Cryptocurrency Tax – How to File PIT-38 for Cryptocurrencies

How to Settle Cryptocurrency Tax?

In Poland, cryptocurrency taxation is a topic that may seem complicated at first glance. However, with proper understanding and preparation, it becomes much more manageable than many people initially believe. The key document for settling cryptocurrency transactions is the PIT-38 form, which is specifically designed for reporting income from digital asset transactions.

When filling out the PIT-38 form, you need to pay special attention to Section E, which is dedicated to cryptocurrency-related income. In line 34 of this section, you must enter the total revenue obtained from selling cryptocurrencies during the tax year. This includes all proceeds from converting digital assets to traditional currency. Meanwhile, in line 35, you should record the costs of acquiring these cryptocurrencies, which essentially represents your initial investment or purchase price.

For those who have accumulated losses from previous tax years, there's an opportunity to carry forward these costs. You can transfer these losses by entering them in line 36 of the form. This provision allows taxpayers to offset future gains with past losses, which can be particularly beneficial for long-term crypto investors. It's important to note that if the result calculated in lines 37 and 38 turns out to be negative, you should enter 0.00 instead of a negative number.

The most critical aspect of cryptocurrency tax settlement is maintaining comprehensive documentation of all your transactions. This includes keeping records of purchase dates, sale dates, amounts, exchange rates, and any associated fees. By maintaining meticulous records, you can ensure that your tax settlement is fully compliant with legal requirements and protects you from potential issues with the Tax Office. Many crypto investors use specialized software or spreadsheets to track their transactions throughout the year, making the annual tax filing process much smoother.

PIT-38 for Cryptocurrencies – How to Fill It Out? Examples

Purchase and Sale of Cryptocurrencies: Let's consider a practical scenario to illustrate how to properly fill out the PIT-38 form. Imagine that in a given tax year, you invested in BTC for 15,000 PLN and in ETH for 25,000 PLN. During the same year, you decided to sell a portion of your BTC holdings for 20,000 PLN and part of your ETH for 70,000 PLN. In this case, when completing line 34 of the PIT-38 cryptocurrency form, you would record a total revenue of 90,000 PLN (20,000 + 70,000). In line 35, you would account for the acquisition costs, which amount to 40,000 PLN (15,000 + 25,000). Your effective taxable income would be 50,000 PLN, from which you would need to pay 19% tax, resulting in a tax liability of 9,500 PLN.

This example demonstrates the importance of tracking both your investment costs and your sales proceeds. The difference between these two figures determines your actual taxable gain, which is crucial for accurate tax reporting. It's worth noting that the 19% tax rate applies to all cryptocurrency gains in Poland, making it relatively straightforward compared to some other countries with progressive tax rates.

Purchase Only of Cryptocurrencies: Now let's examine a different scenario where you only purchased cryptocurrencies without making any sales. Suppose that during a tax year, you acquired cryptocurrencies with a total value of 45,000 PLN but didn't sell any of them. In this situation, you would record the amount of 45,000 PLN in line 35 of the PIT-38 cryptocurrency form. As a result, you would have a loss of 45,000 PLN for that year, which you can carry forward to the following year. This loss can be used to offset future gains, potentially reducing your tax liability when you eventually sell your cryptocurrency holdings.

This provision is particularly valuable for crypto investors who adopt a long-term holding strategy. By carrying forward losses, you can effectively manage your tax burden over multiple years, which can be especially beneficial during market volatility.

No Cryptocurrency Transactions – Carrying Forward Loss from Previous Year: Consider another scenario where you had no cryptocurrency transactions in a given year, but you have an unsettled loss from the previous year amounting to 45,000 PLN. In this case, you would enter this amount in line 36 of the PIT-38 form. The loss from the previous year is transferred to the current year, allowing you to settle it against future gains. This mechanism ensures that losses aren't simply lost but can be utilized to reduce future tax obligations when you return to active trading or selling.

This carry-forward provision demonstrates the Polish tax system's recognition of the volatile nature of cryptocurrency markets and provides some relief to investors who may experience losses in certain years.

