Have you been investing in crypto? Or are you planning to invest soon? Regardless of your category, you will have to report transactions to the HMRC and pay your taxes. But before you can do that, you need to be aware of the UK tax infrastructure and understand the nuances of crypto taxation in the UK.

However, it might seem intimidating. After all, where should one start? 

Don’t worry we have the answer. You should start here with this ultimate UK crypto tax guide. We have curated the most comprehensive crypto tax guide for UK residents, covering all aspects of crypto taxation including capital gains tax UK, income tax UK, and NFT taxes, in a very digestible manner.

So let’s get started…

Latest Updates/Guidelines

26/06/23- Updated to accommodate ICO, Gifts and Donations taxes

26/06/23- Updated to accommodate DAO taxes

How is Crypto taxed in the UK?

In the United Kingdom, there is no specific tax dedicated to cryptocurrencies. Instead, the tax treatment depends on the nature of the transactions involved. If the activity is classified as generating income, it is subject to Income Tax. If it is deemed to generate a gain, it falls under Capital Gains Tax.

For income-generating activities, such as receiving a salary in crypto or earning mining and staking rewards from DeFi or native blockchains, income tax is applicable. Income tax rates in the UK range from 0% to 45%, depending on the individual's tax bracket.

For gains made from crypto transactions, if the total capital gains in a tax year are below £50,270, a Capital Gains Tax of 10% is applied. However, if the gains exceed this threshold, a 20% Capital Gains Tax is levied on the entire gain.

Consider the following transactions,

2022/01/13 - Oliver buys 2 BTC

2022/01/27- Oliver sells 1 BTC (Assuming a gain of €8,000)

2022/03/23- Oliver buys 7 ETH

2022/05/12- Oliver sells 6 ETH (Assuming a gain of €15,000)

2022/06/15- Oliver receives 6.25 BTC as mining rewards (Assuming 1 BTC to be €25,000)

2022/08/17- Oliver receives 12 ETH as compensation(Assuming 1 ETH to be €2,500)

As evident from the above ledger of transactions, Oliver made two disposals.

‍

1st Disposal

1 BTC sold 

Gain incurred from the disposal = €8,000

‍

2nd Disposal

6 ETH sold

Gain incurred from the disposal = €15,000

Collective gain from both disposals = €15,000 + €8,000 = €23,000

This is Oliver’s taxable base, and CGT will be levied on it.

Moreover, Oliver received 6.25 BTC as mining rewards and 12 ETH as compensation. These transactions constitute an income. So let’s calculate the total income made by Oliver.

Value of mining rewards = €25,000*6.25 = €1,56,250

Value of ETH tokens received as compensation = €2,500*12 = €30,000

Total income = €1,56,250 + €30,000 = €1,86,250

This is Oliver’s taxable income base.

Crypto Gains Tax

Since crypto is considered to be a capital asset, selling, swapping, spending, or gifting crypto results in capital gain and attracts a capital gains tax.

Note that HMRC doesn't have a long-term or short-term capital gains tax rate. The segregation is made based on income level. 

The HMRC provides a capital gains tax allowance of £12,570 to each individual, meaning that you are only liable for tax obligations if your gain exceeds this allowance limit. If you have disposed of a crypto asset and made a profit of less than £12,570, you can offset the entire gain against the allowance limit.

Please note that the allowance limit mentioned is applicable for the tax year 2021-2022 and will be reduced by 50% starting from April 2023.

Furthermore, any losses incurred from the disposal of a crypto asset can be offset against the gain, reducing your taxable income. For example, if your gain is £42,570, after deducting the allowance amount, your taxable income will be reduced to £30,000. To further decrease your taxable income, you can close underperforming positions at a loss. Let's assume you close positions worth £20,000, resulting in a taxable income of £10,000.

Crypto Capital Gains Tax Rates UK

The capital gains tax rates are pretty straightforward in the UK, the tax slabs are segregated based on income levels. Below are the tax slabs according to which your capital gains will be taxed.

If your total gain is less than £50,270, you will be taxed at 10%. Otherwise, a 20% tax is levied on your income.

How to Calculate Crypto Gains and Losses

Calculating your crypto gain or loss is a simple process. Start by determining the cost basis of the asset, which includes the acquisition cost of the asset plus any transaction or gas fees paid during the acquisition.

The capital gain or loss is then calculated as the difference between the cost basis and the amount received upon disposal. If the difference is positive (disposal amount exceeds the cost basis), it is considered a capital gain and is subject to capital gains tax. Conversely, if the difference is negative, you owe zero taxes.

However, you should track all your losses because you can offset your losses against your gains and reduce your tax bill.

Consider the following transactions:

2022/01/13 - Jaimie bought 1 BTC for £21,000

2022/03/15 - Jaimie bought 4 ETH for £2,000 each

2022/04/19 - Jaimie bought 2 BTC for £23,000 each

2022/05/20 - Jaimie sold 1 BTC for £25,000

2022/07/21 - Jaimie sold 1 ETH for £2,800

As evident from the above ledger of transactions, Jaimie made 2 disposals

‍

1st Disposal

1 BTC sold for £25,000

Now since BTC tokens were acquired on two separate instances at different prices, we need to use a specialised accounting method for cost basis calculations. There are three tax accounting methods as specified by the tax authorities in the UK, the Same Day rule, the Bread and Breakfast rule, and the Section 104 method. You have to apply one of these methods for cost-basis calculations depending on the nature of your transactions.

Jaimie's transactions fall under the application of the Section 104 method since the disposals were not made within the same day or within a 30-day period. The Section 104 method is akin to the Average Cost Basis (ACB) method, where the average acquisition cost of the asset is used as the cost basis.

Cost Basis for BTC = £23,000 + £23,000 + £21,000/3 = £22,333 (approx.)

Disposal Amount = £25,000

Capital gain = Disposal Amount - Cost Basis = £25,000 - £22,333 = £2,667

‍

2nd Disposal

1 ETH sold for £2,800

Jaimie acquired ETH tokens once. Therefore, this is a fairly straightforward calculation.

Cost Basis = £2,000

Disposal Amount = £2,800

Capital Gain = £2,800 - £2,000 = £800

Collective Gain from both disposals = £2,667 + £800 = £3,467

Crypto Losses

Investing in cryptocurrency, like any other investment, may result in loss. If you sell a capital asset and incur a capital loss, you are not required to pay capital taxes on your loss.

Maintaining accurate records of your losses and reporting them to the HMRC is essential, as losses can be utilised to reduce your taxable capital gains. There is no limit to the amount of losses you can use to offset gains, which has the potential to bring your taxable gains down to the annual tax-free allowance of £12,300, thus exempting you from paying taxes on your gains.

Importantly, you can carry forward your losses indefinitely until they have been fully utilised. Therefore, it is crucial to diligently track and report all your losses to the HMRC in order to maximise their benefits.

Lost or Stolen Crypto

Although capital losses can be offset against gains, it's important to note that lost or stolen crypto cannot be directly written off against your gains. In certain circumstances, you may be able to make a negligible value claim for the lost crypto, which can later be converted into a capital loss.

Lost crypto is not recognized as a capital loss because the assets still technically remain under your ownership, even if you have lost access due to a missing private key. On the other hand, stolen crypto is not considered a disposal of assets by the HMRC, and therefore cannot be offset against capital gains.

Crypto Tax Breaks UK

There are three primary tax breaks offered to citizens in the UK:

1. Income tax Allowance: For the 2021-22 tax year, the first £12,570 is tax-free. Note that you don’t get a personal income tax allowance if your income is more than £125,140 in a year.

2. Capital Gains Allowance: Every UK resident enjoys a Capital Gains Tax-Free Allowance of £12,300. After April 2023, this allowance will be reduced to £6,000, and in April 2024 it will further decrease to £3,000.

3. Trading and Property Allowance: The Trading and Property Allowance allows for £1,000 of income from either trading or property to be tax-free. If you receive income from both, you can enjoy up to £2,000 of tax exemption.

Crypto Cost Basis Method UK

Calculating the cost basis for a single token or currency is a simple task, however, people mostly trade and invest in multiple assets throughout a tax year, which makes cost-basis calculations a bit complicated. 

In the UK, there are three possible cost basis methods you can use and you need to work through them in order of which applies to your assets:

1. Same-Day Rule: When buying and selling coins, if you complete the transaction on the same day, you must use the cost basis of that day to determine your gains or losses. If you sell a higher amount than you purchased, proceed to the next guideline.

2. Bread and Breakfast Rule: If you sell and then buy back the same coins/tokens within 30 days, you will use the cost basis of the newly purchased coins/tokens to calculate any gains or losses. If you sell a greater amount than what you bought in this time frame, you'll follow the final rule.

3. Section 104 Method: If neither of the two applies to your crypto transactions, you must use the cost basis method when determining your cryptocurrency taxes. This method operates similarly to the ACB (Average Cost Basis) by calculating an average cost basis for a group of assets by dividing the total amount paid for all assets by the total number of coins/tokens held.

Consider the following transactions:

2022/01/23 - Emily bought 1 BTC for £21,000 and sold it 6 hours later for £21,500

Now since the disposal was made within 24 hours, the Same-Day rule applies.

So the cost basis from the same day will be used for cost basis calculations:

Capital Gain = £21,500 - £21,000 = £500

2022/02/23 - Emily bought 2 ETH for £2,000 each

2022/03/15 - Emily sold 2 ETH for £2,500 each

2022/03/21 - Emily bought 2 ETH for £2,400

Since the tokens were repurchased within 30 days of the disposal, the Bread and breakfast rule applies which states that the cost basis is equal to the acquisition price of the newly purchased tokens.

Cost Basis = £2,400

Disposal Amount = £2,500

Capital Gain(for 1 ETH) = £2,500 - £2,400 = £100

Gain from 2 ETH disposals = 2*£100 = £200

The Section 104 Rule has been discussed in detail in the section titled “How to Calculate Crypto Gains and Losses”.

Crypto Income Tax UK

Cryptocurrency transactions classified as income may be subject to Income Tax and National Insurance contributions, taxed at your regular tax rate. There are various instances where crypto transactions can be viewed as income by the HMRC and taxed according to income tax laws.

Your gains will be considered an income if they arise from the following sources:

1. Received as compensation for a product or a service
2. Received as a staking reward from a DeFi protocol 
3. Received as a recurring income in the form of interest/reward from the borrower
4. Received as a mining reward
5. Received via airdrops

These transactions are taxed according to the regular income tax slabs. HMRC has finally issued clear guidelines for the taxation of DeFi transactions. Since staking and lending involve recurring payments in the form of interest or reward from the DeFi protocol, they can be considered as income and therefore attract income tax. Although DeFi transactions may also be taxed under capital gains tax laws depending on the nature of transactions. 

The following cases shall be considered for an income to be considered taxable in case of DeFi transactions.

1. If the return is predetermined
2. If the return originates from a borrower or a DeFi platform
3. If the return is periodic as against a one-time payment

The HMRC is yet to release any guidance on income from play-2-earn, learn-2-earn, and watch-2-earn Web3 platforms that offer a reward for engaging with their platform. Some examples would be:

• Tokens earned through Brave Browser for watching ads
• Tokens earned on CoinMarketCap learning or Coinbase learning center
• Rewards earned on Odysee by watching videos

Crypto Income Tax Rates UK

To determine the tax owed on crypto income, familiarise yourself with the crypto Income Tax rates, which align with the Income Tax Bands for other forms of income.

Notice that taxes in the UK are progressive, which means that not all your income is taxed at a flat rate, but only the excess amount. 

Let’s understand this through an example:

Suppose you make £20,000, the first £12,570 will be taxed at 0% as it falls under the first slab and the remaining £7,430 will be taxed at a tax rate of 20% as it falls under the second slab.

How to Calculate Crypto Income

To accurately calculate your crypto income, the most crucial requirement is to have a comprehensive list of cost basis for each token in your crypto portfolio, as well as a record of all the disposals you have made during the tax year, including the corresponding disposal prices. These details will form the foundation for accurately determining your taxable income from crypto transactions.

Determining your cryptocurrency gains is simple if you have infrequent small profits, but tracking and calculating them from recurring sources such as staking rewards or airdrop income from multiple assets can become complicated. Fortunately, Kryptos can quickly manage all these transactions for you and calculate your total cryptocurrency income in minutes.

Tax-Free Crypto Transactions

In the UK, some tax-free crypto transactions include:

• Personal gifts to individuals with a value of less than £250.

• Transactions that are made in a personal capacity and not as part of a trade or business.

• Transfers of crypto assets between an individual's wallets or exchanges.

• Donations of crypto assets to charities registered with the Charity Commission for England and Wales.

• Crypto assets are received as airdrops, provided they are not part of a trade or business.

Taxed Crypto Transactions

Crypto transactions that are taxable in the UK include:

• Disposal of crypto assets for a profit, where the profit is considered as taxable capital gains.

• Crypto assets that are received as income, such as mining rewards or staking rewards, where the income is considered taxable income.

• Trading of crypto assets as part of a trade or business, where the profits are considered taxable business income.

• Sale of goods or services for crypto assets, where the profits are considered taxable business income.

Tax on Mining Crypto UK

Depending upon the size, activity, and objective of the miner, crypto mining is taxed in two different ways. If an individual or group of individuals perform mining operations in their free time just to make a couple of extra bucks on the side, then the event is perceived as habitual mining by the HMRC, and the tokens received are subjected to income tax. These tokens are also subjected to capital gains tax upon disposal.

For mining companies, the taxation model is different. All tokens obtained through mining are included in the company's trading profits and are subjected to an income tax.

Tax on Staking Crypto

According to the HMRC guidelines on Staking rewards, staking rewards can either be viewed as taxable trade subject to capital gains tax, or they may be viewed as miscellaneous income attracting regular income tax based on the consensus you are staking on and how the rewards are distributed. 

Whether staking rewards are viewed as taxable trade depends on the following variables:

• Degree of activity
• Organisation
• Risk
• Commerciality

If it’s not viewed as a trade, the value of the tokens at the point of receipt in pound sterling will be taxed as income. Note that if you choose to hold these tokens and dispose of them later, you will have to pay capital gains tax on any gains you make.

Crypto Margin Trading, Futures and CFDs

In the UK, profits from trading cryptocurrencies, including margin trading, futures, and CFDs, are subject to capital gains tax. If the profits are above the annual tax-free allowance (currently £12,300), the excess must be reported and taxed at the individual's marginal tax rate. Additionally, value-added tax (VAT) may also apply to cryptocurrency transactions in the UK.

Crypto Gifts and Donation Taxes

Gifting crypto to anyone other than your spouse or family in the UK constitutes a taxable event and attracts capital gain tax. However, crypto donations to a registered charity are tax-free.

When gifting cryptocurrency to someone other than your spouse or civil partner, it is necessary to determine the market value (in pound sterling) of the crypto at the time of the gift. This value will be treated as sales proceeds for Capital Gains Tax purposes.

It is crucial to note that if income tax has already been levied on the value of the gifted tokens, section 37 of the Taxation of the Capital Gains Tax Act 1992 will come into effect. Essentially, this means that the "sales proceeds" will be adjusted by the amount already subject to income tax and subsequently subjected to CGT.

When it comes to gifting crypto to your spouse or civil partner, it’s completely tax-free and there’s no limit on how many assets you can give them in a tax year.

Donating cryptocurrency to a registered charity in the UK is exempt from tax.

When an individual donates crypto to a charity, they qualify for Income tax relief on the donated amount. Additionally, they can enjoy an exemption from Capital Gains Tax, with two exceptions:

1. If the individual sells the crypto assets to the charity at a price higher than the acquisition cost, they will be liable to pay CGT on the difference between the selling price (instead of the market price) and the acquisition cost.

2. If they make a tainted donation—this refers to a scenario where an individual enters into an arrangement with a charity to receive some form of kickback or financial advantage.

NFT Taxes UK

NFT taxes are still a grey area in the UK crypto tax infrastructure because the HMRC doesn’t consider NFT to be the same asset class as cryptocurrencies and therefore segregates them from the guidelines governing their taxation.

Although no new legislation has been passed to accommodate the taxation of NFTs in the UK, here’s how some of the common NFT transactions are taxed in the UK:

• Buying an NFT with crypto assets- attracts capital gains tax
• Buying an NFT with fiat currency- attracts zero tax
• Disposing of an NFT for fiat or crypto- attracts capital gains tax
• Swapping one NFT for another- attracts capital gains tax
• Minting an NFT from a blockchain- attracts zero tax
• Gifting NFTs- attracts capital gains tax unless(unless it’s your spouse or civil partner)

ICO Taxes

ICOs are special events that allow investors to acquire tokens from an unreleased project in exchange for mainstream tokens like BTC and ETH. The HMRC is yet to release guidelines on how tokens received from ICOs are viewed from a tax perspective. However, since most European countries treat ICOs as simple crypto-to-crypto trades, we can assume that income from ICOs will be viewed as simple crypto-to-crypto trade and will be subject to CGT.

However, we do suggest seeking the advice of an expert tax accountant to make sure you don’t end up in legal trouble due to discrepancies in your tax report.

DAO Taxes

DAOs are member-owned communities with a shared vision. All the decisions in a DAO are made by the members in the absence of central leadership. DAOs are new-age institutions that aim to democratise decision-making and allow people to have a say in decisions that directly affect them. DAOs are often called the soul of Web3 and enable members to earn rewards in multiple ways. DAO contributors are rewarded for their contributions to the organization, similar to how centralized organisations pay salaries to their employees. They also pay out bounties for one-time projects and redistribute any profits generated through operations.

The HMRC is yet to release specific guidance on how income from DAOs is taxed. We are constantly on the lookout for new guidelines on the subject and all relevant details will be added here as soon they hit our radar.

DeFi Crypto Taxes UK

The HMRC recently announced that DeFi transactions will be taxed depending on the nature of the transactions. If the DeFi transaction results in a capital gain, it is subject to capital gains tax. And if a person or institution appears to be generating income from DeFi protocols, they must pay income tax on that income.

DeFi transactions such as adding/removing liquidity, staking assets, and lump sum rewards received from staking and lending in most instances are considered disposal of assets and attract capital gains tax. 

Returns from DeFi protocols may be considered an income when:

• The return is predetermined
• The return originates from a borrower or a DeFi protocol
• If the return is recurring in nature

How are airdrops and forks taxed in the UK?

Forks 

There are two ways a blockchain can split. One is through a soft fork and another is through a hard fork. According to the HMRC guidelines, a soft fork is a non-taxable event, because it ends with no new tokens. 

Hard Forks, on the other hand, results in the distribution of a fixed number of new tokens to each user in exchange for their existing tokens on the blockchain. Although these new tokens aren't considered income and don't attract income tax, they are assigned a cost basis, or acquisition cost, based on the value of the original tokens. If the user later sells these new tokens, they may incur a capital gains tax liability.

Airdrops 

According to HMRC, airdrops attract income tax(in most cases). If the tokens you receive via the airdrop are the result of an action taken by you, then the tokens received will be counted as income and will attract income tax. Note that your actions may be as simple as promoting the airdrop in your immediate network through social media or having interacted with the blockchain in the past.

When to Report Crypto Transactions in the UK

In the UK, individuals are required to report their cryptocurrency gains and report them as part of their taxable income. This should be done annually as part of the individual's Self-Assessment tax return. The deadline for filing a Self-Assessment tax return for the 2021-2022 tax year is 31st January 2023.

How to File Crypto Taxes in the UK

You file your crypto taxes when submitting your self-assessment tax return to the HMRC. You can report your crypto gains and losses on form SA-100 and crypto gains summary SA-108.

You can report your crypto income in box 17 of your self-assessment tax return(Form SA-100).

What Crypto Records Will the HMRC Want?

As a crypto investor in the UK, it's essential to maintain accurate records to ensure compliance with the HM Revenue and Customs (HMRC) regulations. Here are some records you should consider maintaining:

• Detailed report of all sales and purchases, including dates, transaction amounts, and values in British pounds at the time of the transaction. 
• A record of your cryptocurrency wallet addresses, both for personal wallets and exchange wallets.
• Copies of your account statements from cryptocurrency exchanges, including details of deposits, withdrawals, trades, and any fees incurred. 
• If you are involved in cryptocurrency mining, maintain records of the expenses related to mining equipment, electricity costs, and any income from mining activities.
• A record of any transfers between wallets or exchanges. This includes details such as dates, wallet addresses, and transaction amounts. 
• In addition to transaction-specific information, it's also a good practice to keep personal records, such as email correspondence, contracts, or invoices related to cryptocurrency investments. 

