Bitcoin Tax and Accounting

This post is also available in: German

Bitcoin Tax and Accounting

What needs to be considered for Bitcoin Tax and Bitcoin Accounting when accepting Bitcoin in your store?

This article is aimed specifically at online shops and retailers who (want to) accept Bitcoin in their own shops. We present the different ways of recording in the accounting system. With this knowledge, you can then submit a Bitcoin tax return tailored to your individual requirements with your tax advisor.

If you are a merchant looking for Bitcoin Tax or Bitcoin Tax Declaration, you will be inundated with a wealth of information. However, most contributions are aimed at people who see Bitcoin as an investment and trading object and want to tax these trading profits accordingly.

A merchant who accepts Bitcoin as a payment method has very different requirements.

Treat Bitcoin like foreign currency (e.g. USD, CHF or GBP)

Accepting Bitcoin in its business is permitted by law. Bitcoin is regarded by BaFin (financial regulatory authority for Germany) as a crypto value and thus corresponds to a financial instrument, as do foreign currencies (such as dollars, pounds or Swiss francs).

The invoice to the customer is shown as usual in Euro and with sales tax. With which payment method the customer actually pays is irrelevant.

It is up to each shop to decide whether to accept dollars or Bitcoin in addition to euros.

This means that a Bitcoin payment can be done in the same way as if a customer in the store wanted to pay with dollars.

For example, if the customer has an invoice of €10,- and only has a $10,- dollar bill, then you calculate the exchange rate (e.g. 1:1) and the customer can pay.

Customer pays with Bitcoin – Euro in accounting

Merchant privately acquires Bitcoin

The easiest way is for the shop owner to privately exchange the dollars for euros and put the equivalent of €10 in the till. This private exchange takes place beforehand and the cash payment is recorded in euros in the accounting of the shop.

The same procedure can be followed for a Bitcoin payment. If a customer wants to pay with Bitcoin, the store owner receives the Bitcoin and pays the equivalent value in euros into his business account.

Merchants change Bitcoin to Euro at Bitcoin Exchange

In the above example, it is assumed that a merchant would like to keep Bitcoin privately. If a merchant is not interested in Bitcoin and prefers to continue to receive Bitcoin only in euros, the Bitcoin taken can be immediately exchanged for euros at a Bitcoin exchange.

The article “Accept Bitcoin and receive Euro” explains how the Bitcoin is immediately converted into Euro after the Customer’s payment. The Euro credit may differ marginally from the invoice amount. This difference results from transaction and conversion fees. Anyone who already accepts credit card and Paypal payments knows the statements of these payment providers. The billed sales are also listed there and the fees for disagio and transaction fees are also invoiced.

Merchant accepts Bitcoin and wants to keep Bitcoin

However, it may be in the Company’s interest to retain Bitcoin. So do not change into Euro privately or at a Bitcoin exchange. This can make sense if you want to pay your suppliers with Bitcoin as well or expect a positive price development.

The Bitcoin is then entered in the accounts in the same way as one would handle foreign currency or gold.

In the context of a revenue-surplus calculation, the incoming Bitcoin is valued at the equivalent of the value of the goods delivered. If the Customer receives goods to the value of €100 and pays 1 Bitcoin for them, then the one Bitcoin is listed in the accounts with €100.

The profit only arises at the time of the sale of Bitcoin.

Bookkeeping of Bitcoin

If one accepts Bitcoin as a company that is obliged to prepare a balance sheet, the question arises as to how Bitcoin should be recorded in the balance sheet.

Merchants that accept Bitcoin use Bitcoin for payment processing and therefore Bitcoin is considered more of an intangible asset.

It has to be decided whether Bitcoin should be allocated 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.

In the balance sheet, Bitcoin is not recorded with the Bitcoin value but in Euro, since every balance sheet item must be stated in Euro.

You clarify individually with your tax advisor how Bitcoin should be valued on the balance sheet date.

Transaction overview and documents

Each order is recorded in the backend by the BTCPay server and displayed in a transaction overview.

Bill overview with export function for Bitcoin tax

In the transaction overview, the successful payments are listed with the status Complete. An export can be created via this transaction overview, which can facilitate the work for the accounting department.

In addition, details of each transaction can be used to switch to a detailed view.

Detailed invoice overview with export function for Bitcoin accounting

The detail view shows, among other things, how much Bitcoin the customer has sent, on the basis of which exchange rate the conversion was made and the amount (in euros) paid by the customer.

Ask your tax consultant or accountant whether this detailed view can be used as a document for accounting purposes.

Conclusion

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 your accounting and tax returns. Here it depends on the individual situation of the merchant as well as on the legal framework of the respective country.

The accounting requirements are internationally adapted and the treatment of Bitcoin as a foreign currency has proven to be effective in most countries.

Ask your accountant and tax consultant whether this can be done in your country in the same way. If this is the case, the accounting procedures are sufficiently well known and do not pose a problem.

Thus nothing stands in the way of accepting Bitcoin and other crypto currencies in your own business.

As a rule, you can contact your current tax advisor or accountant for further questions about accounting and tax. If you have specific questions about Bitcoin tax, you will find a list of tax consultants specializing in Bitcoin and crypto currency at Coinpages from Germany, Austria and Switzerland.

This post is also available in: German

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