What needs to be considered for bitcoin tax and bitcoin accounting when accepting merchant bitcoin in your business?
This article is specifically aimed at online stores and retailers who (want to) accept Bitcoin in their own business. We present the different ways of recording in accounting. With this knowledge, you can then work with your tax advisor to file a Bitcoin tax return tailored to your individual needs.
If you are a trader searching for bitcoin tax or bitcoin tax return, you will be flooded with a lot of information. However, most of the articles are aimed at people who see Bitcoin as an investment and trading object and want to tax these trading profits accordingly.
Merchants who accept Bitcoin as a payment method have completely different requirements.
Treat Bitcoin like foreign currency (e.g. USD, CHF or GBP)
Accepting bitcoin in its business is allowed by law. Bitcoin is considered a crypto-value by BaFin and thus corresponds to a financial instrument, as is the case with foreign exchange (such as dollars, pounds or Swiss francs).
The invoice to the customer, is shown as usual in euros and with VAT. Mit welcher Bezahlmethode der Kunde dann tatsächlich bezahlt, ist unerheblich.
Each store is free to choose whether to accept dollars or bitcoin in addition to euros.
This means that when making a Bitcoin payment, you can proceed in the same way as when a customer wants to pay with dollars in the store.
For example, if the customer has an invoice of €10,- and only has a $10,- dollar bill, then you calculate the conversion rate (e.g. 1:1) and the customer can pay.
Customer pays with Bitcoin – Euro in accounting
Trader privately takes over the bitcoin
The easiest way is for the shopkeeper to privately exchange the dollars for euros and put the equivalent of €10 in the cash register. This private exchange takes place beforehand and in the accounting of the store the cash payment is recorded in euros.
An analogous approach can be taken for a Bitcoin payment. If a customer wants to pay with Bitcoin, then you as the store owner accept the Bitcoin and deposit the equivalent in Euros into your business account.
Trader exchanges bitcoin to euro at bitcoin exchange
In the above example, it is assumed that as a trader you would like to keep bitcoin private. If you as a trader have no interest in the Bitcoin and prefer to continue to receive only in euros, the Bitcoin received can be immediately exchanged for euros at a Bitcoin exchange.
The article “Accepting Bitcoin and Receiving Euros” explains how the Bitcoin is immediately converted into Euros after the customer has paid. The Euro credit may differ marginally from the invoice amount. This difference results from transaction and conversion fees. Those who already accept credit card and Paypal payments are familiar with the statements of these payment providers. There, the settled sales are also listed and, in addition, the fees for discount and transaction fees are charged.
Trader accepts bitcoin and wants to keep bitcoin
However, it may be in the company’s interest for the Bitcoin to remain within the company. So not privately or at a Bitcoin exchange to be exchanged into euros. This can make sense if you want to pay your suppliers with Bitcoin as well or if you assume a positive exchange rate development.
In accounting, the Bitcoin are then recorded in the same way as one would proceed with foreign currency or with gold.
In the context of a revenue surplus statement, the incoming Bitcoin are assessed at the value corresponding to the equivalent value of the delivered goods. If the customer receives goods worth €100,- and pays 1 Bitcoin for it, then the one Bitcoin is in the accounting with €100,-.
The profit arises only at the time of the sale of the bitcoin.
Bitcoin accounting entry
If one accepts Bitcoin as a company that is required to prepare a balance sheet, the question arises as to how Bitcoin should be accounted for.
Merchants that accept Bitcoin use Bitcoin to process payments, and thus Bitcoin is considered more of an intangible asset.
A decision must be made whether to allocate the bitcoin to fixed assets or current assets.
Bitcoin becomes a fixed asset if it is intended to remain in the company permanently (long-term). It becomes a current asset if it remains in the company only for a short period of time.
In the balance sheet, Bitcoin are not recorded with the Bitcoin value but in Euro, as each balance sheet item must be stated in Euro.
How the bitcoin should be valued on the balance sheet date, you clarify individually with your tax advisor.
Transaction overview and receipts
Each order is recorded in the backend by the BTCPay server and displayed as part of a transaction overview.
The transaction overview lists the successful payments with the status Complete. This transaction overview can be used to create an export, which can facilitate the work for the accounting department.
Zusätzlich kann über Details zu jeder Transaktion auf eine Detailansicht gewechselt werden.
The detailed view shows, among other things, how much Bitcoin the customer has sent, on the basis of which conversion rate the conversion was made and which amount (in Euro) the customer has paid.
Ask your tax advisor or accountant if this detail view can be used as an accounting document.
Accepting Bitcoin as a means of payment is unobjectionable for legal reasons. If in doubt, you should clarify with your tax advisor how Bitcoin is recorded in accounting and in the tax return. Here it depends on the individual situation of the dealer, as well as to the legal framework of the respective country.
Accounting requirements are internationally aligned and treating Bitcoin like a foreign currency has proven successful in most countries.
Ask your accountant and tax advisor if this can be handled the same way in your country. If this is the case, the processes for accounting are sufficiently known and do not pose a problem.
Thus, nothing stands in the way of accepting Bitcoin and other cryptocurrencies in one’s own business.
You can usually contact your current accountant or bookkeeper for further questions about accounting and taxes. If you have specific questions about Bitcoin tax, you can find a listing of tax advisors specialized in Bitcoin and cryptocurrency at Coinpages from Germany, Austria and Switzerland.