Guide on taxation and tax declaration on Cryptocurrencies in Colombia

If you own cryptocurrencies or are considering investing in them, you may be wondering if you need to declare and pay taxes on these assets. Below, we explain in a simple way what you should consider regarding your tax obligations related to this type of investments.

Important: CryptoMKT does not offer tax advice. This guide is purely informative. It is recommended that you consult a lawyer or accountant, or seek out an expert who can provide you with more detailed advice. The responsibility for complying with your tax obligations lies solely with you.

This information applies only to Colombia and is directed to natural persons.

Let's get started!

Steps to Declare and Pay Taxes:

• Investigate Tax Regulations in Colombia:

• Find out about the tax laws that apply to cryptocurrencies in Colombia. Check if the country considers cryptocurrencies as currency, asset or property.

• Record your Cryptocurrency Transactions:

• Keep detailed records of your transactions, including date, quantity and price.

• Calculate your Capital Gains or Losses:

• Determine the profits or losses derived from your cryptocurrency investments.

• Consultation on the Obligation to Pay Taxes:

• Check if you are required to pay taxes on your earnings.

declare your taxes correctly:

File your taxes correctly or seek professional advice.

Keep a Detailed Record:

Keep a detailed record of your cryptocurrency transactions for future tax returns.

In Colombia, cryptocurrencies are considered an intangible asset, which means that, for tax purposes, they are equivalent to a non-physical movable asset that can be sold, exchanged, invested or as a means of payment, and, therefore, are subject to taxes.

But what kind of taxes?

The general rule establishes that all inhabitants and residents in Colombia are subject to two types of taxes: Income Tax and Value Added Tax (VAT). With this clear, let's move on:

We already inform you that the acquisition, purchase and sale of cryptocurrencies are not subject to VAT, since, being considered an intangible asset, they do not have a physical or corporeal form. Consequently, the tax that can be applied to profits derived from cryptocurrency transactions is the Income Tax.

The first thing you should know is that this tax applies to the profits (income) generated by a natural or legal person in a given year. The Income Tax Law in Colombia includes different subtypes of this tax, which are applied depending on the economic activity carried out by the person or company. The important thing is that, regardless of economic activity, as a Colombian citizen and resident you have the obligation to declare your income once a year.

Now, let's see what happens with this tax and holding cryptocurrencies:

In general, the tax treatment of holding cryptocurrencies is equivalent to the treatment of stock movements.

Legal references: Concept 20436 of August 2, 2017, Concept 00314 of March 7, 2018, Concept 013733 of May 30, 2019 of the DIAN and Concept 100208221-0232 of February 19, 2021.

It is important to keep in mind that other state entities, different from the DIAN, may have different considerations.

2. However, this does not affect the other special taxes in Colombian legislation, which apply to specific situations such as money loans, inheritances, donations, among others.

3. The concept of "Sale" for VAT purposes refers to the act that involves a payment and falls on goods that must always be "corporeal", that is, have a physical form.

What does this mean? It means that you must declare as income when you obtain a profit (or greater value) from your cryptocurrency transactions.

When will this happen? It will occur when you sell or liquidate your cryptocurrencies and the amount obtained is greater than the purchase price. For example, if you acquired a fraction of BTC for $1,000,000 COP and then sold or liquidated it for $1,500,000 COP, your profit would be $500,000 COP.

In the example above, should I declare the total of the sale or liquidation? No, you only have to declare your profit or greater value, that is, $500,000 COP. This gain will be added to your other ordinary income and you will eventually pay taxes on the total in Income Tax.

If I made more than one sale or liquidation in the year, do I have to declare each transaction individually? No, you must calculate the total amount of the operations carried out during the year. Don't worry, we'll help you with that later.

Does only the sale or liquidation generate the obligation to declare these profits? No, let's review the most common cases that also require a declaration.

When are you not required to declare income?

