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Cryptocurrency Tax Fraud

1 Jun 2023 - Cryptocurrency - Min Read 9 min
Cryptocurrency Tax Fraud

Can paying taxes on cryptocurrencies become a scam? Unfortunately, yes, if they are claimed without granting the permission to collect them.

Cryptocurrency is a virtual asset that has now become a popular and in-demand investment object around the world.

Millions of people invest daily in countless digital currencies such as Bitcoin and Ethereum.

Can fraudsters remain indifferent to such business?

As previously experienced with Forex, Cyber Criminals didn’t resist to target investors within a market that is poorly regulated.

Demanding Fees to Unlock Earnings

One well-established way that fraudsters use to extract money from cryptocurrency investors, and in Forex in general, is by demanding fees to unlock earnings.

Fraudulent cryptocurrency brokers, taking advantage of the subject’s vagueness, use this form to draw off as much money as possible from their victims before being exposed.

As a basic rule, you should never give money to unlock the profits you have made on what you have already invested.

If they can make you wonder if it’s a legitimate request, it’s only because they’re quiet convincing.

Before paying other amounts, consider reading the contractual agreements you have signed: You should pay something only if they have clearly warned you that you would be required to do so.

For unconscious victims of scams, this is your wake-up call: if you get a request to pay money for cryptocurrency tax fees, and you are told that the announcements are all over the news, try to withdraw your money or cryptocurrencies immediately because you are talking to scammers. Do not forget to report them.

Should you be interested in reporting and pressing charges against a trading company you can check our previous article.

If one invests and makes a profit, He/she may have to pay taxes on the profit, but certainly not to the person who has already received his commission for the work done, as specified in the very contract for the provision of services.

The News Regarding Cryptocurrency Taxes

Ever since the news of cryptocurrency taxes has been spread, scammers took advantage of it, relying on the fact that one does not always get beyond reading the headline.

In the newspapers, or on the Internet in general, there has been news recently about taxes on cryptocurrencies relative to two different events: the Italian budget law and the future implementation of European cryptocurrency regulation (MICA).

The news that cryptocurrencies will be subject to taxes remains easily etched in one’s memory. Hence, if someone is investing in cryptocurrencies or planning to do so, if one does not delve deeper one will miss the information of how the taxation will be realized.

Scammers leverage the fact that you read the headline but not the news.

Taxes on Cryptocurrencies in Europe

The Budget Law 2023, represented a turning point for the consideration of Cryptocurrencies in Italy, suggesting specific guidance regarding the tax treatment applicable to them.

For companies, capital gains (the difference between the sale and purchase value of the virtual currency) will be added to the balance sheet profit at the end of the year.

For individuals, the amount of capital gains that exceeds 2,000 euros will have to be included in the tax return at the end of the year and will be taxed at 26%.

Cryptocurrencies must be declared if they are purchased by companies, or if the equivalent value of those held by an individual exceeds €51,000.

Those who hold virtual currency in their wallets without earning a profit are not normally required to pay taxes.

In Germany, onlycompanies that pay a tax rate on income earned through cryptocurrency currently pay taxes on Bitcoin. Individuals residing in the country do not pay taxes on capital gains obtained when selling cryptocurrencies held for more than a year. Cryptocurrencies are exempt from VAT.

In Switzerland, professional traders who buy and sell cryptocurrencies pay a tax on capital gains (actual gain) while non-professional traders do not have to pay taxes on gains obtained through cryptocurrencies.

The Helvetic country also demands taxes from those who engage in mining, a system that allows them to verify transactions and get Bitcoin as a reward.

In France, anyone who makes a profit by selling cryptocurrencies is taxed. This also affects those who engage in mining operations. Those who hold virtual currency in their wallets without making a profit are not required to pay tax.

Non-professionals are subject to a one-time taxation at 30 percent, while professionals are taxed according to income tax regulations.

In Portugal, cryptocurrencies are equated with real currencies, so they do not face special taxation. Only professionals receive taxes on capital gains.

The Hidden Fees in Contracts

People tend to believe that trading is free, only the money invested is at stake, the chances of making a profit are so high and it is worth investing in cryptocurrencies. However, the most dangerous costs are those that are not advertised, or even worse, those that are imposed without title or right.

What is not written in the contract is not lawful.

Wanting to list some of the possible costs, we have tried to explain, for each, how they should be paid:

  1. Commissions: They are charged on each transaction made. Technically they are lawful, if specified in the contract and if they are charged within the terms specified. They are deducted directly from the account, so they are NOT paid separately, with additional payment.
  2. Inactivity fees: These may be specified in the contract and are charged to those who are inactive for long periods. Avoid brokers who use this clause especially if you are a beginner or intend to invest occasionally. They should be withheld from the account. Hence, be careful if they ask you to pay them separately, with additional deposit.
  3. Minimum balance. The terms and conditions may state that a minimum balance must be always kept in the account. Avoid brokers who use this clause especially if you are a newcomer or intend to invest sporadically. You may be required to add solids to the account.
  4. Variable spreads: the width or narrowing of the gap between the buying and selling prices of an asset at a given time. They may simply affect profits, so you do NOT pay for them separately, with additional deposit.
  5. Swaps: costs incurred to maintain a position overnight when the market is closed.
  6. Slippage: occurs when orders placed through an online broker cannot be executed at expected (more favorable) prices due to various intervening factors. They are not paid for separately.
  7. Latency: corresponds to the delay caused by slow internet connection when accessing the platform. This results in delays on the speed of order execution and reduced profit potential. It is not paid separately.
  8. Account blocked by FCA for rollover. Rollover is a process of extending the maturity of a loan, usually for an additional fee. It is done at the customer’s request and the fee is deducted from the account. It is not charged separately.

