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How are taxes handled for businesses that accept bitcoin?

March 21, 2024

More and more merchants and stores accept bitcoin for their products and services, thus attracting customers who want to pay in bitcoin. This is great for the adoption of bitcoin worldwide and in everyday use.

However, questions then arise regarding the taxation and accounting of these transactions. How are merchants who accept bitcoin taxed? What tax obligations must they respect? How is this going with the fluctuation in the price of bitcoin?

If you are a merchant and you want to accept bitcoin in your store, don't panic, we will try to guide you in your research.

Indeed, this article explores these questions and provides answers to help merchants who want to pay in bitcoin, in France.

Reminder of the legal status of bitcoin in France

In France, bitcoin and other cryptocurrencies are not considered official currencies. Unlike the euro, the only legal tender in France, bitcoin is classified as a digital asset by article L. 54-10-1 of the monetary and financial code. This means that there are no specific regulations regarding the taxation and accounting of bitcoin transactions. This is also why some merchants are still hesitant to accept bitcoin, due to this legal uncertainty.

Accepting bitcoin as a means of payment is very advantageous for merchants

Accepting bitcoin as a payment method can have several advantages for merchants. First, transaction fees are generally lower compared to traditional payments. In addition, this can attract customers who use bitcoin and want to spend them. This then makes it possible to diversify payment methods and participate in the adoption of bitcoin.

However, it is important to take into account the tax obligations associated with these transactions.

What are the tax obligations of merchants who accept bitcoin?

When a merchant accepts bitcoin as payment, they are generally required to report the value of the bitcoin received as taxable income. It's logic. This means that he must include the value of bitcoin in his tax return and pay the corresponding taxes. To do this, just like an individual, he can use specific tools such as koinly or Waltio for example, which makes the task much easier.

The value of bitcoin can be determined based on the exchange rate at the time of the transaction. This means that the exchange rate used will be that made at the time of the transaction. If the bitcoin has changed in price (which will inevitably happen), upwards or downwards, it is at the time of the transaction that this price must be retained.

This is why it is important for traders to keep accurate records of all bitcoin transactions. That being said, the processors for accepting bitcoins in stores all provide precise histories with the date and for some even the equivalent amount in euros. This will make it easier to declare income and provide evidence in the event of a tax audit.

Traders can use cryptocurrency-specific accounting tools to track and record bitcoin transactions. In any case, the ideal is to choose the same converter to avoid the risk of errors.

What is happening fiscally with the fluctuation in bitcoin prices?

One of the major challenges in accepting bitcoin as a means of payment is the volatility of its price. Bitcoin is known for sudden and large fluctuations, which can affect the value of bitcoin transactions. For traders, this means they can make gains or losses depending on how the price of bitcoin moves.

So, if for example, a merchant accepts a payment in bitcoin (even though it is worth 50,000 euros at that moment) and he keeps it in his treasury another month later and the bitcoin is worth 60,000 euros, what happens? does he?

If there are any winnings, traders must generally report these winnings and include them in their tax return. However, in the event of a loss, it becomes slightly more complicated even if he can deduct these losses from this taxable income, under certain conditions however.

In some cases, it is then wise and recommended to consult an accountant to understand the specific rules applicable in each case.

What are the tools for accepting bitcoin in your store?

There are several easy-to-set-up solutions for merchants who want to accept bitcoin payments.

We can cite the processor Swiss Bitcoin Pay which is certainly one of the simplest to use. It is a simple tool for physical stores by acting as a POS on their smartphone. It is also perfectly suited for online stores as well.

accept bitcoin with swiss bitcoin pay

There are other payment processors like BtcServer of course which is recommended open source software but also Coingate or Bitpay, for example. They can be cited for merchants who want to accept payments in bitcoin and other cryptocurrencies and those who want to immediately convert them into euros for those who wish.

Accounting considerations for the merchant

In addition to tax obligations, merchants must also consider the accounting implications of accepting bitcoin as a payment method. Bitcoin transactions must be recorded correctly in the company's accounting records. It is in fact the same process as with payments in fiat currencies. This may require the use of accounting software specific to cryptocurrencies or the use of an accountant specializing in this field.

Merchants should also consider the rules for converting cryptocurrencies into fiat currency. This is the choice of certain traders who immediately prefer to convert the amount into euros. Processors like Coingate allow you to choose automatic conversion and receive funds in euros directly without the merchant having to do it themselves, for example.

In either case, it is important to follow the proper accounting rules to record these transactions.

What are the risks and precautions to take?

Accepting bitcoin as a payment method also carries potential risks for merchants. Bitcoin price volatility can lead to significant financial losses if the price of bitcoin drops significantly. Additionally, bitcoin transactions are generally irreversible, meaning there is no refund mechanism in the event of a dispute.

It is therefore essential for traders to take precautions to minimize these risks. This may include using third-party payment services that automatically convert bitcoin into fiat currency, as well as having clear refund and dispute policies in place. In general, bitcoin payments are only accepted in cases where there is no return. Otherwise, we do it when the merchant can quickly convert his funds into euros and he has no cash flow problems.

Conclusion

Accepting bitcoin as a means of payment offers many advantages to merchants, but it also carries specific tax and accounting obligations. For all merchants who accept bitcoin payment, it turns out that these problems are minimal compared to the benefits.

Both traders and individuals must be aware of their responsibilities when it comes to tax reporting, keeping accurate records and following accounting rules. In this sense, it is important to use suitable software such as koinly, For example. It is recommended to consult an accountant specializing in cryptocurrencies to obtain personalized advice and to comply with current regulations.

FAQ

I merchant and I want to accept bitcoin, how does it work from a tax perspective?

In fact, the taxation applicable to merchants who accept bitcoin generally depends on the tax laws in force in their country. In many countries, bitcoin transactions are treated similarly to those made in traditional currencies, meaning that merchants are required to report these transactions and pay taxes on the income generated.

How do I report my bitcoin-related income in my store?

Merchants generally must report revenue from bitcoin transactions in the same manner as revenue from traditional currency transactions. This means that they must include this income in their annual tax return and report it to the relevant tax authorities. It's as if you had received euros for example, except that price fluctuations must be taken into account.

Are there any specific tax obligations related to accepting bitcoin?

In some countries, there may be specific tax obligations related to the use and acceptance of bitcoin, such as the collection of VAT or sales tax on bitcoin transactions. It is therefore important for traders to learn about the specific tax laws applicable in their jurisdiction.

Should merchants keep separate records for bitcoin transactions?

Merchants who accept bitcoin are recommended to keep detailed records of all bitcoin transactions, including the dates, amounts, and counterparties involved. These records can be useful for accounting and tax reporting, as well as responding to possible requests for information from tax authorities.

How do fluctuations in the value of bitcoin affect merchant taxation?

Fluctuations in the value of bitcoin can impact merchant taxation, particularly when it comes to capital gains reporting. If the value of bitcoin increases after a merchant receives bitcoin payments, he or she may be required to report a capital gain and pay taxes on that gain. Likewise, if the value of bitcoin declines, the trader may be able to deduct a capital loss from their taxable income.

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