How to File Crypto Taxes Using Kryptos?

Now that you’re aware of how your crypto transactions are taxed and what forms you need to fill out to complete your tax report, here’s a step-wise breakdown of how Kryptos can make this task easier for you:

1. Visit kryptos.io and sign up using your email or Google/Apple Account
2. Choose your country, currency, time zone, and accounting method 
3. Import all your transactions from wallets and crypto exchanges
4. Choose your preferred report and click on generate report option on the left side of your screen and let Kryptos do all the accounting.
5. Once your Tax report is ready, you can download it in PDF format.

If you still need clarification regarding the integrations or generating your tax reports, you refer to our video guide here.

How to avoid crypto taxes in the UK

Tax evasion is a punishable offence in the UK and we advise you to diligently report all your crypto transactions to the HMRC and pay your taxes on time to avoid getting into legal trouble. 

However, there are ways you can legally and strategically reduce your crypto taxes. So let’s look at some of these ways:

• Use a crypto tax calculator to make sure all your losses are accounted for
• Take advantage of tax-free thresholds(capital gains tax-free allowance, tax-free allowance)
• Invest some of your crypto assets into a pension fund.
• Donate your crypto 
• Gift crypto to your spouse or civil partner
• Invest in an opportunity-zone fund.
• Use tax-loss harvesting

FAQs

1. Do you pay tax when spending crypto in the UK?

Spending your cryptocurrency incurs Capital Gains Tax as you are getting rid of a valuable asset. You must determine your capital gain or loss by comparing the fair market value of your crypto on the day of spending to its cost basis. If the value of your asset has risen since you obtained it, you owe Capital Gains Tax on the resulting profit. On the other hand, if the value has fallen, you have a capital loss that can balance out any gains.

2. What is the deadline for reporting crypto taxes to HMRC?

The deadline for reporting crypto taxes to HMRC in the UK is 31st January following the end of the tax year.

3. Is crypto taxable in the UK?

Yes, crypto transactions are taxable in the UK according to the HMRC guidelines. Depending on the nature of the transactions you’re involved in, your gains may be subjected to capital gains or income tax. 

4. How is Crypto Taxed in the UK?

There are no dedicated tax laws for crypto transactions in the UK. Instead, the HMRC has issued guidelines to accommodate crypto taxation within the existing tax laws. Crypto transactions are taxed based on the nature of specific transactions. If a person appears to be earning an income in the form of crypto, he/she is taxed according to income tax laws. If a person seems to be making a capital gain with the disposal of a crypto asset, he/she is taxed according to capital gains tax laws.

It’s important to note that the HMRC doesn’t consider crypto as a currency or a security, but as a capital asset, which automatically aligns its taxation with the capital asset taxation laws. However, crypto transactions can be complicated, especially those involving DeFi, that’s one of the reasons why crypto taxation is multi-layered.

5. Is Crypto legal in the UK?

Yes, cryptocurrency is legal in the United Kingdom. People are allowed to buy, sell, and hold cryptocurrencies like Bitcoin, Ethereum, and others. The UK government has stated that it intends to regulate cryptocurrencies to prevent their use in illegal activities, such as money laundering and financing of terrorism. The Financial Conduct Authority (FCA) has issued guidance on the regulation of crypto assets, including initial coin offerings (ICOs) and exchanges.

‍

All content on Kryptos serves general informational purposes only. It's not intended to replace any professional advice from licensed accountants, attorneys, or certified financial and tax professionals. The information is completed to the best of our knowledge and we at Kryptos do not claim either correctness or accuracy of the same. Before taking any tax position / stance, you should always consider seeking independent legal, financial, taxation or other advice from the professionals. Kryptos is not liable for any loss caused from the use of, or by placing reliance on, the information on this website. Kryptos disclaims any responsibility for the accuracy or adequacy of any positions taken by you in your tax returns. Thank you for being part of our community, and we're excited to continue guiding you on your crypto journey!

Updated upto 21/03/2024 to accommodate ICO, DAO, Gifts and Donation Taxes

Tax authorities in the USA consider crypto to be a form of property not a currency according to Notice 2014-21, and any transactions made using crypto assets entails tax liabilities. Depending on the nature of your transactions, you’ll either pay income tax or capital gains tax in the USA. Crypto assets held for less than a year attract short-term capital gains tax with tax rates ranging between 10-37%, while those held for over a year attract long-term capital gains tax which is either 15% or 20% depending on the value of your gains.

The following transactions are considered taxable by the tax authorities-

• Selling cryptocurrency for fiat currency
• Trading one cryptocurrency for another
• Using cryptocurrency to purchase goods or services
• Earning cryptocurrency as income
• Receiving cryptocurrency through mining or staking activities
• Giving cryptocurrency as a gift or donation (subject to gift tax rules)
• Inheriting cryptocurrency (subject to state tax rules)

If you’re involved in any of these transactions, you must report them to the IRS and file your taxes by April 15, 2024. This guide covers all the different types of crypto transactions that entail tax liabilities such as mining, staking, or trading crypto assets. It also answers some crucial questions like “How to calculate my income or capital gains?”,  “Are there any tax-free crypto transactions?”, and “How can I pay less taxes on my crypto gains/income?” to help resolve all your crypto-tax related queries.

‍

How is Crypto Taxed in the USA?

‍

Crypto transactions broadly fall into two categories in the USA, the first one attracts income tax while the other attracts capital gains tax. Transactions where crypto assets are received as a result of provisioning a service or as interest usually attract income tax, while those where crypto assets are acquired and then sold on a later date for a profit attract capital gains tax. 

‍

Capital Gains Tax

There’s both short-term and long-term capital gains tax in the US, so if you’re selling your assets within less than a year of acquisition then the transaction would attract short-term capital gains tax, and if you’ve held it for over a year then it would attract long-term capital gains tax.

Note that if your gains are less than $44,625 (for the 2023 tax year), you don’t have to pay any long-term capital gains tax.

Example:

Consider the following transactions:

01/13/2023 - Jack bought 2 BTC

02/15/2023 - Jack bought 2 ETH tokens

04/16/2023 - Jack sold 1 BTC

06/04/2023 - Jack sold 2 ETH

01/16/2023 - Jack sold 1 BTC

As evident from the above ledger of transactions, three disposals were made.

Out of the three disposals, two were short-term disposals made within a year, and one was long-term disposal.

1st Disposal

1 BTC sold on 04/16/2023

Let’s assume Jack incurred a capital gain of $8,000 on this transaction, for the sake of simplicity

2nd Disposal

2 ETH sold on 06/04/2023

Let’s assume Jack incurred a capital gain of $2,000.

Collective Gain from both disposals =  $8,000 + $2,000 = $10,000

So the above amount will be subjected to short-term capital gains tax.

3rd Disposal

1 BTC sold on 01/16/2023

Let’s assume Jack made a capital gain of $14,000 on this transaction.

But since the disposal was made after holding the asset for over a year, it comes under long-term capital gain.

But since the gain is less than $44,625, Jack owes no long-term capital tax to the IRS.

Listed below are the tax rates applicable on both short-term and long-term capital gains transactions.

Short-Term Capital Gains Tax Rate

These tax rates are for the 2023 tax year, to be filed in 2024

Looking forward to the next financial year? Here is the chart for short-term capital gain tax brackets for the 2024 tax year, to be filed in 2025.

Long-Term Capital Gains Tax Rate

You can refer to the long-term Capital Gains Tax rates for the 2023 tax year (to be filled in 2024) listed below:

‍

Now, here is the chart for tax brackets for the 2024 tax year, to be filed in 2025.

Crypto Income Tax

There are many ways you can earn crypto income and some of the most common ones include-

• Receiving crypto as airdrops
• Getting paid in crypto in exchange for a product or a service
• Mining crypto as a hobby
• Hard forks
• Referral programs
• Staking rewards

Moreover, any income derived from staking, lending, or liquidity farming on Defi protocols or engaging with Play2Earn platforms is also categorised as income and hence subject to the regular income tax rules. 

Income Tax Rates

Following are the income tax rates in the USA for the 2023 tax year.

Note that any attempts you make to underreport your assets and evade some taxes may end up severe penalties as the IRS can track crypto transactions through the following avenues-

• KYC requirements in the US mandate crypto exchanges to share customer data with authorities
• Exchanges track user wallets, bank transactions and report them to the IRS
• All major exchanges send Form 1099 to the IRS

Classification of Crypto for Tax Purposes

Back in 2014, the IRS issued Notice 2014-21 which states that crypto assets are to be treated as ‘property’ from a tax perspective. The IRS defines cryptocurrency as-

“...a digital representation of value that functions as a medium of exchange, a unit of account, and a store of value other than a representation of the United States dollar or a foreign currency.”

Therefore, any transactions involving the purchase and sale of such assets would be capital in nature and hence attract capital gains tax. Moreover, these assets are taxable as income when received as compensation for a product or service, or as interest.

How to Calculate Crypto Income in the USA?

Calculating income from crypto transactions is fairly straightforward, the taxable value of crypto assets received as income is simply their fair market value on receipt. The real problem lies in calculating capital gains. Since most investors buy multiple assets of the same kind, they usually end up in a stir when it’s time to calculate the capital gains upon disposal. That’s exactly why one must rely on dedicated accounting methods as specified by the tax authorities for capital gains calculations.

The IRS permits the use of three accounting methods namely FIFO, HIFO, and LIFO. Let’s discuss them in a bit more detail.

FIFO

FIFO or First-In-First-Out is one of the most commonly used accounting methods. It states that the first asset you buy is the first one you sell.

LIFO

LIFO or Last-In-First-Out states that the last asset you buy is the first one you sell.

HIFO

HIFO or Highest-In-First-Out simply considers the highest acquisition price of an asset to be the cost basis.

Here’s an example to better understand capital gains calculations.

Consider the following transactions:

01/14/2023 - Mark buys 2 BTC for $20,000 each

03/16/2023 - Mark buys 1 BTC for $21,000

04/05/2023 - Mark buys 10 ETH for $2,200 each

04/28/2023 - Mark buys 2 ETH for $3,000 each

05/06/2023 - Mark sells 2 BTC for $34,000 each

07/16/2023 - Mark sells 1 BTC for $35,000

08/18/2023 - Mark sells 8 ETH for $3,400 each

As evident from the above ledger of transactions, Mark made 3 disposals.

Let’s look at each transaction separately and calculate the gains/loss associated with them.

1st Disposal

2 BTC sold for $34,000 each

Now since BTC tokens were acquired on two different dates for different prices, we need to figure out which one was sold by Jack, and we need to use a specialised accounting method as suggested by the IRS.

We will be using FIFO for these calculations.

The FIFO accounting method assumes that the first asset you buy is the first one you sell.

So the BTC tokens sold were the ones acquired on 01/14/2023 for $20,000 each

Cost Basis = $20,000

Disposal Amount = $34,000

Capital Gain/Loss = Disposal Amount - Cost Basis = $34,000 - $20,000 = $14,000(For 1 BTC)

Gain from 2 BTC = 2*14,000 = $28,000

2nd Disposal

1 BTC sold for $34,000

This token was acquired on 03/16/2023 for $21,000

Cost Basis = $21,000

Disposal Amount = $34,000

Capital Gain/Loss = $34,000 - $21,000 = $13,000

3rd Disposal

8 ETH sold for $3,400 each

Now using the FIFO accounting method, these tokens belong to the same group of tokens acquired on 04/05/2023 for $2,200 each

Cost Basis = $2,200

Disposal Amount = $3,400

Capital Gain/Loss = $3,400 - $2,200 = $1,200(from 1 ETH)

Gain from 8 ETH tokens = 8* 1,200 = $9,600

Collective Gain from all 3 disposals = $28,000 + $13,000 + $9,600 = $50,600

This is your taxable base and capital gains tax will be levied on it.

Crypto Tax Exemptions in the USA

While the tax regime in the US is considered to be a little rough by crypto investors and traders, there are some tax-free allowances offered by the IRS that can help you reduce your tax bill significantly:

Although investors consider the IRS to be one of the thorough and austere tax authorities in terms of crypto tax regulations, it does offer some tax exemptions for investors to lower their tax bill.

1. Capital Gains Tax-Free Allowance: US citizens are allowed a capital gains tax-free allowance. In 2023, if your taxable income is $44,625 or less for single filers or $89,250 or less for married couples filing jointly, you could potentially be eligible to benefit from a 0% long-term capital gains rate.

2. Gifting Crypto: US citizens are also offered an annual gift tax exclusion which allows every citizen to give up to $17,000 worth of crypto assets to anyone and the transaction is considered tax-free.

3. Long-Term Capital Gains Tax Rate: By holding onto your crypto assets for over a year, you can take advantage of a reduced long-term capital gains tax rate ranging between 0 and 20%.

Treatment of Crypto Losses

Investors were allowed to deduct losses they might’ve made due to theft or fraud before the Tax Cuts and Jobs Act was passed. This legislation states that investors can no longer use lost or stolen assets as deductible expenses. So any losses you might’ve made due to scams, chain hacks, phishing attacks, or by losing the private keys to the wallet are now useless.

But here’s the caveat, any losses incurred in or before 2017 are tax deductible if you have relevant documents to prove ownership and theft of these assets.

If you own tokens that have been delisted from exchanges due to regulatory changes and guidelines, you can dispose of these assets to generate fictitious losses and deduct these losses to lower your tax bill. You can do that by selling these tokens at a centralised or decentralised exchange, swapping them for some other token, or by simply burning them.

Taxation of Specific Crypto Activities

Now that we have a good grip on how crypto taxes work and how to calculate them. Let’s look at how specific crypto transactions are taxed.

Mining Taxes

Crypto assets received as a result of mining are taxed as income based on their fair market value at the time of receipt. Furthermore, if you decide to sell these assets for a higher price at a later date, then you’ll be liable to pay capital gains tax on the gains.

Staking Taxes

The IRS has specified in the past that any assets received as a result of staking crypto assets would attract income tax. However, some investors argue against it while suggesting that staking rewards, like newly created tokens, should be taxed upon disposal and not on receipt.

To clarify this situation, the IRS issued Notice 2023-14 which clearly states that staking rewards are taxable as income, dismissing any doubts regarding the same. However, there are no clear guidelines around the taxation and deductibility of additional expenses like “gas fees” and the calculation of staking rewards for income tax purposes. Therefore, one must seek advice from experienced tax consultants to gain more clarity on the subject.

Airdrops and Forks

Soft forks do not constitute a taxable event since no new tokens are created, Soft forks, on the other hand, attract tax liabilities. Any new tokens received due to a chain split are taxed as regular income and these tokens inherit the tax base equal to the fair market value of these tokens on receipt. 

Staking rewards also attract capital gains tax on disposal.

Crypto Gifts and Donations Taxes

Gifting crypto is a taxable event in the US. However, there’s a personal gift exemption limit of $17,000 for the 2023 tax season. If the total value of the gifted assets is more than $17,000, then investors are required to pay a 40% tax.

But here’s the catch, gifts over $17,000 are only taxable when you surpass the lifetime gift exemption limit of $12.92 million. Note that receiving crypto gifts isn’t taxable and the gifted assets simply inherit the cost base equal to the fair market value of the assets at the time they were gifted. So that you attract capital gains tax when you decide to dispose of these assets for a profit.

Any donation made to a registered charity in the US is tax deductible given that the organisation you’re donating to has a 501(c)3 status with the IRS. Here’s a list of all charitable organisations having 501(c)3 status with the IRS.

DeFi Transactions

The IRS is yet to declare clear guidelines on the nature of DeFi transactions and how they are viewed from the tax perspective. Since DeFi is a new landscape and is still evolving, making space for new avenues of earnings for people across the globe, there’s no way to accommodate all DeFi transactions and the returns offered by them into a set of tax guidelines.

However, it’s important to note that you might attract tax liabilities if you appear to be making an income or capital gain from DeFi transactions. Given below are some DeFi transactions that can attract tax liabilities from the IRS:

• Earning liquidity tokens or new tokens from DeFi protocols
• Taking a loan against collateral from DeFi protocols or private lenders
• Staking, yield farming, and adding or removing liquidity from liquidity pools
• Gains made from DeFi margin trades
• Paying interest in crypto for loans sourced from DeFi protocols, which in some cases may be considered as a disposal of crypto assets and hence attracts capital gains tax.

ICOs and Token Sales

ICOs are special events that allow investors to acquire tokens from unreleased projects in exchange for mainstream tokens like BTC and ETH. ICOs are similar to IPOs in traditional markets and are viewed as crypto-to-crypto trades for tax purposes across jurisdictions.

The IRS is yet to release guidelines on the taxation of ICOs. We suggest seeking guidance from an experienced tax professional on the matter to avoid complications with the IRS. Relevant details regarding ICO taxation will be added here soon as the guidelines hit our radar.

Crypto Lending and Borrowing

Borrowing crypto assets doesn’t constitute a taxable event. But if you lend your crypto assets to an individual, exchange, or a Defi protocol in exchange for interest, then the event will attract income tax.

NFT and DAO 

According to the section titled “Digital Assets” on the 16th page of the new tax guidelines report:

“Digital assets are any digital representations of value that are recorded on a cryptographically secured distributed ledger or any similar technology. For example, digital assets include non-fungible tokens (NFTs) and virtual currencies, such as cryptocurrencies and stablecoins.”

This makes it pretty evident that the Internal Revenue Service (IRS) considers NFTs to be a form of property, similar to cryptocurrencies. In other words, disposing of digital assets, such as through a sale or exchange, may result in tax obligations, just like with any other type of property. This is because such transactions may result in capital gains or losses that must be reported to the IRS.

The recent mandate has provided a clearer understanding of NFTs and established a more defined framework for their taxation. The tax rate for NFTs is not fixed and may vary based on factors like mode of purchase, duration held, and amount of gains or losses incurred upon disposal.

To determine the amount of taxes owed to the IRS, you will need to itemise all of your NFT transactions on form 8949 and then use the standard deduction chart at the end of the form to calculate the tax due.

You can refer to the complete NFT tax guide here.

The IRS is yet to release specific guidance on how income from DAOs is taxed. However, DAOs aren’t registered organisations and can’t file taxes independently, they’re closer to flow-through organisations. Therefore, it's safe to assume that any income from DAOs will be subjected to income tax, and any gains incurred on the disposal of tokens received from DAOs will be taxed as a capital gain.

Crypto Margin Trading, Futures and CFDs

For individual investors, the tax treatment of margin trades, crypto futures, and CFDs is similar to other crypto transactions that incur capital gains tax. Any profits derived from these financial instruments are classified as capital gains and are subject to capital gains tax. Just like the disposal of assets, tax liabilities arise only upon the closure of a margin trade, future, or CFD position.

Regarding crypto futures, trading regulated products can lead to more advantageous tax outcomes, particularly due to the IRS 60/40 rule. Essentially, this rule stipulates that if investors engage in regulated futures trading, 60% of any capital gains will be taxed as long-term gains, while the remaining 40% will be taxed as short-term gains, regardless of the duration of the position. Although it's important to note that most crypto futures are currently unregulated and therefore exempt from this rule.

How to Avoid Paying Tax on Cryptocurrency in the US?

To make things clear, there’s no legal way to avoid paying taxes on crypto entirely in the US and any attempt at doing so will be met with regulatory and legal repercussions from the feds. However, there are ways you can avoid paying taxes on a portion of your gains and here are some of them:

1. Buy and HODL Crypto Assets

As mentioned above, buying crypto assets and holding them is not a taxable event in the US. An individual attracts tax liabilities only when he/she disposes of his/her assets and makes a capital gain as a result.

2. Utilise Tax Deductions

The IRS offers several exemptions that can significantly lower your tax bill, therefore it’s advisable to utilise your tax deductions like tax-free capital gain allowance, and the gifting allowance to reduce your taxable base.