Try to think of a trading account like a bank account: before you deposit your money, you inquire about the account’s features and holding fees.

Even though you may not be aware of all the details you would never expect the bank to call you to deposit extra money to pay for example commissions. Thus, you should not expect that from a broker as well.

On commissions, however, a separate point should be made. However much they are due, the broker cannot abuse them at all. If you suspect that he has charged exaggerated commissions, ask to see a summary of all your transactions and verify whether the expected spreads have been applied.

The fictitious fees invented by scammers

Scammers often ask for money even from those they have already scammed, using credible excuses such as:

  • Requesting advance payment of the 26% tax: taxes are paid annually and personally. Asking to pay taxes that were not budgeted for at the time of the investment is an abuse.
  • Requesting payment of hypothetical fees budgeted by the bank for unblocking the transaction: In that case, get the name of the bank and verify for yourself that this cannot be a legitimate request.
  • Request for a payment to obtain a withdrawal PIN to unlock and withdraw money: there is no PIN that will unlock money, if you pay in such a circumstance expect future requests for money, but do not expect to get your money back.
  • Requesting payment of a fee to move cryptocurrency or money into your bank account: there is no such fee, as any bank will confirm.
  • Requesting a fee to pay for the work done for you, even if you were completely unaware of it, as they tracked the money you had invested (and lost) and discovered that the scammers had converted it into cryptocurrencies. To recover the cryptocurrencies, or the lavish earnings they produced, you have to open a special account (which has a cost) and pay a fee for the investigation that led to uncovering the scam-a story, as compelling as it, is still false.
  • Request for payment of alleged administrative office fees: check if they are stated in the contract, otherwise they do not exist.
  • Request for payment of percentages tied to earnings: verify if they are stated in the contract, otherwise they are not due.
  • Request for a payment to be made to unblock the account: contract in hand check if they have the right to block your account. If you are facing abuse report it.
  • Request for money to be paid just for owning cryptocurrencies: there is no fee for owning cryptocurrencies.
  • Request for deposits to withdraw money initially invested in Forex but converted without your knowledge to cryptocurrencies. It is suggested to register with a special platform (the most widely used are binance, coinbase and young): do not pay for an unsolicited service, no one can make such transactions without your consent.
  • Request for advance payment to the advisor in order to withdraw a hypothetical profit: strangely enough, this money can never be withheld from the profit. They are NEVER due.
  • Request to cover AML fees to release funds: you do not pay AML to withdraw your money.

The Notice from the Revenue Agency ( Agenzia delle Entrate )

The ploy of demanding payment of taxes is now a widespread practice, but it took a serious matter letters began arriving from the Revenue Agency demanding payment of taxes for online or cryptocurrency trading.

The Revenue Agency, totally uninvolved in such a request, found itself forced to issue a notice warning against false claims of substitute taxes.

The letters were accurate, and the fraudsters themselves scammed people by posing as intermediaries in the cryptocurrency industry and presenting fake documents traceable to the Revenue Agency itself.

The scammers have a terrible habit of going out after people they have already scammed and manage to convince their callers that they are rescuing them from the previous scam that they have already set up.

Beware of those who call you to recover money

Anyone who calls you claiming to be an FCA, Consob official, or tells you he is an investigator, a (fake) lawyer, and tries to talk to you about your investments already made is a scammer.

A professional does not contact you; instead, you’re the one who seek him out.

Someone who knows that you have lost money can have access to that information only if he/she has taken it from you.

If many people report that they have been defrauded by a particular person , investigation will be opened. Once malicious intent is established, accounts and assets of the scammer will be seized with a view to returning them to the victims.

If you have reported, you may be on the list of those who will be entitled to get their money back. In addition to bankruptcy receivers, there are also specific compensation schemes for investors.

For instance, the assets of The Rock Trading were recently placed under seizure, and at the end of the proceedings the seized money will be divided among those who have raised a claim .

Legal action to try to recover your money comes at a cost. If you have invested small amounts, it is not worth relying on a professional, always report what has happened to you to the proper authorities and do not trust anyone who asks you for an additional fee to recover it.

Our attorneys in the Forex Litigation Department are available to provide you with information, advice, and assistance on the subject. Please do not hesitate to contact us.

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Calogero Boccadutri

Calogero Boccadutri is the Managing Partner of Boccadutri International Law Firm. He has trial experience in Forex, Personal Injury and Administrative litigation.

2 responses to “Cryptocurrency Tax Fraud”

  1. Richard K Nebeker says:

    I have money that I can’t get out of Coinbase Wallet. It’s been numerous times and I have been turned away for so many reasons. It just doesn’t matter. Now I am reached a point to get some help.

    • Calogero Boccadutri says:

      Dear Nebeker,

      Thanks for your comment. Our experts will contact you as soon as possible.

      Kind regards,

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