in 2019, the income obtained from the sale of cryptocurrencies will constitute income from monetary capital according to Article 17(1)(11) of the PIT Act. This means that an entrepreneur will not be able to account for the income as part of business activities. This is because cash capitals are a separate source of revenue. In the case of cryptocurrency exchange, the issue is regulated in Article 17(1f) of the PIT Act. From 2019, the exchange of a cryptocurrency for another cryptocurrency does not constitute income or deductible expenses.
Cryptocurrencies and business activity
When running a business and earning income from cryptocurrencies in 2019, a trader will earn income from two separate sources. Income from business activities will be accounted for according to the chosen form of taxation. On the other hand, income from cryptocurrencies will be accounted for in the annual PIT-38 return filed after the end of the tax year. The trader will not be required to pay any advance payments of income tax on the obtained income from cryptocurrencies during the tax year.
Expenses related to cryptocurrency trading
On the income from cash capitals, traders will be able to account for the costs of purchasing cryptocurrencies and expenses directly related to the obtained income. This means that for expenses that we cannot directly link to a specific income, the trader will not be able to account in PIT-38.
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Simge Ayse Pala LLBs
Gurcan Partners Hungary