3. Actively Track Your Losses and Harvest Them

You can close some of your dud positions or even potentially good ones at a loss and use them as an anchor to bring down your net capital gains and hence save thousands of dollars in capital gains taxes. The wash-sale rule for tax-loss harvesting is only applicable for securities at the moment and therefore, you can sell your assets to create a fictitious loss and then buy the same assets right after.

4. Gift and Donate Crypto

Gifting and donating crypto are considered tax deductibles by the IRS and can be used to bring down your tax bill, however, make sure the total amount of crypto gifted should not exceed $17,000 and the donations made are towards a registered charity and isn’t directly or indirectly linked to you in any way.

5. Invest in IRAs and OZFs

Invest in tax-advantaged investment funds to compound your returns and plan for the future. Alternatively, contribute to an Opportunity Zone Fund (OZF) to support public good initiatives while potentially benefiting financially.

Reporting Requirements, Compliances and Deadlines

Typically, in the US, you must report your cryptocurrency taxes by April 15th, which coincides with the deadline for filing individual income tax returns. However, if April 15th falls on a weekend or holiday, you may be granted an extension to the next business day.

How to File Crypto Taxes in the US

You can file your crypto taxes online or offline. If you decide to go the traditional way and use paper forms to file your taxes with the IRS, follow these steps to make sure everything goes smoothly:

1. First download Form 8949 and use it to report all your crypto disposals within a tax year.
2. Use Schedule D on Form 8949 to report all your capital gains and losses
3. If you receive crypto income from sources such as airdrops, forks, liquidity pools, or bonuses, you'll need to fill out Schedule 1. However, if you happen to be self-employed or operate a crypto-based business and earn crypto income, you should utilise Schedule C instead.
4. Once all of this is done, complete your tax return using Form 1040 and add all other tax forms with it before you file it with the IRS.

If you choose to go the modern route, there are several ways to file taxes online:

• You can use an online crypto tax platform like Kryptos that can guide you through the process step-by-step, help you find deductions and credits, and e-file your tax return directly with the IRS.

• If you meet certain income requirements, you can use the IRS Free File program to file your taxes online for free. The program partners with various tax preparation companies to offer free filing options to eligible taxpayers.

• Many tax professionals offer online tax filing services through their websites. These services typically involve uploading your tax documents to a secure portal and allowing the tax professional to prepare and file your return on your behalf.

What Crypto Records Will the IRS Want?

The IRS requires taxpayers to maintain adequate records to support the positions taken on their tax returns. To meet this requirement, it is essential to keep records of all crypto transactions, including

• The market value of your assets on the day of acquisition
• The market value of your assets on the day of disposal
• A detailed record of all your gains and losses
• Date and time of your transactions
• Receipt of all sales and purchases
• Record all transfers made between your personal and external wallets

How to File Crypto Taxes Using Kryptos?

Now that you’re aware of how your crypto transactions are taxed and what forms you need to fill out to complete your tax report, here’s a step-wise breakdown of how Kryptos can make this task easier for you:

1. Visit Kryptos and sign up using your email or Google/Apple Account
2. Choose your country, currency, time zone, and accounting method
3. Import all your transactions from wallets and crypto exchanges
4. Choose your preferred report and click on the generate report option on the left side of your screen and let Kryptos do all the accounting.
5. Once your Tax report is ready, you can download it in PDF format.

If you still need clarification regarding the integrations or generating your tax reports, you refer to our video guide here.

Resources and Support

Tax Authority- IRS

Notice 2014-21

Revenue Ruling 2023-14

IRS 60/40 rule

Frequently Answered Questions(FAQs)

1. Do you pay tax on crypto in the US?

Yes, in the United States, cryptocurrency is treated as property for tax purposes, which means that any gains or losses from buying, selling, or trading cryptocurrency are subject to capital gains tax. The tax rate depends on various factors, such as how long the cryptocurrency was held and the individual's income tax bracket. Additionally, cryptocurrency transactions may trigger other tax requirements, such as reporting requirements for foreign accounts. It's always best to consult with a tax professional or accountant to understand your specific tax obligations related to cryptocurrency.

2. Is cryptocurrency legal in the US?

Yes, cryptocurrency is legal in the United States. Although the government has been engaged in efforts to establish cryptocurrency regulations, there are no federal statutes forbidding individuals from engaging in the purchase, sale, or retention of cryptocurrencies. However, it's important to note that the use of cryptocurrency for illegal activities, such as money laundering or financing terrorism, is illegal and can lead to criminal charges.

3. Do you pay tax when transferring crypto in the US?

Transferring cryptocurrency from one wallet to another wallet or from one exchange to another exchange is generally not a taxable event in the United States. This means that you will not owe taxes on the transfer itself. However, you may be subject to taxes on the cryptocurrency if you sell or exchange it for another cryptocurrency or fiat currency.

4. What happens when you don’t report crypto in your tax report?

Failure to report cryptocurrency on your tax return can result in penalties and interest charges from the Internal Revenue Service (IRS). The penalties for not reporting cryptocurrency can vary depending on the specific circumstances of the situation but they can include:

• If you fail to file your tax return on time, the IRS may impose a penalty of 5% of the unpaid tax amount per month, up to a maximum of 25% of the unpaid tax.

• If the IRS determines that you understated your tax liability due to negligence or disregard of tax rules, they may impose a penalty of 20% of the understated tax liability.

• In case of intentional tax evasion or fraud, you could face criminal penalties, including fines and imprisonment.

All content on Kryptos serves general informational purposes only. It's not intended to replace any professional advice from licensed accountants, attorneys, or certified financial and tax professionals. The information is completed to the best of our knowledge and we at Kryptos do not claim either correctness or accuracy of the same. Before taking any tax position / stance, you should always consider seeking independent legal, financial, taxation or other advice from the professionals. Kryptos is not liable for any loss caused from the use of, or by placing reliance on, the information on this website. Kryptos disclaims any responsibility for the accuracy or adequacy of any positions taken by you in your tax returns. Thank you for being part of our community, and we're excited to continue guiding you on your crypto journey!

Are you still trying to figure out whether crypto is legal in Australia? Or How crypto transactions are taxed by the ATO? 

If you answered any one of these questions with a “yes”, you’re right where you should be. Figuring out crypto taxes on your can be intimidating for investors filing their crypto taxes for the first time. So we decided to make things easier for you with this comprehensive crypto tax guide, which covers everything you need to know about crypto taxes in Australia and the rules governing them.

So let’s start by answering the most basic question.

‍

Latest Updates/Guidelines

‍

• 9 May 2023: New ATO guidance ahead of EOFY.
• 19 December 2023: Updated for 2024.
• 14 November 2023: Latest ATO insights on spending, gambling, DeFi, and more.
• 23 March 2023: Fresh updates for the new tax season, including airdrops.
• 13 February 2023: ATO starts sending notices to crypto investors.
• 12 September 2022: Updated guidance on airdrops and tax-free initial allocations.
• 27 June 2022: ATO advises against wash sales.
• 22 April 2022: EOFYS is coming! Guide refreshed for 2022.
• 1 December 2021: Updated tax rates for 2021-2022.
• 22 June 2020: ATO warns 350,000 investors to disclose or face penalties.

‍

How are cryptocurrencies taxed in Australia?

‍

The Australian Taxation Office (ATO) does not classify Bitcoin and other cryptocurrencies as currency but rather as property. As a result, when crypto assets are sold or disposed of, they are subject to capital gains tax. It's important to note that the ATO includes bitcoin, altcoins, NFTs, and other crypto assets under the umbrella term of cryptocurrencies. Hence, any profits made from the sale of these assets will incur tax obligations.

However, there might be instances where crypto is viewed as an income by the ATO and is subjected to income tax.

There are different tax rules for traders and investors in Australia. Traders are typically subject to income tax, while investors are usually liable for capital gains tax. This distinction applies to both traditional investments and cryptocurrencies.

The ATO has provided clear guidelines to determine whether someone is classified as an investor or a trader. Here is a simplified summary of the guidelines.

According to the ATO, individuals or entities that engage in frequent crypto trades or operate large-scale mining operations to generate a recurring income are considered traders. Income generated from such activities is subject to income tax.

The ATO suggests that individuals who invest in crypto assets with a long-term perspective or engage in casual trading and occasional mining using spare computing power are considered investors. Gains from these activities are subject to capital gains tax. However, it's important to note that investors may also attract income tax depending on the nature of transactions and the source of income.

You pay anywhere between 0-45% in capital gains tax based on the gains you make in a tax year. We have discussed the tax slabs in more detail later in the guide. The tax rates for crypto income are the same as capital gains tax.

Let’s look at an example to better understand how crypto transactions are taxed in Australia.

Consider the following transactions:

14/01/23 - Jack Buys 2 BTC

16/02/23 - Jack buys 2 ETH

18/05/23 - Jack receives 6.25 BTC through airdrops(FMV - $30,000 per token)

13/06/23 - Jack sells 1 BTC (Realised Gain = $10,000)

18/19/23 - Jack sells 1 ETH (Realised Gain = $1,500)

As evident from the above transactions, two disposals were made.

‍

1st Disposal

‍

1 BTC sold

A gain of $10,000 was incurred from this disposal

‍

2nd Disposal

‍

1 ETH sold

A gain of $1,500 was incurred from this disposal

Collective Gain from both disposals = $10,000 + $1,500 = $11,500

Now this gain will be taxed as capital gains.

The mining rewards received by Jack will be treated as income and as such taxed under the income tax laws.

Taxes will be levied on the FMV of the assets upon receipt.

So let’s calculate the FMV of the received assets

FMV of mining rewards = 6.25 * $30,000 = $1,87,500

This is your taxable income base.

‍

Can the ATO track crypto transactions?

‍

Yes, the ATO can track cryptocurrency transactions. The ATO has access to multiple avenues, such as data from cryptocurrency exchanges and blockchain analytics tools, that they can use to correlate individual transactions and identify discrepancies. The ATO may use this information to ensure individuals are reporting their cryptocurrency gains and losses correctly on their tax returns.

‍

Crypto Gains Tax Australia

‍

As mentioned above, the ATO considers crypto to be a capital asset and therefore their disposal attracts a capital gains tax. The following transactions are considered disposal by the ATO:

1. Selling crypto for fiat currency(AUD or any other)
2. Swapping one crypto token for another
3. Buying goods or services with a crypto asset
4. Gifting crypto

In Australia, it is important to understand that capital gains tax is divided into two sub-categories. If you hold your assets for more than one year before selling them, you are eligible for a 50% discount on capital gains. However, if you sell your assets within one year of acquiring them, your gains will be subject to a higher rate of short-term capital gains tax. It is crucial to consider the holding period when calculating your tax liabilities on capital gains in Australia.

‍

Capital Gains Tax Rate

‍

The gains you’ve made by buying, selling, spending, or gifting your assets will be taxed based on the total income in a tax year. Mentioned below are the tax slabs divided by income groups:

‍

‍

How to calculate your crypto capital gains and losses?

‍

Determining your capital gains or losses is a simple task, just subtract the cost basis (the price you paid to acquire the asset) from the disposal amount. If the result is positive (selling for more than what you paid), you have a capital gain and the disposal is taxable. If it's negative (selling for less), it's a capital loss, allowing you to offset gains and lower your taxable income.

Calculating your cost basis can be a daunting task, especially when dealing with a large number of transactions accumulated over a year. However, there are tools available to simplify the process. One such tool is Kryptos, which can automatically fetch transactions from your investment profiles and digital wallets. With Kryptos, you can conveniently calculate your cost basis by adding the price you paid for the asset during acquisition, including transaction fees or gas fees, and convert it to AUD. This automated solution can save you time and effort, providing you with accurate cost-basis calculations within seconds.

Consider the following transactions:

14/01/23 - Amelia bought 1 BTC for $25,000

18/03/23 - Amelia bought 2 ETH for $3,000 each

23/04/23 - Amelia bought 2 BTC for $30,000 each

04/06/23 - Amelia sold 1 BTC for $35,000

29/07/23 - Amelia sold 1 ETH for $4,000

21/05/24 - Amelia sold 1 BTC for $40,000

As evident from the above ledger, three disposals were made. Let us look at each disposal individually.

‍

1st Disposal

‍

1 BTC sold for $35,000

Now, Amelia acquired BTC tokens on two separate occasions, one for $25,000 and another for $30,000. We need to identify which one of these tokens was disposed of and we need to rely on a specialized accounting method as suggested by tax authorities.

In Australia, the ATO allows investors to use any accounting method as long as the investment lots can be identified.

We will use FIFO accounting for simplicity. A simple way to understand FIFO or First-In-First-Out accounting method is to consider that the first token you buy is the first one you sell.

So according to the FIFO accounting method, the BTC that was disposed of is the same one that was acquired on 14/01/22 for $25,000.

Cost basis = $25,000

Disposal amount = $35,000

Capital Gain/Loss = Disposal Amount - Cost Basis = $35,000 - $25,000 = $10,000

‍

2nd Disposal

‍

1 ETH sold for $4,000

Cost Basis = $3,000

Disposal Amount = $4,000

Capital gain = $4,000 - $3,000 = $1,000

‍

3rd Disposal
‍

1 BTC sold for $40,000

Cost Basis = $30,000

Disposal Amount = $40,000

Capital Gain/Loss = Disposal Amount - Cost Basis = $40,000 - $30,000 = $10,000

However, this disposal is different from the other two. This disposal was made after holding the BTC for over a year. Amelia is eligible for a 50% discount on her tax liabilities.

So actual gain from this transaction is $5,000

Now, collective gain from all three disposals = $10,000 + $1.000 + $5,000 = $16,000

This is the final amount you’ll pay capital gains tax on.

‍

Crypto Capital Losses

‍

Whether you classify as a trader or investor, losses are an inevitable part of the crypto journey. However, losses can have a silver lining when it comes to taxes. By actively tracking and documenting all your losses, you can utilize them to your advantage.

In Australia, managing crypto capital losses can be a strategic way to minimize your tax liability. When you incur a capital loss from cryptocurrency transactions, you can use it to offset your capital gains, but there are specific rules to follow, especially regarding non-allowable capital losses and the order in which these losses are applied.

‍

Non-Allowable Capital Losses

‍

Not all capital losses can be used to reduce your capital gains. For example, if you sell personal use assets like boats or furniture at a loss, these losses are non-deductible. Similarly, losses from assets exempt from Capital Gains Tax (CGT), such as cars, motorcycles, or low-value collectables, cannot be used to offset your capital gains. Additionally, losses from certain leases and arrangements involving personal services income paid through an entity you’ve set up are also non-allowable.

When you report your losses to the ATO, you become eligible for a tax deduction. This deduction can be applied to reduce your overall tax liability. Moreover, if you have excess losses, you have the option to carry them forward to offset future tax liabilities in subsequent tax years. There is no time limit to carry forward the capital loss so it can be carried forward indefinitely.

To ensure accurate calculations of your capital gains and losses, it is essential to maintain precise records of all your cryptocurrency transactions. This includes details such as transaction dates, cryptocurrency costs, and any other pertinent information that may be relevant for tax purposes.

‍

Lost or Stolen Crypto

‍

If you have incurred a loss from theft or other crypto frauds, you may be able to claim a capital loss in Australia.

To claim a capital loss due to loss or theft with the ATO, you'll need to provide substantial evidence. Here's what you'll need:

• Proof of when you acquired and lost your private key.

• The wallet address associated with the lost key.

• Documentation showing the cost of acquiring the lost or stolen crypto.

• Records of the amount of crypto in the wallet when the key was lost.

• Evidence that you controlled the wallet.

• Proof that you possess the hardware where the wallet was stored.

• Transaction records showing transfers to the wallet from an exchange you used.

‍

Crypto Tax Breaks Australia

‍

While it is not possible to completely avoid paying taxes on your crypto transactions unless you have incurred a net loss during a tax year, there are strategies available to help minimize your tax liabilities. Apart from capital loss write-offs, here are some techniques you can employ to lower your tax bill:

‍

Disposal of Long-Term Assets

‍

Any crypto assets held for over a year are eligible for a 50% CGT exemption(33.33% for insurance companies and eligible super funds). So if you’ve held some of your assets for over a year, you can sell them and pay 50% fewer taxes.

For instance, if you bought 2 ETH tokens back in 2018 for 1,271 AUD and sold them in 2021 for 3,921 AUD. The total gains of 5,300 AUD will only be considered to be 2,650 AUD and will be taxed accordingly.

‍

Assets for Personal Use

‍

According to the ATO, capital gains resulting from personal use assets are not taxed. Cryptocurrency is considered a personal use asset if it is primarily used to buy items for personal consumption. However, if the primary purpose is an investment, generating profits, or conducting business, then cryptocurrency is not considered a personal use asset.

Unclear guidelines surrounding the classification of crypto assets as personal use assets can be a challenge. However, by following best practices, you can increase the chances of successfully demonstrating the personal use nature of your transactions to the ATO.

• Segregate personal use crypto assets and investment assets into two wallets
• Don’t hold personal use assets for long durations
• Record all your transactions from the personal use wallet
• Use tokens directly to make purchases, never swap them for fiat currency
• Buy goods or services for personal consumption directly from the seller without the use of a payment gateway or other intermediary service for bill payment.

‍

Crypto Cost Basis Methods Australia

‍

According to the ATO, for the average investor, any one of LIFO, FIFO, HIFO, and ACB accounting methods can be used as long as each tax lot can be accurately identified. However, if you are classified as a trader or someone who conducts crypto trades as a business, the ATO specifies that you should only utilize either the FIFO or the average cost basis accounting method. It's important to align your accounting method with your investor classification to ensure compliance with the ATO guidelines.

‍

Crypto Income Tax Australia

‍

If you’re making an income from crypto assets, you’re liable to an income tax. There are multiple ways you can earn crypto as an income:

• Staking or mining rewards
• Strategically trading crypto assets
• Through lending activities on DeFi platforms
• Creating your NFTs and selling them
• Validating on-chain transactions and collecting prizes for them
• Earning through Play-2-Earn, Learn-2-Earn, Watch-2-Earn Web3 platforms like Brave, Coinbase Learning, Odyssey, and Axie Infinity
• Receiving airdrops
• Receiving referral rewards
• Receiving crypto as payments in exchange for a product or a service
• ‍

Crypto Income Tax Rates

‍

Income tax rates in Australia depend on the total income made in a tax year. Given below are the income tax rates based on income:

‍

‍

How to Calculate Crypto Income

‍

Calculating crypto income is a pretty straightforward process, all you need to do is add all the individual gains incurred from income-generating transactions and you’ll have your taxable income base.

‍

Tax-Free Crypto Transactions

‍

In Australia, the following crypto transactions are tax-free:

• Personal use asset transactions, such as buying cryptocurrency to hold as a personal investment, are exempt from capital gains tax if the cost is less than AUD 10,000.
• Transferring cryptocurrency between personal wallets.
• Trading cryptocurrency for other cryptocurrencies, as long as the transaction is not part of a profit-making scheme.
• Purchasing goods and services for personal use with cryptocurrencies. 

‍

Taxed Transactions

‍

In Australia, cryptocurrency transactions are subject to tax laws and are considered taxable events. Some common crypto transactions that are taxable include:

• Trading or exchanging cryptocurrencies for fiat currency (e.g. AUD) or other cryptocurrencies.
• Receiving cryptocurrency as income, such as payment for goods or services
• Purchasing goods or services with crypto assets(for non-personal use)
• Disposing of cryptocurrencies, such as selling or exchanging them for fiat currency or other cryptocurrencies.
• Mining cryptocurrency, as the reward received is considered income.
• Staking or holding cryptocurrency to receive rewards, as the rewards are considered income.

‍

Tax on Mining Crypto Australia

‍

Mining crypto is not taxable if pursued as a hobbyist, however, you might owe taxes to the ATO if you are involved in mining activities as a business.

‍

Mining as a Hobby

‍

If you're mining cryptocurrency as a hobby, there is no need to report your income on receipt. You'll only be required to pay taxes when you eventually sell those coins. Unlike those who mine cryptocurrency as a business, hobbyist miners don't have the benefit of deducting expenses such as equipment costs, monthly fees, and electricity bills from their taxable income.