It's simple, you are not obliged to declare in the following cases:

Buying and holding cryptocurrencies: If you buy cryptocurrencies with fiat money (local currency) and keep them unsold or liquidated, you do not need to declare.

Transfers between your wallets: Transferring cryptocurrencies between wallets or virtual wallets that you own does not generate an obligation to declare.

Now that you have a clear idea of ​​when you must declare, it is important to note that having the obligation to declare profits does not necessarily mean that you must pay taxes on them. Let's go to the next step to better understand your tax situation.

Step 2: Record Cryptocurrency Transactions

Keep a detailed record of all your cryptocurrency transactions, including purchase and sale dates, quantities and prices. This will help you determine the amount to declare for a given tax year. For example, when declaring in 2023, you must report the income obtained during the year 2022.

To obtain this record from the platform CryptoMKT, follow these steps:

Visit our website at www.cryptomkt.com and log into your account with your email and password. Don't forget to have your second authentication factor on hand.

2. Once you have logged in, go to the Exchange Pro version. Again the platform will ask you for your second authentication factor.

3. In the Exchange Pro version, press the “Reports” section located at the top left of the screen, then the “Wallet” section in the drop-down menu on the left side and finally the “Transaction History” section.

4. In the “Transaction History” section you will find all the movements in your wallet with their date, currency and type of movement in a specific period of time. For the purposes of your tax return, make sure that this period considers from January 1 to December 31 of the corresponding year. You can download the transactions that appear in Excel format by pressing the “export to .xlsx” option.

And that's it! With the information contained in that file, you will be able to determine how much you bought and how much you sold.

Step 3: Calculate your capital gains or losses

To calculate profit or loss on cryptocurrency, subtract the purchase price from the sale price. If the selling price is higher than the buying price, you made a capital gain. If it is less, incurriste in a capital loss.

For the calculation, keep in mind the following:

• Purchase prices must be readjusted according to the CPI between the month prior to the purchase date and the month in which the sale is made. For example: if you bought a fraction of BTC in July at $1,000,000 COP and then sold it at $1,500,000 COP in October of the same year, the calculation should be:

• Then, for the purposes of your declaration, you must also readjust your profit according to the CPI. In the case of our example, this variation will be between the month of October and December. With this you will obtain your profit as of December 31 of the corresponding year.

• You must perform this calculation for each of the operations of this nature executed during a calendar year, which may result in a profit or loss for each operation.

• Then, you will add all these gains and losses, and the result will give you the answer as to whether or not you are required to include said income in your return. Simply put, if the number is positive you must declare it, and if it is negative, you will not have this obligation.

Step 4: Check your tax obligation

Depending on your country of residence, you may have to pay taxes on capital gains made from cryptocurrencies. Review local tax regulations to determine your tax liability.

In many countries, tax laws establish annual income thresholds below which no taxes are paid. For example, in Colombia, you will only be required to pay taxes if your total annual net income, including fees, dividends, and profits from cryptocurrency transactions, exceeds $53,206,000 COP.

Additionally, if your cryptocurrency trades are infrequent, part of your profits could be tax-exempt thanks to capital gains tax benefits.

For all this It is very important that you consult with an expert, since these facts depend on each person and particular situation.

Step 5: declare your taxes

If, after everything you've learned, you conclude that you are required to file and pay taxes, make sure you do it correctly. Depending on the country you are in, you can file your taxes online or with the help of an accountant.

Step 6: Keep detailed records

We have reached the final phase! To facilitate future statements, it is essential to keep detailed records of all your cryptocurrency transactions. We recommend you write down the purchase and sale dates, prices and the amount of cryptocurrencies involved.

We know that paying taxes can be a hassle, but we urge you to educate yourself and comply with your tax obligations. Declaring your income in cryptocurrencies can offer significant advantages, such as making it easier to prove income and accessing financial benefits more easily.

We hope this guide has clarified your doubts on the subject!