In Cyprus, cryptocurrencies are not recognized as legal tender or currency but are treated as assets for tax purposes. They are considered as intangible assets, similar to stocks or bonds, rather than currency or property. Various types of cryptocurrency transactions, including buying, selling, mining, and trading, are categorized as capital transactions.
Tax liabilities on cryptocurrencies are calculated based on the gains or losses realized from cryptocurrency transactions. The methodologies used to determine taxable events and calculate tax obligations include:
- For capital gains: The difference between the acquisition cost and the disposal proceeds of cryptocurrencies is calculated. Gains are subject to capital gains tax, while losses may be offset against gains or carried forward.
- For mining: Cryptocurrency mining activities are treated as business income, and the value of the mined cryptocurrency at the time of receipt is considered taxable income.
- For trading: Profits from cryptocurrency trading are also treated as capital gains and subject to taxation.
Cryptocurrency transactions in Cyprus are subject to capital gains tax rates, which range from 0% to 35% for individuals, depending on the total taxable income and the nature of the gain. However, certain exemptions or deductions may apply, such as the annual exemption threshold for capital gains.
Legal References:
- The Income Tax Law (Law 118(I)/2002) governs the taxation of cryptocurrencies in Cyprus.
- Article 5 of the Income Tax Law specifies the treatment of capital gains, including gains from the disposal of cryptocurrencies.
- Article 6 of the Income Tax Law outlines the calculation of taxable income, including income from cryptocurrency mining and trading.