‍

Mining as a Business

‍

If your mining activity classifies you as a business, it's mandatory to report the fair value of the received tokens as soon as you receive them. All the figures to be reported must be in AUD, and you are entitled to claim tax deductions for expenses associated with the mining operation, such as equipment, electricity, and so on.

‍

Tax on Staking Crypto

‍

In Australia, staking rewards are considered regular income and are subject to income tax. However, the ATO is yet to offer specific guidance on this matter, leading to debates among crypto stakes. For example, ETH 2.0 stakers faced challenges as they couldn't immediately withdraw and dispose of their assets. This created uncertainty about whether taxes should be paid based on the fair market value of the tokens upon receipt or on the day when investors could access and dispose of them. You need to declare this income in your tax return as other income.

‍

Crypto Margin Trading, Futures, and CFDs

‍

Crypto margin trading, futures, and CFDs are taxed as income in Australia. The value of the asset at the time of the transaction is your tax base. The amount is converted to AUD for tax reporting. If the trading activity is considered to be a business, then the individual is eligible to deduct related business expenses, such as trading software, internet costs, and so on.

For personal investment in Australia, individuals can only claim a capital loss from crypto margin trading, futures, and CFDs if the value of the cryptocurrency decreases. This loss can be offset by capital gains from other investments. It is recommended to consult with a professional tax advisor to understand the specific tax implications of these activities and receive personalized advice.

‍

Crypto Gifts and Donation Taxes

‍

Gifting and donating crypto in Australia can have tax implications, but it depends on the situation. Generally, if you’re donating to a Deductible Gift Recipient (DGR), you may get a tax deduction. However, donations to non-DGRs won’t be eligible. Here’s what the ATO says about taxing crypto gifts and donations.

‍

Giving Crypto as a Gift - Capital Gains Tax

This one might sting a bit. Whether you’re being generous or just want to offload some crypto, the ATO requires you to pay Capital Gains Tax on any profits made from giving away crypto.

‍

Receiving Crypto as a Gift - Tax-Free

If someone gifts you crypto, consider yourself fortunate. Not only do you get the crypto, but you also don’t have to pay any tax on it. However, you should note down the fair market value of the crypto on the day you received it. This will be your cost basis if you decide to sell or even re-gift the crypto later.

‍

Selling Your Crypto Gift - Capital Gains Tax

Here’s the catch. While receiving a crypto gift is tax-free, selling, swapping, spending, or even re-gifting it is not. Any disposal of the crypto is taxed as a capital gain, with your cost basis being the value of the crypto on the day you received it.

‍

Donating Crypto - Tax-Free

In Australia, donating crypto works similarly to donating cash. If you donate to a DGR, your donation is tax-deductible. The donation amount is calculated based on the value of the cryptocurrency at the time it’s donated, and any related capital gain is exempt from tax.

‍

NFT Taxes Australia

‍

NFTs have surged in popularity over the past year, and the ATO treats them as crypto assets, similar to other cryptocurrencies. This means NFTs are considered Capital Gains Tax (CGT) assets for investors and will follow the same tax rules as other crypto assets. How your NFT is taxed will depend on your specific situation, including whether you’re an investor or running a business.

‍

Creating and Selling NFTs - Income Tax

‍

If you’re creating and selling NFTs, how you’re taxed will depend on whether it’s seen as a hobby, an investment, or a business. If it’s considered a business, the income from selling NFTs is treated like any other business income and will be subject to Income Tax. It’s best to consult with a qualified accountant to understand how the ATO views your activities and what that means for your taxes.

Additionally, if you’re farming NFTs for staking rewards, this income will likely be treated similarly to DeFi staking rewards and be subject to Income Tax.

‍

Buying, Selling, and Trading NFTs - Capital Gains Tax

‍

For those not considered professional traders, Capital Gains Tax applies in the following scenarios:

‍

1. Buying an NFT with Cryptocurrency: You’ll owe Capital Gains Tax on any profit made from the cryptocurrency you used to purchase the NFT (unless it qualifies as a personal use asset, in which case no CGT is due).

2. Selling an NFT for Cryptocurrency or Fiat Currency: You’ll need to pay Capital Gains Tax on any profit made from the sale of the NFT.

3. Swapping an NFT for Another NFT: Any gain from the NFT you’re swapping away is subject to Capital Gains Tax.

NOTE: if an individual acquires an NFT for resale, the sale will be considered a taxable supply and may be subject to goods and services tax (GST).

‍

DAO Taxes

‍

DAOs are member-owned communities with a shared vision. All the decisions in a DAO are made by the members in the absence of central leadership. DAOs are new-age institutions that aim to democratise decision-making and allow people to have a say in decisions that directly affect them. DAOs are often called the soul of Web3 and enable members to earn rewards in multiple ways. DAO contributors are rewarded for their contributions to the organization, similar to how centralized organizations pay salaries to their employees. Moreover, DAOs pay bounties for one-time projects and redistribute any profits generated through operations.

The ATO is yet to release specific guidance on how income from DAOs is viewed from a tax perspective. We are constantly on the lookout for relevant guidelines and relevant information will be added here as soon as the guidelines hit our radar.

‍

ICO Taxes

‍

In the realm of cryptocurrencies, ICOs represent opportunities for investors to acquire tokens/coins from an unreleased crypto project. Typically, this acquisition occurs through the exchange of conventional tokens like Bitcoin or Ethereum.

From the perspective of the ATO, this constitutes a crypto-to-crypto trade. The taxable event arises at the precise moment of the ICO transaction when you receive the newly minted tokens. Subsequently, when you decide to sell these tokens at a later point in time, the cost base of that transaction will be determined by the cryptocurrency's value on the date of the ICO, which you initially utilized for the purchase.

‍

DeFi Crypto Taxes Australia

‍

The ATO has finally provided guidelines on how DeFi transactions are taxed for Australian investors.

According to the ATO, DeFi transactions can lead to either Capital Gains Tax or assessable income, depending on the type of transaction.

• If you're lending or adding liquidity to pools, the ATO considers these as crypto-to-crypto transactions, which means any gains are subject to Capital Gains Tax.

• When you earn new tokens through DeFi rewards or similar activities, these are treated like interest income, and the market value of the tokens is considered assessable income.

• For wrapped tokens, the ATO has clarified that wrapping your crypto triggers a Capital Gains Tax event, making any gains taxable.

This stance on wrapped tokens can be confusing since wrapped assets like BTC and wrapped BTC represent the same underlying asset. The question arises as to whether there’s an actual economic disposal when exchanged, especially since wrapping is often used to facilitate transactions on non-native blockchains to reduce fees, such as bidding for NFTs.

‍

When to Report Crypto Taxes in Australia

‍

In Australia, the tax year extends from 1 July to 30 June of the subsequent year. If you are an individual who is personally filing your tax return for the period of 1 July 2023 to 30 June 2024, the deadline for submitting your taxes is 31 October 2024.

‍

How to Report Crypto Taxes in Australia

‍

With your reconciled cryptocurrency calculations in hand, you have two options for filing your taxes in Australia. You can choose the traditional method of filling out a paper tax form and mailing it to the ATO or you can opt for the convenient and secure online option through myTax. This online service, associated with the ATO, offers a fast and easy way to prepare and file your tax return, helping you receive your refund sooner.

Here's a step-by-step tutorial on how to file your crypto taxes online using the myTax portal:

1. Collect all the necessary information related to your cryptocurrency transactions. This includes details of each transaction such as dates, amounts, and any applicable fees. Make sure you have records of your cryptocurrency purchases, sales, trades, and any other relevant transactions.
2. Access the ATO website
3. Log in to myGov Click on the "Log in" or "Sign in with myGov" button on the ATO homepage. Enter your myGov username and password to access your myGov account. If you don't have a myGov account, you will need to create one by following the provided instructions.
4. Once logged in to myGov, locate and select the myTax option from the available services. This will redirect you to the myTax portal on the ATO website.
5. Select the option to start your tax return for the relevant financial year (e.g., 2023-2024). Follow the prompts and provide the required information, such as your details and income sources.
6. When you reach the section for declaring income, look for the category related to cryptocurrency or digital assets. Select the appropriate option to indicate that you have engaged in cryptocurrency transactions during the tax year.
7. Enter the relevant details of your cryptocurrency transactions as requested in the form. This may include the type of transaction (e.g., purchase, sale, trade), dates, amounts, and any associated costs or fees. Be thorough and accurate while providing this information.
8. Calculate gains or losses Based on the information provided, the myTax portal will automatically calculate the gains or losses from your cryptocurrency transactions. Ensure that the calculations are accurate and reflect your actual financial activities.
9. Complete the tax return Continue filling out the remaining sections of the tax return, including any other income sources, deductions, and credits you may be eligible for. Review the entire form to ensure all information is accurate and up to date.
10. Submit your tax return Once you have completed all the necessary sections, review your tax return one final time. If you are satisfied that everything is correct, submit your tax return electronically through the myTax portal. Follow any additional instructions or prompts provided.

‍

What Crypto records will the ATO want?

‍

You should maintain the following records to avoid complications when filing your taxes with the ATO:

• Receipts: Save proof of all purchases, transfers, or sales of your crypto assets.
• Transaction Dates: Note down the date of each transaction.
• Transaction Details: Record the purpose of each transaction and details about the other party (such as their crypto asset address).
• Exchange Records: Keep a log of transactions on crypto exchanges.
• Value Records: Document the value of each crypto asset in AUD at the time of each transaction.
• Costs Records: Maintain records of any costs related to agents, accountants, or legal services.
• Wallet Records: Keep track of your digital wallet details and access keys.
• Software Costs: Record any expenses related to software used for managing your taxes

‍

How long to keep records

‍

The ATO expects you to keep detailed records of your cryptocurrency transactions for 5 years. This period starts from the date you prepared or received the records, or from the date you completed the transactions, whichever is later.

‍

How to File Crypto Taxes Using Kryptos?

‍

Now that you’re aware of how your crypto transactions are taxed and what forms you need to fill out to complete your tax report, here’s a step-wise breakdown of how Kryptos can make this task easier for you:

1. Visit Kryptos and sign up using your email or Google/Apple Account
2. Choose your country, currency, time zone, and accounting method
3. Import all your transactions from wallets and crypto exchanges
4. Choose your preferred report and click on generate report option on the left side of your screen and let Kryptos do all the accounting.
5. Once your Tax report is ready, you can download it in PDF format.

If you still need clarification regarding the integrations or generating your tax reports, you refer to our video guide here.

‍

How to Avoid Crypto Taxes in Australia?

Although there is no legal way to avoid crypto taxes entirely. You can employ some strategies to lower your tax bill in Australia.

1. Deduct your losses and trading fees: Trading fees and losses are tax-deductible in Australia, contingent on whether you’re viewed as an individual investor or a business by the ATO.

2. Deduct your mining expenses: If you’re involved in mining as a business, you can deduct mining expenses from your tax bill in Australia. You can know more about it in the Are-you-in-business section on the ATO website.

3. Invest in Australian BTC-ETFs: A Bitcoin ETF launched on 27 April 2022, offering a tax-efficient investment option for investors. ETFs track Bitcoin's price and simplify the investment process. Some Bitcoin ETFs may distribute dividends, offering Australian investors potential tax advantages through franking credits. These credits offset corporate taxes paid by the ETF's constituent companies, reducing investors' tax liability.

4. Hold your assets: If you hold on to your assets for more than 12 months before disposing of them, you can get a 50% exemption on the capital gain incurred on the transaction.

‍

FAQs

‍

1. Can the ATO track crypto transactions?

Yes, the ATO can track cryptocurrency transactions to some extent. The ATO has access to a range of information and data sources, including cryptocurrency exchange data, to help it identify individuals who may not have properly declared their cryptocurrency transactions for tax purposes.

‍

In recent years, the ATO has been taking an increasingly active approach to enforcing tax obligations related to cryptocurrency transactions. This includes using data matching to identify individuals who have not declared cryptocurrency gains or who have underreported their taxable income.

‍

2. Is cryptocurrency legal in Australia?

Yes, crypto is legal in Australia and is considered a capital asset(property) instead of a currency by the ATO(Australian Taxation Office) and taxed accordingly.

‍

3. How are airdrops and forks taxed in Australia?

In Australia, airdropped and forked cryptocurrencies are considered taxable income and must be reported on an individual's tax return. The value of the airdropped or forked cryptocurrency on the date it was received is considered its cost to calculate capital gains tax when it is later sold. If the cryptocurrency is held for 12 months or more, it may be eligible for the capital gains tax discount. Moreover, suppose the airdrop or fork is part of a profit-making scheme or carried out in the course of carrying on a business. In that case, the value of the airdropped or forked cryptocurrency may be subject to ordinary income tax.

‍

4. What happens when I move crypto between wallets, exchanges and pools?

As long as you’re moving assets between wallets or exchanges that you own, the event is not considered a taxable event. However, the transaction fees paid to move the assets are considered disposal of assets and are subjected to a capital gains tax in Australia.

Similarly, funds moved from one liquidity pool to another follow the same rule. It’s a non-taxable event in the eyes of ATO. 

However, note that it’s essential to keep track of all these transactions to accurately calculate the cost basis for all your assets and that may be an intimidating task for many as their investments are spread across wallets, exchanges, and DeFi protocols.

An intelligent step would be to use an online crypto tax tool like Kryptos, which can easily track all your transactions from across your trading and investment profile and even creates legally compliant tax reports seamlessly with a click of a button. All you need to do is to add all your wallets and investment profiles on the website and let the software do the job for you.

‍

5. What if I can't afford my crypto tax bill?

If you cannot afford to pay your crypto tax bill in Australia, you have several options:

• You can contact the Australian Taxation Office (ATO) and request to set up a payment plan to pay off the tax debt over a longer period.
• You can request an extension of time to pay the tax debt.
• If you are experiencing financial hardship, you can apply to have your tax debt remitted (cancelled) or varied (rearranged).
• You may consider seeking assistance from a tax professional or financial advisor to help you manage your tax debt.

‍

6. Is there a legal way to avoid taxes in Australia?

No, there is no legal way to avoid paying taxes in Australia. It is a legal obligation to accurately report all taxable income, including profits from cryptocurrency transactions, and pay the appropriate amount of tax. Failing to report income and pay the required taxes accurately can result in significant fines and penalties, as well as potential criminal charges. It's essential to comply with all tax laws and regulations in Australia and seek professional advice if necessary.

If you live in New Zealand and happen to be involved in crypto transactions, you might owe some taxes to the IRD. And If you’re struggling to figure out how crypto taxes in New Zealand work, you’re not alone. Thousands don’t understand how crypto transactions are taxed in New Zealand and how it affects them over a tax year.

That’s why we decided to create the most comprehensive tax guide and simplify crypto taxes for investors in New Zealand. This guide touches upon every aspect of crypto taxation and goes into detail on how crypto transactions are taxed in New Zealand, how to calculate your crypto taxes, and how to report them easily.

Note that this guide will be updated regularly and will reflect any new guidelines issued by the IRD, so make sure you keep revisiting this piece to make sure you don’t miss out on important updates.

So let’s get started…

Latest Updates/Guidelines

14/08/23 - Updated to accommodate ICO, Gifts and Donations Taxes

14/08/23 - Updated to accommodate DAO Taxes

How is Crypto Taxed in New Zealand?

Although cryptocurrencies have been around for over a decade now, tax authorities in New Zealand started talking about them just recently towards the end of 2017. Just like most countries, New Zealand doesn't consider Bitcoin and other blockchain-based assets as legal tender and denies them the legal status of currency within the national borders. Instead, the IRD treats Bitcoin and other crypto assets as property for tax purposes. 

The tax authorities have refrained from drafting new laws for crypto taxation and have issued guidelines to accommodate crypto transactions under existing income tax laws. However, the status quo might shift towards a more concrete tax regime as new legislation is being discussed by the tax authorities.

Here’s an excerpt from the recent guidelines issued by the IRD regarding the acquisition and disposal of crypto assets.

“If you acquire crypto assets to dispose of them you need to pay income tax on any profit you make. For example, if you buy or mine crypto assets to sell or exchange them. If you make a loss when you sell your crypto assets you may be able to claim this loss.”

Since crypto assets are considered capital assets (property), any gains incurred from their disposal are usually considered capital gains. However, these gains are considered income in New Zealand and are taxed under the regular income tax laws.

Capital gains are taxed under a progressive income tax infrastructure, with rates varying from 10.5% to 39% based on the value of your gains.

Consider the following transactions:

23/01/22 - Oliver buys 2 BTC

12/02/22 - Oliver buys 3 ETH

14/03/22 - Oliver sells 1 BTC

16/06/22 - Oliver sells 2 ETH

As evident from the above ledger of transactions, two disposals were made.

Let’s assume that both sell transactions resulted in a capital gain. And since we haven’t discussed how capital gains calculations work, we will simply consider the gains to be $21,000 for the BTC disposal and $11,000 for the ETH disposal.

Collective gain from both disposals = $32,000

This is your taxable income base.

Can the IRD track crypto?

Yes, the Inland Revenue Department (IRD) can track cryptocurrency transactions. Therefore,  individuals who engage in cryptocurrency transactions must keep records of their transactions and declare any income or gains made from their cryptocurrency holdings on their tax returns. The IRD can also access information from cryptocurrency exchanges and other third-party providers to track and verify cryptocurrency transactions.

Crypto Gains Tax

The New Zealand government does not classify cryptocurrency as a currency but rather as property. Therefore, capital gains resulting from cryptocurrency sales are subject to the same tax regulations as gains from other types of property, such as real estate or stocks. In New Zealand, there is no separate capital gains tax; instead, all capital gains are treated as income and taxed accordingly under the income tax regulations.

Selling cryptocurrency for a profit qualifies as a taxable capital gain, and it is included as part of your income for the applicable tax year.

Income Tax Rate New Zealand

New Zealand's tax system operates on a progressive principle, meaning that as one's earnings rise, so does the tax rate. For the 2021-2022 fiscal year, tax brackets in New Zealand range from 10.5% to a top rate of 39%.

‍

‍

How to Calculate Crypto Gains and Losses?

Calculating your crypto gains or losses in New Zealand is a simple process. You subtract your cost basis (including acquisition price, gas fees, and transaction fees) from the proceeds of selling a crypto asset.

Two methods are available for calculating your cost basis: FIFO (First-In-First-Out) and ACB (Average Cost Basis). It is crucial to choose one accounting method and use it consistently for cost-basis calculations in future tax years.

Also, using LIFO accounting is not allowed in New Zealand. 

A method like FIFO is convenient for accurate calculation of the purchase price when holding multiple units of the same cryptocurrency obtained at varying times and prices. FIFO entails selling the oldest acquired coins first and is widely favoured in most nations.

When arriving at the purchase price becomes challenging, a prudent strategy is to view its value as nil. But this approach requires paying taxes on the complete sum, leading to an unwarranted increase in the tax liability.

Consider the following transactions:

12/02/22 - Noah buys 2 BTC for $32,000 each

14/04/22 - Noah buys 3 ETH for $2,300 each

18/05/22 - Noah buys 1 BTC for $30,000

22/06/22 - Noah buys 2 ETH for $2,500 each

13/07/22 - Noah sells 1 BTC for $40,000

15/07/22 - Noah sells 2 ETH for $3,000 each

24/08/22 - Noah sells 2 BTC for $42,000 each 

As evident from the above ledger of transactions, Noah made three disposals.

And since we have multiple assets of the same kind acquired at different times, we will be using the FIFO accounting method for cost basis calculations.

‍

1st Disposal

1 BTC sold for $40,000

Since the first token acquired is the first one to be disposed of. The BTC disposed of is from the same bunch acquired on 12/02/22 for $32,000.

Cost Basis = $32,000

Disposal Amount = $40,000

Capital Gain = $40,000 - $32,000 = $8,000

‍

2nd Disposal

2 ETH sold for $3,000 each

Now these ETH tokens have the cost basis of the ones acquired on 14/04/22 for $2,300

Cost basis = $2,300

Disposal Amount = $3,000

Capital Gain = $3,000 - $2,300 = $700(From 1 ETH disposal)

Gain from 2 ETH disposal = 2*700 = $1,400

‍

3rd Disposal

2 BTC sold for $42,000 each

This transaction here is a bit more complicated than the above disposals because there are two different types of BTC tokens involved in the transaction.