Settling Cryptocurrencies – What You Must Remember!

Regulations from Recent Years: In the past few years, new regulations have been implemented to govern the digital currency market in Poland. Consequently, the calculation of cryptocurrency tax for individuals has been adjusted to align with these new rules. These regulations have brought more clarity to the crypto tax landscape, making it easier for investors to understand their obligations. The changes reflect the growing recognition of cryptocurrencies as a legitimate asset class requiring proper regulatory oversight.

Maintain Transaction Confirmation: A crucial aspect of cryptocurrency tax compliance is maintaining proper documentation of all your crypto transactions. This includes keeping records such as exchange statements, receipts from cryptocurrency exchanges, and documentation from crypto trading platforms. These documents serve as proof of your transactions and are essential if the Tax Office requests verification of your reported income. Digital records, screenshots, and transaction histories from exchanges should all be preserved for at least five years.

Taxation of Crypto-Fiat and Fiat-Crypto Transactions: In Poland, tax obligations arise specifically from transactions that convert cryptocurrencies to traditional currencies and vice versa. This means that when you sell Bitcoin for Polish zloty or purchase Ethereum with euros, these transactions are taxable events. However, it's important to understand that crypto-to-crypto transactions (such as exchanging Bitcoin for Ethereum) are not subject to taxation under current regulations. This distinction is crucial for tax planning and can significantly impact your annual tax liability.

Don't Combine Cryptocurrency Income with Other Sources: Income derived from cryptocurrency transactions must be reported separately and should not be combined with other sources of income such as employment income, business income, or rental income. This separate treatment ensures that cryptocurrency gains are taxed at the appropriate rate and according to the specific rules applicable to digital assets. Mixing income sources can lead to errors in tax calculation and potential issues with tax authorities.

Settle Your Losses: If you experience losses in cryptocurrency transactions, it's mandatory to include them in your tax settlement. Reporting losses is not optional – it's a legal requirement. Moreover, properly documenting and reporting losses allows you to carry them forward to offset future gains, which can result in significant tax savings over time. Many investors overlook this aspect, but strategic loss reporting can be a valuable tool for tax optimization.

No Tax Deductions Available: Unfortunately, when settling cryptocurrency transactions, taxpayers cannot take advantage of standard tax deductions or reliefs that might be available for other types of income. This means that the full amount of your cryptocurrency gains is subject to the 19% tax rate without the possibility of reducing it through personal allowances or other deductions. This makes accurate calculation and reporting even more important.

Taxation of Purchases Made with Cryptocurrencies: An often-overlooked aspect of cryptocurrency taxation is that purchases made using digital currencies are also taxable events. When you use Bitcoin or another cryptocurrency to buy goods or services, this is treated as a disposal of the cryptocurrency and may trigger a tax liability if the value of the crypto has increased since you acquired it. This applies to everything from buying a coffee to purchasing real estate with cryptocurrency.

Individual Tax Settlement: Individual taxpayers do not have the option to file joint tax returns with their spouse for cryptocurrency transactions. Each person must settle their cryptocurrency tax obligations separately, even if they are married and file joint returns for other types of income. This individual responsibility means that both partners in a marriage need to maintain separate records of their crypto transactions.

Account for All Costs: When calculating your cryptocurrency tax liability, you can only include documented expenses that are directly related to the purchase or sale of digital currencies. This includes transaction fees, exchange fees, and other costs directly associated with buying or selling crypto. However, indirect costs such as internet fees, computer equipment, or educational materials cannot be deducted. Proper documentation of all eligible costs is essential for maximizing your legitimate deductions.

Solidarity Levy: Income from cryptocurrencies is included in the calculation of the solidarity levy, which is an additional tax imposed on high earners. If your total annual income exceeds 1 million PLN, you must pay an additional 4% tax on the amount exceeding this threshold. This applies to all income sources combined, including cryptocurrency gains. High-earning crypto investors need to factor this additional tax into their planning and ensure they set aside sufficient funds to cover this obligation.

