In a somewhat confusing turn of events, the Colombian government, specifically the Tax and Customs office, announced that Bitcoin is subject to taxes despite it still not being recognized as a legal currency. Back in late 2016, the Colombian government made an official announcement that Bitcoin was not legal tender, and that the only money recognized by the government of Colombia is the Colombian Peso. In addition to that, the announcement went on to warn against becoming involved in cryptocurrency dealings and even referred to them as “scams.”
Not Legal Tender, But Subject to Taxes
As you have probably become well aware of by now, the Bitcoin movement is reaching farther and wider than ever before. With so many additions to the market in the past few years, the Colombian government has decided to turn its focus on cryptocurrency investments, many of which have greatly appreciated as of late.
Like any other type of investment made in Colombia, the government is saying that investments in Bitcoin are subject to taxes as well. Though there is no specific structure in place to tax Bitcoin investments, there are ample reports that such a system is in the works. Like they do for stock market investments, the government is rumored to be on the verge of implementing taxes on the sale of Bitcoin as well as other cryptocurrencies.
There is no official language in the law stating that people have to report taxes on Bitcoin profits, but attorneys far and wide say that reporting those profits is a nice way to ensure you will remain out of trouble. Still, very few people even think of reporting these profits as they know it is very difficult for the government to track or enforce.
Not Such An Easy Task
Even though the government of Colombia may end up criminally pursuing those that use Bitcoin to avoid taxes, it is going to be difficult for them to do this. For now, however, attorney Juan Peredo says that “tax issues are yet to be decided.” He went on to say, “We should think that people will have to report them as part of their assets in their income tax return. In this way, and to the extent that Bitcoin is part of people’s assets, they will have to follow the corresponding tax rules. Ultimately, this currency has raised concerns among several countries’ tax authorities because of the difficulty of tracing the transactions and, therefore, the possibility that they are used to evade taxes.”
So while it may be fully out in the open that the government can punish those who do not report profits stemming from Bitcoin transactions/investments, there is a strong feeling that people will continue to ignore the reporting requirements altogether. What the Colombian government is going to do to combat people who do not report profits is still up in the air, but the feeling is that they will follow in the footsteps of Spain and Australia, who both recently implemented systems to tax Bitcoin transactions similarly to how fiat currency transactions are taxed.