Let’s call them BTC-1 and BTC-2

BTC-1 was acquired on 12/02/22 for $32,000

BTC-2 was acquired on 18/05/22 for $30,000

Cost Basis for BTC-1 = $32,000

Cost Basis for BTC-2 = $30,000

Disposal Amount = $42,000

Capital Gain (BTC-1) = $42,000 - $32,000 = $10,000

Capital Gain (BTC-2) = $42,000 - $30,000 = $12,000

Total Gain = $22,000

Now, collective gain from three disposals = $8,000 + $1,400 + $22,000 = $31,400

Crypto Losses

Losses are a part of the game when you trade or invest in a capital asset because capital markets are largely speculative. It’s difficult to predict the market movement with 100% accuracy. Fortunately, you can offset your crypto losses against the capital gains you’ve made in a tax year.

Therefore, it’s imperative to actively track all your losses and report them to the IRD, so that you can offset your losses or carry them forward to the subsequent tax year in case you have leftover losses.

Lost or Stolen Crypto

In New Zealand, if you experience the theft or loss of cryptocurrency, you may be able to treat it as a capital loss for tax purposes. To claim a capital loss in such cases, you must provide evidence that the loss was not a result of voluntary disposition, such as selling or exchanging the cryptocurrency.

To claim a capital loss, you need to provide evidence of the theft or loss, such as a police report or a statement from a reputable cryptocurrency exchange, and keep records of the cost of the cryptocurrency, the date it was acquired, and the date it was lost or stolen. By doing so, you may be able to offset your capital loss against capital gains from other sources, reducing your overall tax liability.

Crypto Tax Breaks New Zealand

Although it’s impossible to avoid paying crypto taxes entirely, you can claim some deductions and lower your tax bill in New Zealand. Here are some ways you can reduce your tax liabilities:

1. Transaction Fees Deductions

In New Zealand, any additional costs associated with purchasing a crypto asset, such as transaction fees or gas fees, are considered deductible expenses. These expenses can be offset against your gains, helping to reduce your overall tax liability. Although transaction fees and gas fees may seem insignificant on an individual basis, when accumulated over a year, they can add up to a significant amount.

2. Capital Loss Deductions

Losses are not always bad news. If you’ve made some losses while trading or investing in crypto assets over a tax year, you can offset them against your capital gains and claim a tax deduction, as long as you have a detailed account of all your losses and you have reported them to the IRD. 

Crypto Cost Basis Method

The examples we’ve used so far are primitive and don’t represent real-world transactions. They are far more complex and have multiple assets of the same kind acquired at different dates and prices. For such complex transactions you have no other choice but to rely on specialised accounting methods as specified by the individual tax authority of your country. 

The IRD allows investors to use one of the following methods for cost-basis calculations:

1. The FIFO Method is where the first asset you buy is the first one you sell.
2. The ACB Method is where the cost basis for an asset is taken to be the average acquisition price.

You are free to use any one of the two accounting methods, just make sure you stick to the same accounting method in the subsequent tax years to avoid discrepancies in tax reports.

Here’s an example to better understand how these accounting methods work.

Consider the following transactions:

03/01/22 - Amelia bought 1 BTC for $28,000

14/02/22 - Amelia bought 1 BTC for $30,000

19/03/22 - Amelia bought 1 BTC for $32,000

04/06/22 - Amelia sold 1 BTC for $40,000

‍

1. Using FIFO Accounting

The first BTC was acquired on 03/01/22 for $28,000

So the cost basis is $28,000 for this disposal

Disposal Amount = $40,000

Capital Gain = $40,000 - $28,000 = $12,000

‍

2. Using ACB Accounting 

Since there are three instances where Amelia bought BTC.

We need to calculate the average acquisition price.

1st acquisition = $28,000

2nd acquisition = $30,000

3rd acquisition = $32,000

Average Acquisition Price = ($28,000 + 30,000 + $32,000)/3 = $30,000

Cost basis = $30,000

Disposal Amount  = $40,000

Capital Gain = $40,000 - $30,000 = $10,000

Cryptocurrency and Tax Residency 

Residents, Non-residents, and Returning residents are taxed differently in New Zealand. 

Non-Residents for Taxes

The ambit of crypto taxes in New Zealand is not properly defined for non-residents. A non-resident in New Zealand only has to pay taxes on income that has been sourced from New Zealand. However, the term “source” for tax purposes has not been defined properly for non-residents, leaving behind a trail of uncertainties, confusion, and tax loopholes. 

Although as far as crypto assets are concerned, any assets held in NZD, or traded for NZD are considered to be a taxable according to the IRD. To keep taxation of non-residents streamlined, most countries including New Zealand have double tax agreements, and these profits usually attract tax liabilities in a person’s home country.

Any income derived from outside New Zealand is considered to be non-taxable for non-residents.

New and Returning Residents

New and returning residents in New Zealand are granted a “grace period” by the IRD that lasts for 4 years and they are considered “transitional tax residents”. And during this period they have to pay zero taxes on a majority of the offshore income. While it’s still unclear whether revenue generated from crypto assets is included in the list of non-taxable offshore income, the IRD is considering the prospect of issuing new guidelines regarding their taxation. But until they do, it’s a great area for new and returning residents.

Residents for Tax Purposes

Residents in New Zealand are taxed regardless of the source of their income. And this includes crypto assets. If you live in New Zealand and you have bought, sold, mined, or traded crypto assets during a tax year, you have to report these transactions to the IRD on your tax return and pay your taxes. 

Tax-Free Crypto Transactions

In New Zealand, the following are some tax-free cryptocurrency transactions:

• If you use cryptocurrency to purchase goods or services for personal use and the value of the transaction is $60,000 or less, it is considered tax-free.

• If you earn cryptocurrency through mining, this income is tax-free.

• If you donate cryptocurrency to a registered charity, the transaction is tax-free.

• If you gift cryptocurrency to someone, it is tax-free as long as the value of the gift is $6,000 or less.

Taxed Crypto Transactions

Listed below are some of the taxable crypto transactions in New Zealand:

• If you use cryptocurrency to conduct business activities, any profits you make from these activities are subject to income tax.

• If you sell or trade cryptocurrency for a profit, the profit is considered a capital gain and is subject to capital gains tax.

• If you receive cryptocurrency as a form of payment for your work, it is considered taxable income and must be declared on your tax return.

• If you purchase cryptocurrency as an investment, gains made from the investment are subject to capital gains tax.
  

Tax on Mining Crypto New Zealand 

Crypto mining is considered a service by the IRD, and any income incurred from crypto mining is taxable according to the latest update on the crypto mining guidelines. And since it is categorised as a service by the IRD, the provisioning of this service also attracts a GST(Goods and Service Tax) in New Zealand. 

However, the GST is zero in almost all cases because the service is offered to a blockchain set up outside New Zealand. The tax rate that applies to the income made through mining activities depends on the category in which your mining activities fall.

There are four categories your mining activities might fall into:

1. Mining as a hobby
2. Mining as a business 
3. Mining for ordinary income
4. Mining as a profit-making scheme

You can look at how the IRD categorises mining activities here.

Taxes on Crypto Staking

The IRD groups crypto mining and crypto staking under the same bucket and considers both a service. The tokens received as a staking reward are considered income and therefore attract income tax in New Zealand.

It’s important to note that the tokens are taxed at the time you receive them as a reward and are also taxed at the time of disposal if you sell them for a profit. 

Staking activities, similar to crypto mining, may be viewed by the IRD as a profit-making venture, a business operation, a source of ordinary income, or simply a leisure activity. If deemed a hobby by the IRD, your staking rewards and any future sales profits will be exempt from taxation. However, it's important to note that the criteria for classifying an operation as a hobby are stringent.

Taxes on Buying and Selling Crypto 

Buying crypto with fiat currency is not a taxable event, according to the IRD. Crypto assets do not attract tax liabilities unless they’re disposed of. Any sale, trade, exchange, or transfer of a cryptocurrency, as well as the conversion of crypto to fiat currency, is considered disposal and may be subject to capital gains tax. The tax treatment of crypto assets may vary based on the specific circumstances of each case.

So let’s say you swap ETH for BTC. This event is taxable because you have disposed of your BTC holdings. To calculate the amount you owe taxes on, you need to first identify your cost basis(the cost incurred to acquire an asset) from back when you bought these ETH tokens and then subtract it from the price of BTC at the time of acquisition. The difference between these two assets is what you pay taxes on. 

People often assume that the only way to attract tax obligations is by selling their assets, and that leads to underreporting on tax reports and unsolicited legal complications for people.

Crypto Gifts and Donation Taxes

Gifting crypto is a taxable event in New Zealand. If the value of the gifted assets has appreciated since the acquisition, you are required to pay income tax on the appreciated value. The person receiving the gifts is not liable to pay any taxes. However, any gains incurred by disposing of the assets are considered income and taxed accordingly.

There’s no specific guidance on how crypto donations are taxed in New Zealand. However, donations in general are tax deductible and you can claim a donation credit of up to 1/3d of the donated value given that you’ve made a taxable income during the tax year.

Crypto Margin Trading, Futures and CFDs

Understanding cryptocurrency futures and margin trading taxes in New Zealand is challenging as there is no regulatory framework. The best approach is to study how other countries handle these transactions and seek the advice of a tax professional. A prudent step as a trader or investor would be to Consult with a tax advisor if you’re unsure about reporting taxes.

Exchanges trading futures contracts keep a record of your realized profits and losses (P&L) in the settlement currency, usually USD, USDT or BTC. If you score a win of $1000, your account will reflect the victory and be taxed as income. On the flip side, if you incur a loss, it'll be deducted from your account and can be used to balance out other gains. Essentially, you'll only be taxed on the net gains from your cryptocurrency futures trading endeavours in a given financial year.

ICO Taxes

ICOs are special events that allow investors to acquire tokens from unreleased projects in exchange for mainstream tokens like BTC and ETH. They’re similar to IPOs in traditional markets. 

While the IRD has not issued specific guidelines for individuals participating in Initial Coin Offerings (ICOs), it is reasonable to assume that ICOs are treated similarly to crypto-to-crypto trade for tax purposes. In this context, participating in an ICO involves sending cryptocurrency in exchange for tokens from a new project. The general principle is to consider the transaction as if you sold your crypto for the value of the ICO token in the local currency. The cryptocurrency you send is subject to personal income tax, and the received token inherits its cost basis.

DAO Taxes

DAOs are member-owned communities with a shared vision. All the decisions in a DAO are made by the members in the absence of central leadership. DAOs are new-age institutions that aim to democratise decision-making and allow people to have a say in decisions that directly affect them. DAOs are often referred to as the soul of Web3 and enable members to earn rewards in multiple ways. DAO contributors are rewarded for their contributions to the organization, similar to how centralized organizations pay salaries to their employees. They also pay out bounties for one-time projects and redistribute any profits generated through operations.

The IRD is yet to release guidelines on the taxation of income received from DAOs. However, it’s reasonable to assume that income from DAOs will be treated as regular income for tax purposes. 

NFT Taxes New Zealand

According to the IRD, NFTs are similar to crypto assets because they are built on the same technology and exist on distributed ledgers. However, they’re not the same as they are unique and non-fungible.

NFTs are considered a service for GST purposes. According to the IRD:

“NFTs are classified as a service for GST. Selling NFTs is subject to GST so you need to register for GST if you sell more than $60,000 worth of NFTs in 12 months. If the NFTs are sold to people outside of New Zealand the sales are zero-rated for GST purposes.”

Also, some smart contracts governing the sale and transfer of NFTs are encoded so that every time the NFTs are sold in an open market, the creator receives royalties. These royalties are considered income for tax purposes and are subjected to capital gains tax.

As per the IRD guidelines, you’ll have income tax liabilities on the sale of NFTs if:

• your business creates NFTs
• you buy and sell NFTs to make a profit
• you acquired NFTs for disposal.

NFTs offer a unique advantage over crypto assets, as they can be not only used but also enjoyed. If you purchase NFTs for personal use, you won't have to pay any taxes when you dispose of them. However, if you acquire NFTs as an investment, it's important to have clear documentation showing your intentions at purchase.

DeFi Crypto Taxes New Zealand

In New Zealand, the tax treatment of DeFi transactions is determined by the nature of the transaction and the individual's circumstances. DeFi transactions, like any other investment, may be subject to income tax, capital gains tax, or goods and services tax (GST) depending on the specific circumstances of the transaction.

Income tax may apply to the profits earned from DeFi transactions, and capital gains tax may apply to the gains made from disposing of DeFi assets. GST may apply to DeFi transactions involving the supply of goods or services.

When to report Crypto Taxes in New Zealand?

In New Zealand, the tax year stretches from April 1st to the following March 31st. So, if you're compiling your tax return for the 2021/2022 fiscal year, ensure submitting it by July 7th, 2022. It's worth keeping in mind that if you submit any filings past the deadline, it could result in fines and additional charges.

How to file crypto taxes in New Zealand?

In New Zealand, you can file your cryptocurrency taxes through the Inland Revenue Department (IRD). The IRD requires that you declare all income, including income from cryptocurrency transactions, on your tax return.

There are two ways you can file crypto taxes in New Zealand:

1. Using the online portal myIR
2. Using physical forms

People usually prefer the online portal over physical forms as it is easy to track and edit.

What crypto records will the IRD want?

The IRD has released specific guidelines regarding record-keeping for taxpayers. You might need the following records when filing your tax returns:

• Name of the asset involved in transactions
• Date of the transaction
• Type of transaction (acquisition, disposal, swap, etc.,)
• Quantity of tokens
• The value of the cryptocurrency in NZD at the time of the transaction
• Total units of each cryptocurrency held at the beginning and end of the year
• Exchange records and other relevant statements
• Wallet addresses of your digital wallets

In the event of an audit by the IRD, it's crucial to have detailed records of all your cryptocurrency transactions on hand. As per current tax regulations, these records must be kept for at least seven years, even if you no longer possess any cryptocurrency. Failing to produce these records during an audit can result in consequences.

How to Avoid Crypto Taxes in New Zealand

Although there’s no legal way to avoid crypto taxes entirely, you can employ some strategies to lower your tax bill in New Zealand without getting into trouble.

• Transaction fees and gas fees paid when buying crypto assets are deductible costs that can be used to offset gains and reduce tax obligations. Despite appearing minimal individually, these fees can accumulate to a substantial amount over time.

• Crypto losses can be offset against capital gains, leading to tax deductions. Keep detailed records of losses and report them to the IRD for eligibility.

• Donations in general are tax deductible in New Zealand and you can claim 1/3rd of your donation amount as a tax credit, given that you’ve made a taxable gain in the tax year.

FAQs

1. What happens if you don’t report cryptocurrency on your tax return?

If you don't report cryptocurrency on your crypto taxes in New Zealand, it can result in penalties and fines from the Inland Revenue Department (IRD). The IRD can assess tax liabilities and issue fines for non-compliance, and if the non-compliance is found to be intentional, there could even be criminal charges brought against the individual. It's important to accurately report all income, including from cryptocurrency, to avoid these consequences.

2. How to file crypto taxes with the IRD?

There are two ways you can file crypto taxes in New Zealand:

3. Using the online portal myIR
4. Using physical forms

People usually prefer the online portal over physical forms as it is easy to track and edit.

3. Is Crypto Taxable in New Zealand?

Yes, crypto transactions are taxable in New Zealand. Cryptocurrency gains are treated as taxable income and subject to income tax. Moreover, transactions including buying and selling, are subject to goods and services tax (GST).

4. Is cryptocurrency legal in New Zealand?

Yes, cryptocurrency is legal in New Zealand. The New Zealand government has taken a relatively relaxed approach to the regulation of cryptocurrencies, and there are currently no specific laws in place that govern the use of cryptocurrencies.

However, the Reserve Bank of New Zealand and the Financial Markets Authority have issued warnings to investors about the risks associated with investing in cryptocurrencies. Additionally, the Inland Revenue Department (IRD) has issued guidelines on the tax treatment of cryptocurrencies, which requires individuals to report any income derived from cryptocurrencies as taxable income.

‍

All content on Kryptos serves general informational purposes only. It's not intended to replace any professional advice from licensed accountants, attorneys, or certified financial and tax professionals. The information is completed to the best of our knowledge and we at Kryptos do not claim either correctness or accuracy of the same. Before taking any tax position / stance, you should always consider seeking independent legal, financial, taxation or other advice from the professionals. Kryptos is not liable for any loss caused from the use of, or by placing reliance on, the information on this website. Kryptos disclaims any responsibility for the accuracy or adequacy of any positions taken by you in your tax returns. Thank you for being part of our community, and we're excited to continue guiding you on your crypto journey!

Are you a Spain resident and wish to understand the rules governing crypto taxation and how they affect you? Then you’ve come to the right spot. Because this tax guide will address questions like how crypto transactions are taxed in Spain, How much taxes should you pay on your crypto transactions? and How to report your taxes to the Agencia Tributaria?

For individuals involved in trading or investing in crypto assets, it is crucial to familiarise themselves with the guidelines and regulations governing the taxation of these transactions. Staying informed about the tax rules will help you avoid potential legal and tax implications when filing your tax report. As the landscape of crypto taxation continues to evolve worldwide, it is essential to understand that Spain is also implementing its own regulations in this regard. By staying up-to-date with the latest developments, you can ensure compliance with the tax requirements in Spain related to crypto assets.

This guide is comprehensive and will be updated regularly as the tax authorities keep updating the guidelines. So make sure you go through the entire guide thoroughly to avoid missing out on the pivotal aspects of crypto taxation.

So let’s get started…

Latest Updates/Guidelines

27/06/23- Updated to accommodate ICO, Gifts and Donation Taxes

27/06/23- Updated to accommodate 

How are crypto transactions taxed in Spain?

Agencia Tributaria, the Spanish tax authority defines Bitcoin and other crypto assets as:

“a digital representation of value that is neither issued nor guaranteed by a central bank or public authority, is not necessarily associated with a legally established currency and does not have the legal status of currency or money, but is accepted as a medium of exchange and can be transferred, stored or traded electronically.”

According to the latest guidelines from Agencia Tributaria, capital gains or losses from the sale of cryptocurrencies are treated as savings income for tax purposes. The taxation rules remain the same, whether you received fiat currency or another cryptocurrency after disposal.

The categorisation of crypto assets as property makes them liable for four kinds of taxes in Spain:

1. Savings Income Tax
2. Wealth tax
3. Inheritance and Donation Tax

Let’s dissect them one at a time.

Savings Income Tax(CGT)

Since crypto is considered a property and not a currency by tax authorities in Spain, the disposal of crypto assets attracts a capital gains tax, also known as the Savings Income tax. 

The following transactions are considered to be a disposal of crypto assets by the Agencia Tributaria:

1. Selling crypto for Fiat
2. Trading crypto for another cryptocurrency
3. Gifting crypto to other people

Depending on the size of gains you’ve made, you will be taxed according to the following rates:

Since Spain has a progressive tax infrastructure, you don’t pay a flat rate on your capital gains. You only pay a higher tax rate on the extra income.

General Taxable Income

Any income that’s not a savings income is by default assumed to be general taxable income for Spanish citizens and attracts a progressive income tax. Any income made from the following transactions is considered General taxable income by Spanish tax authorities:

1. Any income not considered savings income. 
2. Mining Crypto

Just like savings income, progressive tax rates apply to general income, which contains both a state tax rate and a local tax rate approved by each autonomous community in Spain. As a result, the applicable tax rate may vary between autonomous communities.

The general income tax rates are as follows:

‍

Wealth Tax

Like Norway, Netherlands, and Italy, Spain also levies a wealth tax on its citizens at the end of the tax year. It applies to individuals who are Spain's residents and those who own assets in the country, regardless of their place of residence. The tax rate ranges from 0.2% to 2.5% based on the individual net worth. It is primarily governed by the state, however, autonomous communities can establish independent guidelines for wealth taxation.

To calculate the wealth tax you owe to tax authorities, you need to calculate your taxable base first. Your taxable base is the total worth of your assets after all permissible deductions.

