Are Bitcoin buying and selling transactions subject to income tax? | Elçin Karatay, Attorney

Whether any tax is to be accrued in cryptocurrency transactions should be evaluated by taking into account the legal character of the relevant cryptocurrency in terms of different types of taxes.

Elçin Karatay, Attorney

It is not possible to make a general suggestion by including all types of taxes for all cryptocurrencies –ignoring the legal characters of such cryptocurrencies– or say whether they are subject to tax or not. Our tax system stipulates various rules which are sometimes based on the nature of the activity resulting in tax liability and which are sometimes based on the characteristics of the assets subject to delivery.

Our tax system relies on the following laws for buying and selling transactions:

  • Income Tax Law no. 193 (GVK)
  • Corporate Tax Law no. 5520 (KVK)
  • Value Added Tax Law no. 3065 (KDVK)

This article is limited to the evaluations based on the Income Tax Law (GVK) in relation with Bitcoin [1]trading activities maintained by natural persons.

Bitcoin trading under Income Tax Law (GVK)

GVK regulates the income tax in relation to earnings and revenues considered as an income obtained by natural persons. Pursuant to Article 2 of GVK, earnings and revenues considered as income are as follows:

  • Trade earnings
  • Agricultural earnings
  • Fees
  • Self-employment earnings
  • Revenues from immovable capitals
  • Revenues from securities
  • Other earnings and revenues

In this context, for Bitcoin trading activities maintained by a natural person to be subject to income tax, the earnings obtained by this person must be included in one of the earnings and revenues listed above. Whether Bitcoin trading activities maintained by natural persons are subject to income tax should be considered accordingly.

Tax experts should also be consulted about the subject matter

Pursuant to Article 37 of GVK, which contains provisions on the definition of trade earnings listed above under GVK, trade earnings are defined as all earnings arising out of any kind of commercial and industrial activity. Therefore, any kind of earnings obtained out of a commercial activity shall be subject to income tax. Within this scope, the relevant commercial activity should be defined. Although the definition of commercial activity is not provided under GVK, customary practice suggests that any kind of activities carried out with an aim to generate income and maintained independently in a continuous manner in parallel with Turkish Commercial Code no. 6102 shall be deemed as a commercial activity. In this context, our opinion is that Bitcoin trading activities maintained by a natural person in a continuous manner with an aim to generate income may be subject to income tax according to article 37 of GVK.

On the other hand, taxation of Bitcoin trading [2] activities carried out intermittently should be considered within the scope of other earnings and revenues which are listed in Article 2 of GVK. In this context, pursuant to Article 3 of Income Tax General Communique Serial No. 310 in reference to article 82 of GVK, in case the amount of earnings obtained as a result of Bitcoin trading activities exceeds 40,000 TL, such earnings may be subject to tax as incidental earnings.

In conclusion, we believe that the common perception in the Turkish cryptocurrency ecosystem that is based on the assumption that all kinds of cryptocurrency transactions are exempted from tax –disregarding the nature of the person carrying out the transaction as well as the character of the transaction– does not reflect the reality. We also advise you to consult your tax experts to avoid any unpleasant surprises about income tax in the near future.

[1]     This review is based on the assumption that Bitcoin is not considered as a capital market instrument or money
[2] In this context, the customary practice adopted by the Tax Administration suggests that a transaction shall be deemed to be carried out continuously if it has been carried out multiple times within the same calendar year and/or once a year during subsequent years.

Bu içerik en son 26 October 2022 tarihinde güncellenmiştir.


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