Summary

Settling cryptocurrency tax in Poland, while initially appearing complex, becomes significantly more straightforward with proper preparation and understanding of the requirements. The key to successful tax compliance lies in completing the PIT-38 form accurately, with careful attention to entering the correct information in the appropriate sections based on your specific situation.

The most important aspect of cryptocurrency tax settlement is maintaining comprehensive documentation of every transaction throughout the year. This includes keeping records of purchases, sales, exchange rates at the time of transactions, and all associated fees. By establishing a systematic approach to record-keeping from the beginning, you can avoid the stress and potential errors that come with trying to reconstruct your transaction history at tax time.

Remember that cryptocurrency taxation is an evolving area of law, and staying informed about regulatory changes is crucial for maintaining compliance. Consider consulting with a tax professional who specializes in cryptocurrency taxation if you have complex transactions or significant holdings. With the right approach and attention to detail, you can fulfill your tax obligations confidently while optimizing your tax position within the legal framework.

FAQ

What is the PIT-38 form? Why do cryptocurrency investors need to file it?

PIT-38 is a tax form for reporting cryptocurrency transactions and gains in personal income tax filings. Investors must file it to ensure tax compliance, report transaction amounts and profits, and avoid penalties. The filing deadline is February 28, 2025.

How should gains from purchasing, holding, and selling cryptocurrencies be classified and reported in PIT-38?

Cryptocurrency gains are classified as capital gains in PIT-38. Report all transactions including purchase costs, selling proceeds, and net gains. Annual settlement requires detailed documentation of all crypto trading activities and their corresponding tax implications.

How to calculate taxable gains or losses from cryptocurrency transactions?

Calculate taxable gains or losses by subtracting your cost basis from the sale price. Short-term holdings (under one year) are taxed as ordinary income up to 37%, while long-term holdings (over one year) qualify for preferential rates of 0%, 15%, or 20%. Losses can offset other gains or up to $3,000 of ordinary income annually.

How are cryptocurrencies obtained through mining, airdrops, and staking rewards taxed?

Mining, airdrops, and staking rewards are treated as ordinary income taxed at rates from 10% to 37% based on your tax bracket. When you later sell these cryptocurrencies, you owe capital gains tax on any appreciation. Short-term gains (held under one year) are taxed as ordinary income, while long-term gains (over one year) receive preferential rates of 0%, 15%, or 20%.

How should crypto-to-fiat conversion transactions be reported on PIT-38?

Report crypto-to-fiat conversions on PIT-38 by disclosing the transaction amount, conversion date, and realized gains or losses. Detail each conversion with acquisition cost and sale price to calculate taxable income. Accurate reporting ensures compliance with tax obligations.

What are the tax consequences of not filing PIT-38 correctly?

Failing to file PIT-38 correctly can result in substantial penalties, fines, and potential tax audits by authorities. Non-compliance may lead to legal liability, increased interest charges, and damage to your financial standing.

Can cryptocurrency trading losses be offset against other income?

Cryptocurrency trading losses cannot offset other income such as wages or business income. They can only offset gains from other cryptocurrency transactions. Tax rules vary by jurisdiction, so consult a tax professional for specific guidance.

How to save cryptocurrency transaction records for tax audit?

Keep detailed records of all buys and sells with dates, amounts, and prices. Use reliable software or hardware wallets to track transactions. Regularly backup all records to prevent loss and ensure complete documentation for tax purposes.

What are the differences in how different countries handle cryptocurrency taxation?

Countries tax cryptocurrencies differently. The U.S. treats crypto as property with capital gains tax (0-37%), while Japan imposes high rates (15-55%). The U.K. charges 10%, Australia offers 50% discount for long-term holdings. Some countries like UAE, Malta, and Cayman Islands exempt cryptocurrencies from taxation entirely.

How are cryptocurrency wallet and exchange transaction records used for PIT-38 filing?

Detailed transaction records from wallets and exchanges must be compiled to calculate capital gains. Document all buy/sell dates, amounts, and prices to ensure accurate PIT-38 reporting and tax compliance.