Here’s a list of permissible deductions while calculating wealth tax:

• Every Autonomous Community can set its minimum amount exempt from taxation. You can get more details from the website of the autonomous community.

• If an autonomous community fails to set its tax exemption threshold, a default exemption of €700,000 will be in effect.

• Your primary residence, be it a house or apartment, is eligible for a tax exemption of up to €300,000.

• Family company stakes and business assets may be exempt, provided certain criteria are fulfilled.

Given below are tax rates for autonomous communities in Spain:

• Catalonia: between 0.21% and 3.48% tax.
• Asturias: between 0.22% and 3% tax.
• Region of Murcia: between 0.24% and 3% tax.
• Andalusia: between 0.20% and 2.5% tax.
• Cantabria: between 0.24% and 3.03% tax
• Community of Valencia: between 0.25% and 3.5% tax
• Balearics: between 0.28% and 3.45% tax
• Extremadura: between 0.3% and 3.75% tax

Inheritance and Donation Tax

Spain has a gift and inheritance tax, also known as Impuesto Sobre Donaciones y Sucesiones, a tax imposed on transfers of wealth as gifts and inheritances. The tax rate depends on the value of the asset being transferred, the relationship between the giver and the recipient, and the autonomous community in which the recipient resides. 

Exemptions and reductions are available for transfers between close relatives, such as spouses and children. The Spanish government sets the general framework for the gift and inheritance tax, but each autonomous community can establish its tax rates and exemptions.

Can the Agencia Tributaria track crypto?

Yes, it can. The Agencia Tributaria has access to information from cryptocurrency exchanges, wallets, and other platforms to identify taxable transactions. This information can be used to verify if taxpayers have reported all of their taxable crypto transactions and to identify any discrepancies or underreporting. As a result, it is important for taxpayers to accurately report all of their cryptocurrency transactions to avoid any penalties or fines. 

Savings Income Tax

Acquiring crypto is not a taxable event in Spain. However, since crypto is considered a type of property by the Spanish tax authorities, the disposal of crypto assets is considered a capital gain and attracts tax liabilities. 

In general, capital gains made by individuals are taxed at a rate in the range of 19% or 283% depending on the gain, while gains made by companies are taxed at a rate of 25%. However, certain exemptions and reductions may apply.

Consider the following transactions:

13/01/22 - Antonio bought 3 BTC 

11/02/22 - Antonio bought 4 ETH

18/04/22 - Antonio received 6.25 BTC as mining rewards (Total Value Є1,25,000)

23/05/22 - Antonio sold 1 BTC (Capital Gain = Є10,000)

21/06/22 - Antonio sold 1 ETH (Capital Gain = Є2,000)

01/08/22 - Antonio received 2 BTC as a gift (Perceived Value of the Gift Є50,000)

As evident from the above ledger of transactions, two disposals were made. 

Since cryptocurrencies are treated as property in Spain, their disposal attracts a savings income tax.

So collective gain from both disposals = Є12,000

Since the total gain lies between Є6,000 and Є50,000, a 21% CGT will be levied on the gain. So Antonio owes Є2,520 in CGT to the tax authorities.

Now, Antonio received 6.25 BTC as mining rewards. Mining rewards are perceived as general taxable income in Spain, so the total value of the rewards (Є1,25,000) will attract a GIT (General Income Tax) based on the tax bracket it falls in.

As for the 2 BTC received by Antonio with a total perceived value of Є50,000, an inheritance and Donations Tax will be levied on the value. 

How to Calculate Crypto Gains and Losses

You can calculate your crypto gains or losses easily. The first step would be to find the cost basis for your assets which is the price you paid to acquire the crypto asset, including any gas fees or transaction fees paid in addition to the asset’s market value. Once you have that figured out, you can move on to the next step.

Your capital gain or loss is simply the difference between your cost basis and the value of your asset at the time of disposal. If the difference is positive, it’s considered a capital gain and if it’s negative, it is a capital loss. 

Consider the following transactions:

13/01/22 - Pablo buys 1 BTC for Є20,000

19/01/22 - Pablo buys 2 ETH for Є2,100 each

21/02/22 - Pablo buys 1 BTC for Є22,000

19/04/22 - Pablo sells 1 BTC for Є25,000

24/06/22 - Pablo sells 2 ETH for Є2,500 each

As evident from the above transactions, Pablo made 2 disposals, let’s calculate the gains/losses incurred by Pablo from these disposals one at a time.

1st Disposal

1 BTC sold for Є25,000

Now since BTC tokens were acquired at two separate instances for different prices, we need to use a specialised accounting method to calculate the cost basis for this transaction. The Spanish authorities recommend using the FIFO or the First-In-First-Out accounting method for cost-basis calculations, stating that the first asset you buy is the first one you sell. 

Accounting methods have been discussed in detail later in the guide.

So the cost basis for this transaction comes out to be Є20,000 because this is what Pablo paid to acquire the first BTC.

Cost Basis = Є20,000

Disposal Amount = Є25,000

Capital Gain = Є25,000 - Є20,000 = Є5,000

2nd Disposal 

2 ETH sold for Є2,500 each

This is a pretty straightforward disposal since ETH tokens were acquired in only one instance.

Cost Basis = Є2,100

Disposal Amount = Є2,500

Capital Gain = Є2,500 - Є2,100 = Є400 (For 1 ETH)

Total Gain from both ETH = 2 * Є400 = Є800

Collective gain from both disposals = Є5,800

Crypto Losses

When you trade or invest in speculative capital markets, losses are inevitable. However, losses aren’t always bad. You can use your capital losses from crypto assets to reduce your tax bill by offsetting them against your gains. You can write off all your losses as long as you’ve made these losses in the same tax year as the gains. 

If you carry your losses to a subsequent tax year, you can only use 25% of the net loss to reduce your tax bill. To write off capital losses in Spain, you will need to provide evidence of the sale of the asset, such as a brokerage statement or other documentation and meet any other requirements established by the Spanish tax authorities.

Lost or Stolen Crypto

In Spain, there's a chance you can deduct a lost or stolen cryptocurrency as a tax loss, but it depends on various elements, including the country's tax laws and the situation surrounding the loss. To claim a tax loss on lost or stolen cryptocurrency, you must have evidence of the loss, such as a report from the police or exchange where the cryptocurrency was held. 

Furthermore, the tax laws in Spain may have specific regulations for reporting and claiming losses involving cryptocurrencies, so it would be wise to seek advice from a tax expert. You should remember that declaring a tax loss for lost or stolen crypto can be a complicated process and may not always be possible.

Crypto Cost Basis Method Spain

In Spain, the FIFO (first in, first out) method is employed when calculating your taxable income. This means that the first asset you buy is considered the first asset you sell, and the crypto taxes are calculated based on this original cost.

If you need more clarity on using the FIFO accounting method to calculate your crypto taxes you can refer to this article here.

Consider the following transactions:

13/01/22 - Carlos bought 1 BTC for Є21,000

15/02/22 - Carlos bought 1 BTC for Є23,000

17/06/22 - Carlos sold 1 BTC for Є25,000

As evident from the above ledger, Carlos acquired BTC tokens at two separate instances for different prices, now since we’re using the FIFO accounting method, the cost basis for this disposal would be Є21,000

Cost Basis = Є21,000

Disposal Amount = Є25,000

Capital Gains = Є25,000 - Є21,000 = Є4,000

How to Calculate Crypto Income

Calculating your taxable income from crypto assets in Spain is a straightforward process. Start by summing up all your capital gains from the sale or disposal of your crypto assets. Next, offset any capital losses you have incurred against these gains. The resulting amount after offsetting the losses is your taxable income from crypto assets. It's important to note that only the net capital gains (gains minus losses) are subject to taxation. By accurately calculating your taxable income, you can fulfil your tax obligations and ensure compliance with the tax regulations in Spain.

Tax-Free Crypto Transactions

Not all crypto transactions attract tax liabilities. The following transactions are tax-free in Spain:

• If you give cryptocurrency to someone, it may be exempt from taxes until it meets the criteria established by Spanish tax law.

• Holding crypto is also tax free in Spain unless you meet the wealth tax threshold.

• Transfers of cryptocurrency between your wallets or exchanges may not be subject to taxes in Spain.

Taxed Transactions

If you’ve been a part of any of the transactions listed below, you might owe some taxes to the Spanish tax authorities:

• If you trade one cryptocurrency for another or exchange it for fiat currency, you may be subject to taxes on any capital gains or profits from the transaction.

• If you sell cryptocurrency for a profit, the profit may be considered a capital gain and subject to taxes in Spain.

• If you use cryptocurrency for business operations, such as accepting it as payment for goods or services the transactions may be subject to taxes.

• If you earn cryptocurrency through mining, the rewards may be considered taxable income.

Tax on Mining Crypto Spain

The Agencia Tributaria is silent on the taxation of cryptocurrency earned through mining operations. However, as many other countries consider mining rewards equivalent to regular income, it is best to report it in your tax return, as you are effectively compensated for a service. This approach is likely the safest option.

We do suggest seeking help from an experienced tax professional to better understand how mining rewards are viewed from a tax perspective.

Tax on Staking Crypto

The Agencia Tributaria is yet to release specific guidelines on the taxation of staking rewards. But since most countries in the vicinity treat mining and staking rewards similarly from a tax perspective, any staking rewards will probably be taxed as investment income and should be recorded at fair market value at the time of receipt.

However, we do suggest seeking advice from an experienced tax accountant to avoid legal trouble in the future.

Crypto Margin Trading, Futures and CFDs

In Spain, the tax treatment of margin trading, futures, and Contracts for Difference (CFDs) depends on the classification of the investor. If you’re a retail investor, any profits from these financial instruments are taxed as capital gains. And If you’re a professional trader, the profits are taxed as business income.

For retail investors, capital gains are taxed at 19% for gains up to €6,000 and 23% for gains over €50,000 and €200,000. In addition, Spain has a progressive tax system, so the more you earn, the higher the rate will be.

For professional traders, business income is taxed at the normal corporate tax rate of 25%. However, it may be possible to qualify for a reduced tax rate of 20% under certain conditions. 

Crypto Gifts and Donation Taxes

When an individual inherits cryptocurrencies, it is important to include them in the ISD (Inheritance and Gift Tax) statement.

Similar to the Wealth Tax, the taxation of inherited or gifted cryptocurrencies depends on the amount received and the specific jurisdiction. Each Autonomous Community in Spain establishes its tax rate for inherited and gifted assets. However, as a general guideline, the taxable rate typically ranges from 7% to 36.5%. The specific rate applied will vary accordingly.

NFT Taxes Spain

In Spain, the taxation of Non-Fungible Tokens (NFTs) is determined based on the specific use and nature of the NFT. NFTs can be considered a means of payment, or a work of art, or a financial asset.  NFTs are considered a financial asset, they are subject to capital gains tax.

ICO Taxes

ICOs are special events that allow investors to acquire tokens from unreleased projects in exchange for mainstream tokens like BTC and ETH. ICOs are similar to IPOs in traditional markets and are viewed as crypto-to-crypto trades for tax purposes across jurisdictions.

Therefore, it is highly probable that any crypto assets received through ICOs will be viewed as a crypto-to-crypto trade and will be subjected to capital gains tax or Savings Income Tax in Spain. However, there are no  specific guidelines in this regard. Hence. We do suggest seeking the advice of experienced tax professionals to better understand how such transactions are taxed.

DAO Taxes

DAOs are member-owned communities with a shared vision. All the decisions in a DAO are made by the members in the absence of central leadership. DAOs are new-age institutions that aim to democratise decision-making and allow people to have a say in decisions that directly affect them. DAOs are often called the soul of Web3 and enable members to earn rewards in multiple ways. DAO contributors are rewarded for their contributions to the organization, similar to how centralized organizations pay salaries to their employees. They also pay out bounties for one-time projects and redistribute any profits generated through operations.

The Agencia Tributaria is yet to release any guidance on the taxation of income from DAOs, we suggest seeking the advice of an experienced tax professional to understand better how such transactions are viewed from a tax perspective.

DeFi Crypto Taxes Spain

Agencia Tributaria is yet to release clear guidelines around the taxation of DeFi transactions. Inferring from the existing guidelines and tax rules, we can say the following:

1. Any income made from DeFi transactions shall be subjected to income tax
2. Any income made from crypto-to-crypto swaps, trades, and liquidity farming shall be subjected to savings income tax.

Taxes on buying and selling crypto in Spain

Whether or not buying crypto is taxable depends on the nature of your transaction. If you’re using fiat currency to buy crypto assets, the event is non-taxable. However, if you buy a crypto asset and pay for it using another crypto asset, the event is considered a disposal of a capital asset. It attracts a Savings Income Tax ranging from 19-28% depending on the size of your income.

Selling cryptocurrency, regardless of the type of currency you receive is deemed a taxable event. So, when you swap a cryptocurrency for euros, stablecoins, or any other crypto asset, it's necessary to calculate the capital gains from the cryptocurrency sold.

How are Airdrops and Forks taxed in Spain?

The Spanish Tax Agency has not issued any official guidance on the taxation of cryptocurrency airdrops and forks. However, as a precautionary measure,to recognize income as per the fair market value, at the time of receipt.

 It is advisable to consider crypto received from airdrops and forks as taxable income under personal income tax.

How to report crypto taxes in Spain?

You can use the Form 100 ( Modelo 100) to declare all your income to the tax agency in Spain, and since capital gains are considered a part of your income, you can report all your capital gains and losses through this form.

There’s been a bit of confusion regarding the declaration of foreign assets worth more than €50.000 using the Modelo 720 declaration form but the recent notifications from the Agencia Tributaria clarify that crypto assets are not included in the list of financial assets that must be reported using this form.

How to file your crypto taxes in Spain?

Once you’ve successfully calculated your cost basis and the collective taxable income across all your transactions, you need to fill up the form called Modelo 100 and submit it to the Agencia Tributaria.

You can do this physically or through their online portal called Renta Online which allows you to fill, edit, and submit your tax forms from the comfort of your home.

What crypto records will the Agencia Tributaria want?

The Spanish Tax Agency, AEAT, mandates that thorough documentation of cryptocurrency transactions be retained for 5 years. This requirement applies from the later of either the date when the records were prepared or obtained or the completion of the transactions they relate to. The following information should be included in these records:

• The date of each cryptocurrency transaction
• The value of the cryptocurrency in Euros at the time of the transaction, which can be obtained from a reputable online exchange
• The purpose of the transaction and the identity of the other party involved, even if it is just a wallet address.

FAQs

1. What is the deadline to file taxes in Spain?

In Spain, the tax year follows the standard calendar year, starting on January 1st and ending on December 31st. To keep up with tax obligations, Spanish income tax returns for the previous year must be submitted by June 30th. This means, for the 20232 tax year, the deadline for submitting your tax return is June 30th, 20243.

2. Who can help you calculate your crypto tax in Spain?

Although you can calculate your crypto taxes on your own, or have a tax accountant do it for you, there’s a high chance that you might miss reporting on your tax report and that may lead to some legal complications. It is advisable to use an online tax calculator like Kryptokatt that can auto-fetch all your transactions from your digital wallets and investment profiles and generates a legally compliant tax report for you within minutes saving you thousands in consulting fees.

3. How is Crypto Staking Taxed in Spain?

Spain doesn’t have clear guidelines on the taxation of cryptocurrency staking rewards. However, because staking rewards are similar to mining rewards, it's advisable to treat staking rewards as general income and report it on your tax return, just like you would with mining rewards. This is the most correct and prudent approach.

4. Is crypto taxable in Spain?

Yes, cryptocurrency is taxable in Spain. According to Spanish tax law, any capital gains obtained from the sale of cryptocurrency are considered taxable income and are subject to taxation. The tax rate varies based on the individual's tax bracket, and the applicable tax rate can range from 19% to 26%. It's essential to consult with a tax professional for specific questions about your tax situation.

‍

All content on Kryptos serves general informational purposes only. It's not intended to replace any professional advice from licensed accountants, attorneys, or certified financial and tax professionals. The information is completed to the best of our knowledge and we at Kryptos do not claim either correctness or accuracy of the same. Before taking any tax position / stance, you should always consider seeking independent legal, financial, taxation or other advice from the professionals. Kryptos is not liable for any loss caused from the use of, or by placing reliance on, the information on this website. Kryptos disclaims any responsibility for the accuracy or adequacy of any positions taken by you in your tax returns. Thank you for being part of our community, and we're excited to continue guiding you on your crypto journey!

Are you among the many Swedish citizens involved in cryptocurrency transactions and unsure about the tax implications? 

Don't worry, you're not alone!

Thousands of people are confused about how their crypto activities are taxed in Sweden and how this affects their tax obligations. That's why we've created a comprehensive guide to simplify the complexities of crypto taxation in Sweden for you. 

Our guide covers every aspect of crypto taxation, including how to calculate your crypto taxes and report them easily. We'll also keep this guide up-to-date with the latest guidelines from the Skatteverket, so you don't miss out on any crucial updates. So let's dive in and demystify the world of crypto taxes in Sweden.

‍

Key Information

‍

Latest Updates/Guidelines

16/06/22 - Updated to accommodate ICO, gifts and donation taxes

16/06/22 - Updated to accommodate DAO taxes

How are Cryptocurrencies Taxed in Sweden?

According to Skatteverket, Bitcoin and other cryptocurrencies are classified as property rather than currency. Consequently, any sale or disposal of crypto assets in Sweden is subject to capital gains tax or income tax. It's important to note that the Skatteverket categorises bitcoin, altcoins, and other crypto assets as "other assets" under Chapter 52 of the Swedish Income Tax Act, which governs their taxation.

It is also possible to be liable for additional taxes such as income tax/employment tax and interest income tax, depending on individual circumstances. Each situation is unique and may attract different taxes, which we will delve into further.

A flat tax rate of 30% applies to all gains made from crypto assets. Note that this only applies when crypto assets are classified as stock assets.

There are two types of Income Tax in Sweden:

1. Municipal Income Tax
2. National Income tax

National income applies to income above SEK 5,98,500, the municipal income tax varies based on the municipality you live in.

Let’s understand how these taxes work through an example.

Consider the following transactions

2022/02/21 - Olivia bought 1 BTC for SEK 2,40,000

2022/03/11 - Olivia bought 1 BTC for SEK 2,50,000

2022/04/14 - Olivia bought 2 ETH for SEK 16,000 each

2022/04/21 - Olivia bought 1 ETH for SEK 18,000 each

2022/06/04 - Olivia sold 2 BTC for SEK 2,90,000 each

2022/08/18 - Olivia sold 3 ETH for SEK 20,000 each

2022/10/23 - Olivia receives 6.25 BTC as a mining reward

Now as seen in the above transactions, a total of 2 disposals were made, so let’s look at the gains incurred from each transaction.

1st Disposal

2 BTC sold for SEK 2,90,000 each

Since the two BTC tokens were acquired at two different dates and prices, we are obligated to use a cost basis method to calculate the cost basis.

The Skatteverket recommends using the average cost basis method in Sweden. We have discussed it in more detail later. For now, just know that the average cost basis method considers the cost basis of an asset to be the average of its acquisition prices.

BTC-1 was acquired for SEK 2,40,000

And BTC-2 was acquired for SEK 2,50,000

Now the average cost base = (2,40,000 + 2,50,000)/2 = SEK 2,45,000

Disposal Amount = SEK 2,90,000

Capital Gain = Disposal Amount -  Cost Basis = 2,90,000 - 2,45,000 = SEK 45,000

Gain from both disposals = 2*45,000 = SEK 90,000

2nd Disposal

3 ETH sold for SEK 20,000 each

ETH-1 acquisition cost = SEK 16,000

ETH-2 acquisition cost = SEK 16,000

ETH-3 acquisition cost = SEK 18,000

Avg. Cost Base = (16,000 + 16,000 + 18,000)/3 = SEK 16,666.67

Disposal Amount = SEK 20,000

Capital Gain from 1 ETH disposal = 20,000 - 16,666.67 = SEK 3333.33

Gain from 3 ETH disposals = 3*3,333.33 = SEK 9,999.99

Collective gain from both disposals =  SEK (90,000+ 9,999.99) = SEK 99,999.99

This capital gain will attract a blanket tax rate of 30%.

