Tax on dividends

Hello community,

I have an accounting question regarding Dividends.

Would there be tax implications on dividends collected in crypto, or only once you have sold those dividends into fiat? Being from the UK there are different Tax bands, trading would be income tax while investments cashed out over a year would go under capital gains tax. So buying BTC and selling a year later would go under the latter. But does the same go for dividends?

For example, staking for different periods effect the “class” the investment is in? 1-11 months stake compared to 12-24 months stake?

Does having a one click function where converting all dividends into a single crypto, lets say BTC, impact this as effectively you have sold and bought, which may be perceived as a re-investment?

Will Nash provide accounting documents like an .exe file, which can be submitted to accountants with a break down of dividends for specific time periods?

Many thanks.

In most common wealth countries, you should be taxed on the FMV of those dividends when received. So if you get paid out in GAS, and the FMV of the GAS received is $100 at the time of distribution, then you would report this as dividend income on your return. Since you received an Asset, this would now form the cost of the asset. If you then sell all that GAS a year later for $200, you should be taxed on only the gain.

Under Canadian rules, your capital gain would then be $100 ($200 FMV upon sale less the $100 cost base which you were already taxed on when the dividends were received), which only half is taxable. So the taxable capital gain would be $50 multiplied by your tax rate to give you the tax payable.

thanks for your response!

it would be hard to track the price of the asset though for a FMV with the volatility. Plus the day that you receive it may be at peak price, say at $200, but when you sell its actually $50.
You would have to liquidate immediately to protect from the risk of paying tax on the $200 and then it being worth a fraction some time later.

Im trying to think of an asset outside crypto where this is comparable to. Where dividends are paid out in shares or assess rather than straight fiat.

Similar structures would be Dividend Reinvestment Plans for some larger companies, but they would be very stable. Your dividends are reinvested to the equity/shares and form a new cost base of the asset.

Depending on the country through, you can have active business losses. So if it does depreciate in value significantly and you sell it, the loss can be used to offset the income associated with it. Really country dependent because they all have different rules for unrealized vs realized gains. The US would be drastically different than the UK/Canada.

That aside, depending on the size of the dividend payouts I will suggest selling some of it to cover the associated tax as a good practice.

if you get taxed lets say 20% on profits, it would be wise to have 20% of your staking set to USDC, this way at the end of the year it’s all ready and waiting. Easy peazy