Imagine you're just starting to explore the world of cryptocurrencies, or perhaps you're already a seasoned expert, and suddenly you're faced with the big question: Do I have to pay taxes on this?

 

Although the term "taxes" may sound intimidating, understanding your tax obligations when dealing with cryptocurrencies is simpler than it seems. Here, we present the essentials so you can feel confident about this topic.

 

To manage this, you can rely on LedgiFi, an application where you can track your cryptocurrency portfolio and always know your balance. It also calculates your gains or losses based on your transactions, helping you plan and file your taxes.

 

Cryptocurrency Classification and Tax Obligations in Chile

First, keep in mind that in Chile, cryptocurrencies are not considered official currency; instead, they are viewed as digital assets. This means that when you generate profits by selling or exchanging them, you are subject to capital gains tax. But don’t worry—this only applies if you sell your cryptos for more than what you originally paid, use them to purchase goods or services, or trade them (swap). Simply holding them does not incur tax obligations.

 

Moving forward, we’ll refer to cryptocurrency Gains or Losses (Income), as the tax itself depends on your cryptocurrency income combined with other income sources, such as salaries, business revenue, or investments. These are all grouped under what is known as Global Complementary Tax, which applies a certain percentage based on your income bracket.

 

When Should You Calculate Your Gains or Losses?

This is straightforward. If you dispose of a cryptocurrency—whether by purchasing a good or service, exchanging it for another cryptocurrency (including swaps), selling it for fiat money, or even using it to pay fees—you must calculate the result of the transaction.

 

This process is technically referred to as alienation. When you alienate a cryptocurrency, it’s time to calculate whether you’ve gained or lost value.

 

Some examples of this include:

• Buying a coffee.
• Paying a bill.
• Swapping one cryptocurrency for another.
• Selling it for fiat currency like the Chilean peso or the U.S. dollar.
• Using it to pay service fees.

 

Who Should Be Concerned About This?

If you have ever done anything with cryptocurrencies, this matter is relevant to you, even if you’ve sold all your holdings, closed your accounts, or decided to distance yourself from them. Moreover, for those actively participating in the market, understanding income tax is useful, as profits can be considered taxable income.

 

Maintaining a detailed record of your transactions is crucial. A clear history—from sales and exchanges to any conversions into pesos or other currencies—will make tax filing much easier and protect you in case the Internal Revenue Service (SII) requests proof of your activities. Think of this as a way to secure your gains and avoid surprises.

 

What Happens If You Don’t Declare?

Many people mistakenly believe that because cryptocurrencies are decentralized, any profit they generate from transactions is not taxable or doesn’t need to be declared. This is incorrect, as any movement in your assets must be declared, especially if it results in an increase in wealth.

 

In Chile, failing to pay taxes can lead to various consequences depending on the severity of the infraction and the specific laws violated. These may include fines, interest on overdue payments, asset seizures, and even legal action.

 

Therefore, it’s necessary to declare any income or gains derived from cryptocurrencies. Tax evasion penalties can be severe and may even include prison time 🚨.

 

You can find more details about these penalties in Article 59 bis of the Tax Code.

 

How Are Cryptocurrency Gains or Losses Calculated?

To calculate, you need to review each transaction and determine its Acquisition Cost. Then, compare this with the Profit to see if you gained or lost value.

 

Simply put:
Gain or Loss = Profit - Acquisition Cost

 

• The Acquisition Cost is what the cryptocurrency you’re alienating cost you. Its calculation depends on what are known as Valuation or Inventory Methods and must be adjusted for inflation (IPC) in Chile.
• The Profit is what you received from selling your cryptocurrency, whether in cash, another cryptocurrency, or goods/services.

 

Valuation Methods

If you bought different quantities of cryptocurrency at different times and sold only a portion, you might wonder: Should you sell the first one you bought? The last? Or a weighted average? These are the Valuation or Inventory Methods: FIFO, LIFO, HIFO, and WAC.

 

• FIFO: Sell the first cryptocurrency you bought.
• LIFO: Sell the last cryptocurrency you bought.
• HIFO: Sell the most expensive cryptocurrency you bought.
• WAC (Weighted Average Cost): Use the average cost of your purchases.

 

Which method to use depends on your decision and what the law permits. However, the most conservative method is FIFO.

 

For individuals, you can decide which lots you’re selling, allowing you to use any of the described methods or others. Once you declare a method, however, it’s recommended not to change it.

 

Inflation Adjustment (IPC)

To accurately calculate your gains or losses, you must apply inflation adjustments to the acquisition cost and the resulting gain or loss. Luckily, LedgiFi automates this process.

 

For example, if you used the FIFO method and purchased 1 BTC at different times in 2020 and then sold 1.5 BTC later that year, you would need to adjust the acquisition costs of each purchase using the IPC and determine the updated costs for the portion sold.

 

Simplifying Tax Management with LedgiFi

LedgiFi simplifies the entire process by allowing you to sync and add your transactions from various platforms, organize and manage your cryptocurrency portfolio in one place, and stay on top of your tax obligations. You’ll always know your gains or losses for accurate tax declarations.

 

For more information, read our complete guide at learn.ledgifi.com/chile, and sign up for LedgiFi to stay updated and avoid missing any of our content. Visit LedgiFi!

 

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