As far as crypto mining goes, tax will be calculated on the fair market value of the crypto mined.

Moreover, if the business criteria are met, then the Tax Agency may tax mining of cryptocurrency, specifically as income from business activities. Or else, it may be taxed as income from employment (hobby) of a natural person.

Can the Skatteverket Track Crypto?

Yes, Skatteverket can access your records from cryptocurrency exchanges, including your holdings, transaction history, and withdrawal addresses due to strict regulation and the availability of data on public blockchains.

Most exchanges require users to complete a 'Know-Your-Customer' (KYC) application before purchasing cryptocurrencies. Thus, if you have signed up for any exchange that requires this check, Skatteverket is likely to have your record.

Moreover, the European Union's stricter regulations regarding customer identification mean that data is shared between EU member states. This directive has made it easier for financial authorities like Skatteverket to gain access to data on cryptocurrency owners.

Crypto Gains Tax

As discussed earlier, cryptocurrencies fall under the category of "Other Assets" defined in Chapter 52 of the Swedish Income Tax Act. As a result, if you’re selling Bitcoin or other cryptocurrencies it is subject to capital gains reporting requirements. However, numerous complex scenarios may require capital gains tax calculations, the fundamental expectation is that you, who hold cryptocurrencies, have to declare and pay capital gains taxes.

The following scenarios are subject to capital gains tax:

1. Selling a cryptocurrency for fiat currency (such as USD, EUR, or SEK)
2. Trading one type of cryptocurrency for another
3. Exchanging a cryptocurrency for a fiat currency
4. Using a cryptocurrency to purchase goods or services
5. Lending out a cryptocurrency (which may result in taxable income or capital gains, depending on the specific circumstances)

Capital Gain Tax Rate

If you are a Swedish resident and have earned capital gains from cryptocurrencies, you are subject to the same tax rate of 30% that applies to other types of assets such as bank savings, equities, dividends, and real estate. This means that the tax rate for cryptocurrency capital gains is not different from that of other capital gains in Sweden.

How to Calculate Crypto Gains and Losses

You have to use the “Average Cost Basis Method”, or Genomsnittsmetoden while calculating capital gains tax. To accurately calculate your cryptocurrency gains tax, it is essential to establish your "Cost Basis" or Omkostnadsbelopp. Typically, the cost basis is the average price at which the cryptocurrency was purchased which is mostly expressed in Krona(SEK).

While calculating your profit or loss, subtract your cost basis from the disposal amount of the asset. If you have made a profit, you will be required to pay a 30% tax on the gain, while if you have made a loss, you may deduct 70% of the loss.

A simple way to calculate taxable excess capital (your taxable gains) is to add all transactions with a gain together and all transactions with losses together and then finally deduct 70% of your losses from your gains to get the taxable base.

Crypto Losses

You can offset 70% of any capital losses you incur during a tax year against your capital gains and claim a tax deduction for the remaining losses. However, to take advantage of this tax deduction, you should actively track and record your losses.

Keeping accurate records of all your cryptocurrency transactions, including the purchase date, cost basis, and other relevant details is essential when calculating your capital gains and losses for tax purposes. If you maintain detailed records, you can claim your tax deductions and offset your capital losses against your capital gains, thereby minimising your tax liability.

Here’s an example:

Let’s say Erik makes a total gain of 100,000 SEK in a tax year and a loss of 100,000 SEK as well. Now since only 70% of the loss is deductible, you can deduct 70,000 SEK from your 100,000 SEK gain and the excess capital comes out to be 30,000 SEK and at a 30% tax rate, your tax liability comes out to be 9,000 SEK.

If your losses far exceed your gains, you can claim a tax reduction and get a refund from Skatteverket. If a taxpayer's capital deficit does not exceed 100,000 SEK, they receive a 30 per cent tax reduction. However, if the deficit is greater than 100,000 SEK, the tax reduction consists of 30,000 SEK (30 per cent of 1,00,000 SEK) plus 21 per cent of the amount by which the deficit exceeds 100,000 SEK. Although the tax credit may not be carried forward to a later year in some instances.

Consider this example:

Erik bought 4 Bitcoin for 500,000 SEK in year 1. In year 3, Erik sells 4 bitcoin for 250,000 SEK. The capital loss is 2,50,000 and 70 per cent of the loss is deductible, 175,000 SEK. Erik has no other incomes or expenditures in capital and the total capital deficit is therefore 175,000 SEK. The tax reduction is 30 per cent of 100,000 SEK (30,000 SEK) plus 21 per cent of 75,000 SEK (15,750 SEK), in total 45,750 SEK.

Wash Trading and It’s Tax Implications in Sweden

Sometimes investors make fictitious losses by closing a position at a loss and immediately purchasing the same assets again, feeding wrong information to the market. This practice is called Wash Trading and some countries like the UK even have a 30-day rule against it to prevent investors from doing so. There are no existing guidelines against wash trading in Sweden, so we decided to reach out to Skatteverket to better understand how such actions are viewed by them and here’s what they had to say about it:

“In Sweden, there is no equivalent to the 30-day rule that you mention in your email. The disposal of the asset however needs to be final and a real transfer of ownership has to take place. Selling an asset on the open market, for example on a trading platform, is usually regarded as a disposal. But if you sell the asset outside of a trading platform, especially to close relatives, the circumstances are different and if it is a disposal or not would have to be determined on a case-by-case basis. In that assessment, the time aspect is just one part. An agreement between buyer and seller, the transfer of the assets, that the price paid is based on market value, that the payment transaction took place, and how regularly the asset is traded are examples of other aspects of the disposal that might be considered.”

Lost Or Stolen Crypto

If you've experienced unfortunate events like losing your private keys, having your funds stolen, or facing losses from a collapsed exchange, you may be wondering if you can offset these losses against your capital gains. Unfortunately, Skatteverket has provided guidance on this matter, and the news isn't favorable.

According to the guidelines issued by Skatteverket , if you've lost access to your crypto due to a lost private key or a hacking incident, you cannot claim deductions for the resulting losses. Moreover, if you still own multiple assets of the same kind and haven't disposed of them or lost access to them, your cost basis remains the same.

Skatteverket has also offered specific instructions for individuals who lent assets through Celsius or suffered a from the FTX collapse. For FTX users, if your disposals on the platform led to capital gains or losses, you must report both in your tax return. However, to claim your losses, you need to make an open claim in the other information section and report the capital losses in the tax report. It's important to note that this only applies to losses incurred prior to the collapse of FTX, not for funds frozen on the platform. To claim losses from frozen funds, you'll likely have to wait for the conclusion of bankruptcy proceedings to assess your situation.

For Celsius users who lost crypto by lending it on the platform, the situation is a bit more complicated. According to Skatteverket, when you lent crypto, it was considered a disposal of the assets at the moment of transfer to Celsius. Therefore, individuals who lent their crypto assets to Celsius are deemed to have disposed of the assets and must perform a capital gain calculation in their Income Tax Return. Instead of holding the crypto assets, they now possess a claim against Celsius.

To deduct a loss on a claim related to Celsius, it is necessary, among other requirements, for the claim to have been disposed of. A claim is considered disposed of if the issuing company has been declared bankrupt and is a limited company or a cooperative association. Since Celsius is currently undergoing corporate restructuring under Chapter 11, the claim cannot be regarded as disposed of due to bankruptcy.

Crypto Tax Breaks

Despite crypto being a taxable asset in Sweden, some transactions are exempt from taxation:

1. Gifting crypto

In Sweden, gifting and inheritance of crypto assets are tax-free. This means you can give away crypto without any tax obligations. However, it's important to note that gifted assets cannot be deducted from your profits.

If you receive crypto as a gift, you are not required to pay taxes on it until you decide to sell it. It is advisable to request the purchase receipt from the gifter, it can serve as your cost basis. Having the original purchase price as your cost basis can help reduce your tax liabilities when you eventually sell the gifted crypto.

2. Donating Crypto

In Sweden, donating cryptocurrency is considered equivalent to giving a gift and is exempt from taxes. But unlike certain countries where donating cryptocurrency can be tax deductible, this is not the case in Sweden. The receiver of the donation has to be approved by the Swedish Tax Agency and the donations must be at least SEK 200 per donation with an aggregate donation of SEK 2000 per year to be considered tax deductible. 

3. Tax Loss Harvesting

You can deduct 70% of your losses from your tax base and lower your taxable income in Sweden. This method is called tax-loss harvesting and is often relied on by investors across the globe to lower their tax bill.

Income Tax

If you have received cryptocurrency as compensation for your labour or services, you are required to pay standard income taxes on it, just as you would if you were paid in your local currency.

If you choose to hold onto the cryptocurrency you received, any profits or losses that occur when you sell it will be subject to capital gains taxes. The cost basis for this purpose will be equivalent to the amount you reported on your income tax return.

The following transactions attract income tax in Sweden-

• Mining crypto
• Rewards (e.g., referrals)
• Income (e.g., salary, freelancing)
• Creating and selling NFTs

Furthermore, per the Swedish Tax Agency, if the activities in relation to cryptocurrency are being carried out in the ordinary course of business or the business criteria are met, then too, income tax would be levied.

Crypto Income Tax Rate

In Sweden, the income tax system comprises two types of taxes:

• National income tax
• Municipal income tax.

The national income tax applies if your income exceeds SEK 5,98,500 for the 2023 tax year.

On the other hand, the municipal income tax rate varies between 29-35% depending on the municipality you reside in. The municipal income tax rate is determined by the municipality's tax rate, which can differ from one municipality to another.

‍

How to Calculate Crypto Income

Calculating your crypto income is a simple process. All you need to do is add the FMV of the assets received through multiple avenues. As mentioned earlier, assets received as mining rewards, salary, or compensation for voluntary participation are counted as income.

Let’s consider the following transactions:

2022/01/13 - Astrid received 6.25 BTC as mining rewards (FMV - SEK 1,50,000 each)

2022/02/14 - Astrid received 2 ETH as compensation for her services (FMV - SEK 17,000)

2022/03/15 - Astrid received 1 ETH from a DAO referral program (FMV - SEK 18,000)

To calculate the crypto income for the tax year, Astrid just needs to add the value of the assets received from these three transactions.

Total Income = SEK (6.25*1,50,000 + 2*17,000 + 1*18,000) = SEK 9,89,500

This is Astrid’s taxable income base.

Interest Income Tax

If you have received cryptocurrency as loan interest or staking rewards, you will be subject to interest income tax, also known as "Ränteinkomst".

Interest Income is taxed at a flat rate of 30%.

Interest Income Tax Rate

In Sweden, interest income from loan interest and staking rewards are subject to a flat rate tax of 30%. The key difference between interest income tax and capital gains tax is that any losses incurred from interest payments you have made are fully deductible.

To calculate your interest income tax, you will need to sum up the total income you have received from your loan interest and staking rewards activities. This total amount will be subject to the flat rate of 30% tax.

Tax-Free Crypto Transactions

The following transactions are tax-free in Sweden:

• Buying Crypto
• Holding crypto
• Transferring crypto between wallets
• Donating crypto
• Gifting crypto

Taxed Crypto Transactions

Following are transactions that attract tax liabilities in Sweden:

• Converting crypto to fiat
• Swapping one crypto for another
• Buying goods and services with crypto
• Lending crypto
• Participating in liquidity pools and other DeFi transactions
• Earning tokens through mining, staking, or referral rewards
• Receiving crypto through airdrops, forks, and ICOs
• Receiving crypto as a salary

Tax On Mining Crypto Sweden

Skatteverket states that if you engage in mining as an individual, the earnings are classified as income from a hobby. Consequently, it is necessary to declare and pay Income Tax on your mining proceeds.

To determine the income tax amount owed on your mining earnings, you should calculate the value of the proceeds in your local currency on the day of receipt. The cost basis for the newly acquired coins is equal to the fair market value of the tokens at the time of receipt. However, if you choose to sell the cryptocurrency you have mined in the future, any gains incurred would be subject to regular capital gains taxes on any resulting profits or losses. This implies that if the value of the cryptocurrency has appreciated since the day of mining, you will owe capital gains taxes on the difference in value.

Tax on Staking Cypto

Skatteverket recently stated that staking crypto typically does not incur tax liabilities in most cases. However, the tax implications may vary depending on the platform you’re staking your tokens on.

Earning from staking crypto is likely to be taxed as interest income tax on the fair market value at the time of receipt. Later, then later in the case price of rewards has increased - Capital Gain Tax in the moment you sell/spend them.

Furthermore, staking DeFI might be seen as disposing of an asset and therefore, might be subject to capital gains taxes.

Crypto margin trading and futures

The Skatteverket is yet to release any guidelines on how transactions involving crypto margin and future trades. However, it is likely that such transactions would follow the same rules as regular trades. 

We are constantly on the lookout for new guidelines around the subject and will add new updates here as soon as they arrive.

NFT Taxes Sweden

The tax implications of NFTs vary depending on the circumstance. If you have bought or sold an NFT, it is treated similarly to any other cryptocurrency and you have to pay capital gain. And although there are no official guidelines on how the gains are to be calculated, it is likely that the NFTs would inherit the cost base equal to the fair market value of the assets at the time of receipt. Moreover, the creation and sale of NFTs would be classified as income, as opposed to capital gain only if the same is done at such a scale, so as to derive an income.

Regardless of your involvement with NFTs, it's advisable to include a statement in your tax filing that clarifies how you handled NFT taxes. This statement, known as "Öppet Yrkande", can reduce the likelihood of incurring a tax surcharge due to errors.

ICO Taxes

ICOs or Initial Coin Offerings are special events that allow you to invest in new projects and get access to project-native tokens in exchange for mainstream tokens like BTC and ETH. It is similar to IPOs in traditional securities markets. ICOs are treated as simple crypto-to-crypto trades from a tax perspective. The tokens you send to the project are counted as disposal and attract capital gains tax. While the tokens you receive inherit the cost base equal to the disposal amount, to be taxed at a later date when you dispose of these assets.

DAO Taxes

Specific guidance from Skatteverket regarding assets received from DAOs (Decentralised Autonomous Organisations) as compensation or for completing bounties is currently unavailable. However, based on our inference, income from DAOs would likely be subject to taxation in the same manner as other tokens received as salary or compensation for providing products or services.

It is essential to declare any assets obtained from DAOs as income and fulfil the corresponding income tax obligations. Nonetheless, we highly recommend seeking advice from a knowledgeable tax professional for a more comprehensive understanding of the matter.

DeFi Taxes Sweden

While the Skatteverket has not issued explicit guidelines for DeFi taxation, it is crucial to recognize that engaging in DeFi activities does not exempt you from tax obligations. Whether you are involved in selling, swapping, utilising cryptocurrency, or receiving coins or tokens as income within the realm of DeFi, it is important to be aware that these activities are subject to taxation.

Given below are some DeFi transactions that attract tax liabilities in Sweden:

• Lending crypto through P2P lending platforms is considered a sale by the Swedish tax authorities and in turn attracts capital gains tax
• The interest incurred from lending crypto assets is viewed as an income and therefore attracts an income tax(the interest is to be declared in section D of From K4).
• Using crypto as collateral to borrow funds from DeFi platforms is considered a sale and attracts capital gains tax
• Staking your assets is considered as a disposal by the Swedish tax authorities and attracts capital gains tax
• Staking rewards on the other hand are considered an income and therefore attract an income tax.

Crypto Gifts and Donation Taxes

In Sweden, gifting and donating cryptocurrency are exempt from taxation. You can send and receive crypto without incurring any tax liabilities. However, when you choose to dispose of the gifted crypto by selling or swapping it, you will be subject to capital gains tax. To reduce the tax burden, you can inherit the cost basis from the original gifter by obtaining a purchase receipt from them. This allows you to pay a lower capital gains tax when selling or swapping those assets.

Donating crypto to any registered organisation approved by the Swedish tax agency are tax-free in Sweden, given that the individual and aggregate donations cross the required threshold.

How are Airdrops and Forks Taxed in Sweden?

Airdrops and forks are generally considered "gifts" from token holders, thus not subject to immediate tax obligations. However, it would be considered a disposal as with gifting cryptocurrencies and therefore, capital gains taxes would be levied. and it is recommended to establish a cost basis of zero in such cases.

If an airdrop is received as compensation for a specific service, such as referring individuals, it may be classified as taxable income. While the Skattverket does not explicitly address the taxation of cryptocurrency hard forks, they are likely treated similarly to staking rewards.

When to Report Crypto Taxes in Sweden?

In Sweden, the tax year runs from January 1st to December 31st. You should include your crypto taxes in your annual tax return and your employment income.

As per Skatteverket, tax returns for the year 2023, can be filed from the 19th of March to the 2nd of May 2024, unless an extension has been granted.

What Crypto Records will the Skatteverket want?

These are the general crypto records that need to be reported to Skatteverket:

• Type of transaction
• Date of the transaction
• Which cryptocurrency was part of the transaction
• Exchange records and other relevant statements
• Transaction histories from personal wallets
• Details about the trading venue
• The amount bought, sold, or exchanged
• Wallet addresses that you possess the private keys for.
• Value of the cryptocurrency in SEK at the time of the transaction
• Documents pertaining to fiat transaction details moved to acquire crypto assets

How to File Crypto Taxes in Sweden?

Once you’ve calculated the cryptocurrency taxes you can file capital gains tax, employment tax, and interest income taxes online mode or via mail.

Let’s understand all these taxes one by one.

Submitting Capital Gains Tax in Sweden

There are three methods to submit your capital gains taxes:

1. You can enter your crypto taxes in Section D of the K4 tax form using a paper form and mail it to Skatteverket.

“K4 Tax Form is where all profit and loss need to be addressed. Moreover, you need to keep in mind the gains and losses which must be reported separately.”

2. Fill in the K4 form manually on Skatteverket's online portal.
3. Alternatively, you can upload SRU (Standardised Accounting Extract) files to the online portal which will automatically complete the K4 form.

Submitting Employment Income Tax in Sweden

Submitting employment income tax depends on the type of income you’ve received. The following are the steps to report various types of income:

Salary:

Your employer should have already declared this income, but if they failed to do so, you can manually report it under the under Inkomst av Tjänst section.

Rewards/Mining:

To report income from rewards or mining, you need to fill out a T2 form. You can find the form in the online portal by going to Bilagor > Inkomst av hobby, internetinkomster m.m. (T2).

How to File Crypto Taxes Using Kryptos?

Now that you’re aware of how your crypto transactions are taxed and what forms you need to fill out to complete your tax report, here’s a step-wise breakdown of how Kryptos can make this task easier for you:

1. Visit kryptos.io and sign up using your email or Google/Apple Account
2. Choose your country, currency, time zone, and accounting method
3. Import all your transactions from wallets and crypto exchanges
4. Choose your preferred report and click on generate report option on the left side of your screen and let Kryptos do all the accounting.
5. Once your Tax report is ready, you can download it in PDF format.

If you still need clarification regarding the integrations or generating your tax reports, you refer to our video guide here.

How to Avoid Crypto Taxes in Sweden

There’s no legal way to avoid crypto taxes in Sweden entirely. However, there are strategies you can use to lower your tax bill.

• Sending and receiving crypto gifts is tax-free in Sweden
• You can offset 70% of your capital losses in a tax year in Sweden
• Donating crypto is tax-free in Sweden.

FAQs

1. Is crypto legal in Sweden?

Yes, crypto is legal in Sweden and is categorised as “others asset” instead of a currency by the Skattverket (Swedish Taxation Office) and taxed accordingly.

2. What are the non-taxable crypto transactions in Sweden?

Here are the few non-taxable crypto transactions in Sweden that we haven’t discussed earlier.

Purchasing Crypto with Fiat Currency

Purchasing crypto doesn't incur any taxes, but it's essential to maintain a record of the price paid for it to include in your average cost basis or "Omkostnadsbelopp". If you've bought the crypto in a foreign currency such as USD or EUR, convert it to the local currency's value on the date of purchase. This is necessary for accurately calculating any future taxes you might incur upon selling the crypto.

Transfer of Crypto between Wallets

Transferring crypto between your wallets and exchanges is not subject to taxes. Only the transaction fee is taxable.

