With more people buying into the bitcoin market, some rightfully wonder can bitcoin be taxed? The answer is yes, anything can be taxed. Most governments have have a tax scheme for bitcoin, but the laws and responsibilities vary from nation to nation.
In most cases, bitcoin is considered to be a collectible or commodity, and not money. By using the legal definition of a collectible or commodity, the tax status of bitcoin isn't as good as many other assets.
Traders or other people who buy and sell bitcoin on a regular basis need to be especially aware of how bitcoin is taxed.
As an asset that is generally subject to capital gains taxes, any purchase or sale of bitcoin is a taxable event. In many nations there are severe penalties for failing to disclose these events, especially if there are profits involved.
It is also important to note that governments have to rely on their tax payers to disclose all the crypto holdings they have, as it is next to impossible for governments to directly investigate crypto holdings at this time.
While it may be possible for a tax agency to look into who owns cryptos, the costs and challenges associated with an investigation are prohibitive in most cases.