Gifting or Receiving Crypto

When you gift someone crypto, it's not taxable. However, you can't subtract it from your profits, similar to lost or stolen crypto. Receiving crypto as a gift is also non-taxable until you decide to sell it. In this case, the cost basis you should use is the price at which the person who gifted you the crypto originally purchased it.

Donating Crypto

Donating crypto is also non-taxable, but unlike in some other countries, it's not tax-deductible in Sweden. For a donation to qualify for a tax deduction, it must be given in the form of currency, which Skatteverket does not consider crypto to be. In addition to this, the donation should be made to an approved recipient by the Swedish Tax Agency and the individual, as well as aggregate donation should be of a specific threshold.

3. What happens if I don’t report my Crypto taxes?

If you don’t report your crypto taxes accurately or provide incorrect information to the Swedish Tax Authorities, you may end up paying penalties of up to 40% of the evaded taxes in addition to the regular tax rate, depending on the situation and periodic severe cases, you could even face criminal prosecution and up to 6 years in prison. The Skatteverket considers tax evasion a grave offence and may have access to data on individuals who have undergone KYC checks on centralised exchanges. 

Interest would also be levied w.e.f from February 14 if tax arrear is more than 30,000kr and if less than 30,000kr then interest will be levied w.e.f. May 4

4. How is staking taxed in Sweden?

Staking rewards earned from cryptocurrency holdings are subject to interest income taxes in Sweden. Typically, staking rewards are paid in the same cryptocurrency as the one you are staking towards. The cryptocurrency received will have a cost basis equal to the local currency value on the day you gain access to the staking rewards. If you hold the crypto and sell it later, regular capital gains taxes will apply.

Estaking ether in Ethereum 2.0 is equated with estaking ether and so it does not incur capital gains tax, which is also what the Guide clarified. However, the allocation of ether through either the deposit or the participation as a node in the network, as a result of which rewards are received in the form of either, is taxed as income in the capital income category. The amount of income is calculated at the market value of ether received when it can be used. But this position, per Skatteverket, applies to ether, and not staking as a whole alone.

Moreover, staking DeFI might be seen as disposing of an asset and therefore, might be subject to capital gains taxes.

5. Can I claim tax benefits in Sweden if Celsius goes bankrupt?

Celsius is currently undergoing a corporate restructuring process through Chapter 11, which means that any outstanding receivables cannot be regarded as disposed of due to the ongoing bankruptcy proceedings. If Celsius is ultimately declared bankrupt, the Swedish tax authority Skatteverket will evaluate whether your claim of disposal is valid.

To claim tax deductions for losses on your Celsius claim, it is currently necessary to sell or dispose of it. However, to ensure that your claim is considered disposed of, it must be sold in a manner that is not considered a gift or transferred below market value. Otherwise, such transactions will not be considered as disposal of the asset. Therefore, it is important to take appropriate action and sell your claim at market value to qualify for any tax benefits.

‍

All content on Kryptos serves general informational purposes only. It's not intended to replace any professional advice from licensed accountants, attorneys, or certified financial and tax professionals. The information is completed to the best of our knowledge and we at Kryptos do not claim either correctness or accuracy of the same. Before taking any tax position / stance, you should always consider seeking independent legal, financial, taxation or other advice from the professionals. Kryptos is not liable for any loss caused from the use of, or by placing reliance on, the information on this website. Kryptos disclaims any responsibility for the accuracy or adequacy of any positions taken by you in your tax returns. Thank you for being part of our community, and we're excited to continue guiding you on your crypto journey!

If you are deep into the crypto territory and have no idea how they’re taxed, you’re not alone. Thousands of residents struggle to understand the tax obligations these transactions entail and find themselves in the middle of tax complications and legal troubles.

That’s why we put together the most comprehensive crypto tax guide for Netherlands residents, to help them get acquainted with the crypto tax infrastructure. We’ve also touched upon how you can file your crypto taxes conveniently, and the records you need to keep to be able to report these transactions conveniently.

The Dutch tax authorities are yet to discuss the taxation of some crypto applications like DeFi. However, we assure you we will be among the first ones to update this guide and accommodate any new guidelines issued by the authorities in the forthcoming days.

So with that in mind, let’s get started…

Latest Updates/Guidelines

26/06/23 - Updated to accommodate ICO, Gifts and Donation Taxes

26/06/23 - Updated to accommodate DAO Taxes

09/03/24- Updated to accommodate new guidelines and tax rates

How is Crypto Taxed in the Netherlands

Unlike most countries, the Netherlands does not have a specific capital gains tax for crypto assets. Instead of taxing gains from the sale of crypto assets, the Netherlands taxes the presumed gains of crypto assets throughout a tax year.

The presumed gains are calculated based on the Fair Market Value (FMV) of your assets as reported on January 1. This means that simply holding crypto in the Netherlands is a taxable event. The cost basis of your assets is reset on January 1 each year, so the tracing of the cost basis can only go back to January 1 of the previous year.

In the Netherlands, you are required to pay tax on the presumed gains of your total assets, and the Belastingdienst (Tax and Customs Administration) always assumes that you generate a gain, never a loss.

The taxable income is divided into three categories:

Box-1 is for Income from Job/Business

Box 2 is for any substantial Interest earned through crypto

Box 3 is for presumed Gains from assets, investments, and savings

Crypto assets are reported under Box-3, and the tax levied on the presumed gains is called Vermogensrendementsheffing. You pay 32% (36% for 2024) tax on a presumed return on the total value of your assets. However, it’s important to note that there are some instances where you must report crypto assets under Box-1. There are primarily three instances where Crypto assets are reported as Box-1 assets:

1. When you have insider knowledge of a project
2. When you’re involved in day trading with crypto assets
3. When you’re mining tokens, except at a hobby level

Crypto Gains Tax

In contrast to most countries, where the taxation of crypto assets is triggered by their disposal, the Netherlands follows an inclusive tax rule. This means that even if you do not sell or dispose of your crypto assets within a tax year, they are still subject to taxation.

The Belastingdienst requires all residents to report the value of their assets on January 1st of each year. The cost basis of these assets is considered equal to their market value on that specific day, and it resets exactly one year later.

The tax authorities utilise the cost basis to calculate the presumed gains on the asset throughout the financial year. Taxes must be paid on these gains regardless of whether the assets are sold or held onto.

Taxes in the Netherlands are divided into three categories, and each category has an independent tax rate.

1. Income from employment
2. Significant interest income from any source
3. Gains derived from assets, investments, or savings

Crypto happens to be in the third category, and the tax levied on Box 3 gains is called the Vermogensrendementsheffing, and it’s equivalent to the capital gains tax charged in other countries.

Capital Gains Tax Rate

As mentioned earlier, the Netherlands has no dedicated tax for capital gains. Any gains incurred from crypto assets are grouped as Box 3 gains by the tax authorities and are subjected to a flat tax rate of 32%(36% for 2024) regardless of income level. Note that individual (resident tax payers) have a personal income tax exemption limit of €57,000.

How to Calculate the Presumed Gains on My Assets?

The presumed gains are calculated based on the premise that the bigger your asset base, the more gains you make in a tax year. It’s a progressive system with fictitious gains varying from 0.92% - 6.17% based on the reported value of your assets. One should use the following rates when calculating presumed gains on bank balance, crypto investments, and debts.

Consider the following example:

Let’s say you reported the total value of your assets to be €70,000,

Now since the first €57,000 is exempt from any taxation, your taxable base is just €13,000 (€70,000 - €57,000).

The presumed gains rate for crypto investments is 6.17%

So presumed gains = 0.617 * €13,000 = €802.1

Hence, you’ll pay a 32%(36% for 2024 tax season) tax on the presumed gains of €802.1.

Crypto Losses

Since the Belastingienst doesn't tax the actual gains, but the presumed gains on assets, any losses incurred from disposal don’t affect your tax bill in the Netherlands.

Since buying and selling crypto are non-taxable transactions in the Netherlands, there are no profits to offset your losses against. Therefore, any capital losses incurred in the Netherlands are simply losses, and you can neither write them off against them again nor carry them forward to the subsequent tax year.

Lost or Stolen Crypto

There are provisions in the Dutch crypto tax guidelines that allow you to use your lost or stolen crypto as a tax-deductible and reduce your tax bill. However, you need the documents to prove your loss of possession and the negligible chance of recovery of these assets.

Crypto Tax Deductions Netherlands

Although there’s no (legal) way to avoid paying taxes entirely in the Netherlands, there are ways you can claim some tax deductions and reduce your tax bill.

1. Gift Crypto

You can give up to €3,244 worth of crypto tax-free in the Netherlands, and the amount doubles to €6,604 if you grant the assets to your children. You can use this to your advantage and lower your tax bill by gifting crypto to your spouse or children.

2. Donate Crypto

When contributing to a public benefits organisation (ANBI), philanthropic individuals can lower their taxable income by subtracting the value of their donations. It's important to note that donations below 10% of your annual taxable income are exempt from taxes.

Crypto Cost Basis Method Netherlands

As mentioned earlier, in the Netherlands, the disposal of crypto assets does not trigger taxation. Since capital gains from such disposals are non-taxable, there is no requirement for a specialized accounting method to calculate the cost basis. In the Netherlands, the cost basis is determined as the initial purchase price of the asset for tax purposes.

In the Netherlands, the cost basis is calculated based on the value of your assets at the start of the tax year, precisely at 00:00 on January 1st.

Crypto Income Tax Netherlands

Crypto is taxed as income in the Netherlands when it is reported under Box-1 assets. The following scenarios attract income tax:

• When you get paid in crypto- for your work, contribution to a project, or sale of a product or service.
• When you earn interest from liquidity pools
• When you mine tokens as a business
• When you earn interest from DeFi protocols

Crypto Income Tax Rate

Paying Income Tax on cryptocurrency is subject to the same rates as your regular Income Tax.

How to Calculate Crypto Income

Calculating Income for Box-1 assets is pretty straightforward. All you need to do is add the fair market value of the tokens received from various sources like mining, staking, lending, and DeFi. The figure you end up with is your taxable income base.

Tax-Free Crypto Transactions

Following crypto transactions are tax-free in the Netherlands:

• If you use one cryptocurrency to purchase another, this transaction is generally not subject to taxation.

• Suppose you receive a gift or donation in the form of cryptocurrency. In that case, this transaction is tax-free as long as the value of the gift or grant is less than the annual gift tax exemption amount of €6,604, which goes up to €6,604 if the person gifting you the assets happens to be your parents.

• If you mine cryptocurrency as a hobby, any profits you make from this activity are non-taxable

• Buying and selling crypto is non-taxable in the Netherlands since capital gains tax is not applicable.

Taxed Transactions

Here’s a list of taxed crypto transactions in the Netherlands:

• Donating crypto to an unregistered charity
• Buying and holding crypto
• Mining crypto as a hobby

Tax on Mining Crypto

The taxability of mining as a source of income is contingent on whether it constitutes a business activity. In the absence of such, the gains from mining are classified as assets that are included in Box 3's asset base. However, if it can be anticipated that the mining activities will yield profit in the long term, it is typically considered as income derived from other sources and falls under the purview of Box 1 taxation.

Tax on Staking Crypto

Interestingly, staking rewards are categorised as Box-3 assets, unlike mining rewards. The value of the tokens received is added to other assets and investments of the taxpayer and taxed at a flat rate of 32% (36% for 2024).

NFT Taxes Netherlands

The taxes around NFTs depend on the underlying asset of the NFT. Generally, all the assets are to be reported as Box-3 assets, although there’s an exception in the case of art pieces. However, you must report your NFT art pieces under box 1 of your tax report if you are an art dealer.

As a business, any earnings made from the production, sale, or swap of NFTs are automatically included in the tax profit calculations and are subjected to a tax rate of 15% for profits up to €395,000 and a flat rate of 25.8% above that.

NFTs and VAT

Regarding NFTs, there aren't any clear rules about handling Value-Added Tax (VAT). Because it's unclear what kind of thing an NFT is, it's hard to know how it should be taxed. Unlike cryptocurrencies, it's possible that buying or selling NFTs might not be considered exempt from VAT. And even though you're buying something when you get an NFT, it might not be considered a regular purchase of goods.

ICO Taxes

ICOs are special events that allow investors to invest in tokens from unreleased projects in exchange for mainstream tokens like Bitcoin and Ethereum. ICOs are similar to IPOs from traditional markets.

The Belastingdienst is yet to release specific guidance on the taxation of such transactions, although it is highly likely that any income from such transactions will be categorised under Box-3 and will be taxed accordingly. We do suggest seeking advice from an experienced tax professional to get a clear picture of how such transactions are taxed.

DAO Taxes

DAOs are member-owned communities with a shared vision. All the decisions in a DAO are made by the members in the absence of central leadership. DAOs are new-age institutions that aim to democratise decision-making and allow people to have a say in decisions that directly affect them. DAOs are often called the soul of Web3 and enable members to earn rewards in multiple ways. DAO contributors are rewarded for their contributions to the organisation, similar to how centralised organisations pay salaries to their employees. They also pay out bounties for one-time projects and redistribute any profits generated through operations.

The Belastingdienst is yet to release guidance on how income from DAOs is viewed from a tax perspective. We suggest seeking advice from a tax expert to better understand how such transactions are taxed.

DeFi Crypto Taxes in the Netherlands

DeFi, being a relatively new financial application of crypto assets, hasn't been touched upon by the Dutch tax authorities. However, it doesn’t imply in any way that the income made from DeFi transactions won’t attract any taxes in the Netherlands.

If you’re making significant gains using DeFi protocols, you should consider contacting a Dutch tax consultant and understanding the liabilities that entail these DeFi transactions.

Based on the existing crypto taxation guidelines, it may be inferred that most DeFi transactions may be considered Box 1 assets and may be subjected to income tax in the Netherlands. If you’ve been involved in the following DeFi transactions, you should consider reporting them to the Belastingdienst.

• Yield farming on crypto lending platforms like Aave
• If you’ve earned liquidity tokens or governance tokens on DeFi platforms
• If you’re earning recurring interest on crypto assets you’ve lent
• If you’ve earned crypto as dividends from platforms like CoinRabbit

Crypto Gifts and Donation Taxes

In the Netherlands, gifting or inheriting assets, including cryptocurrencies, is exempt from taxation up to €3,244. However, if the gift is received from parents, the tax-free threshold is more than doubled to €6,604. When a gift is exchanged between individuals who are not immediate family members, such as friends or distant relatives, the first €2,244 of the gift is exempt from tax. However, any amount exceeding this threshold is subject to a flat tax rate of 30%.

For charitable donations, individuals can deduct the value of their donations from their taxable income, given that the recipient charity is registered as a public benefits organisation (ANBI). If the donation amount is less than 10% of the individual's annual taxable income, it is considered tax-free.

How are Airdrops and Forks Taxed in the Netherlands?

Airdrops

If you are not a trader, any tokens received from airdrops will be considered Box 3 assets by the tax authorities in the Netherlands and will be taxed accordingly. In the case of corporations, tokens received are subject to corporate income tax based on the market value of the assets at the time of receipt.

Forks

Since soft forks don’t result in any additional tokens, they’re considered non-taxable by the Dutch tax authorities. However, hard forks are a different story. Any additional tokens received after a hard fork must be reported as a Box 3 asset in the tax form and will attract income tax unless you’re a trader(Any income made as a trader is reported under Box 1 of the tax form).

When to Report Crypto Taxes in the Netherlands

In the Netherlands, taxpayers are required to submit their tax returns on an annual basis, with the typical deadline being May 1st of the subsequent year. It's important to be aware that specific types of taxes or situations might have different deadlines, so it's advisable to stay informed about any applicable variations.

How to File Crypto Taxes in the Netherlands

You can file crypto taxes in the Netherlands through the online portal after you have filled out your tax form which is available on the Belastingdienst website. You are required to file your tax return before the May 1 deadline. However, you can extend the deadline to accommodate some unforeseen circumstances.

You can file crypto taxes yourself, through a third-party intermediary like a tax accountant, or using a crypto tax software like Kryptos which is capable of generating legally compliant tax reports in a matter of minutes without you having to lift a finger. Regardless of how you file your taxes, you need your DigiD to prove your identity to the tax authorities.

If you don’t have one, you can apply for it here.

Once you have access to your DigiD, you can visit the tax authorities' website and download your electronic tax return report.

Here’s an overview of all the information you need to file your taxes online in the Netherlands.

What crypto records will the Belastingdienst want?

According to the official website of the Belastingdienst, you should maintain the following records:

Personal details

• Your citizen service number (burgerservicenummer, bsn), if applicable, those of your partner and children
• Your bank account details (IBAN, preferably a Dutch bank account)
• Your DigiD or – if you do not have one - your username/password combination or an EU-approved login key
• Your telephone number
• Your home address details

Income (worldwide)

• Your annual income statements for 2023
• If you do not have any income statements: your payslips.
• In the case of wages received from Belgium: all payslips
• Spousal maintenance payments received
• Bank account details (Dutch and foreign bank accounts)
• Your current account annual statement for 2023
• Your savings account annual statement for 2023, as well as the annual report of the savings accounts of your children under 18 years of age
• Your investment account annual statement 2023

Property

If you are considered a ‘non-resident taxpayer:

• Your own home’s WOZ value on 1 January 2022
• You’ll find this value on last year’s municipal WOZ assessment.
• Your mortgage’s annual statement for 2023
• In case of purchase or sale of your house: the final settlement from your notary

If you are considered a ‘qualifying non-resident taxpayer’ or if you are covered by Dutch social insurance, you will also need your foreign home’s details:

• The value of your foreign home
• Your foreign home’s mortgage annual statement 2023

Deductions (only if you are a ‘qualifying non-resident taxpayer’, or if you were living in Belgium, Surinam or Aruba, or if you were covered by Dutch social insurance)

You will need proof of payment. For instance:

• Gifts
• Costs for care which were not covered
• Your own Healthcare Insurance Act contribution. Non-deductible items are private care insurance premiums and any deductible excess.
• Paid partner alimony
• Costs for study, in case you were not entitled to any study loans or grants

Other (only if you are a ‘qualifying non-resident taxpayer’, or if you were living in Belgium, Surinam or Aruba, or if you were covered by Dutch social insurance)

• Details of grants or loans for study costs
• Details of other loans or debts
• Details of paid premiums for annuities
• Overview of paid premiums for occupational disability insurance
• Details of dividend

How to File Crypto Taxes Using Kryptos?

Now that you’re aware of how your crypto transactions are taxed and what forms you need to fill out to complete your tax report, here’s a step-wise breakdown of how Kryptos can make this task easier for you:

1. Visit Kryptos and sign up using your email or Google/Apple Account
2. Choose your country, currency, time zone, and accounting method
3. Import all your transactions from wallets and crypto exchanges
4. Choose your preferred report and click on generate report option on the left side of your screen and let Kryptos do all the accounting.
5. Once your Tax report is ready, you can download it in PDF format.

If you still need clarification regarding the integrations or generating your tax reports, you refer to our video guide here.

How to Avoid Crypto Taxes in the Netherlands

Although there’s no legal way to avoid crypto taxes entirely in the Netherlands, you can claim some tax deductions by employing some of these strategies:

1. Gifting crypto is tax-free in the Netherlands for up to €3,244. This amount doubles to €6,604 when you grant crypto assets to your children.

2. When donating to a public benefits organisation (ANBI), individuals can deduct the value of their donations from their taxable income. Donations below 10% of annual taxable income are tax-exempt.

FAQs

1. Can the Belastingdienst Track Crypto Transactions?

Yes, the Belastingdienst (the Dutch Tax and Customs Administration) can track crypto transactions like any other financial transaction. While the transactions are recorded on a decentralised ledger, the identities of the individuals involved in the transactions can be traced through the use of blockchain analysis tools, especially if the person has used an exchange or another centralised service to buy or sell cryptocurrencies.

2. Is crypto legal in the Netherlands?

Yes, owning, buying, and selling cryptocurrencies is legal in the Netherlands. The Dutch government has been relatively open to new financial technologies, including cryptocurrencies and blockchain.

The legal status of cryptocurrencies in the Netherlands is that they are not recognised as legal tender, but they are considered assets. Therefore, any gains or losses from buying, selling or exchanging cryptocurrencies are subject to taxes.

3. Is crypto taxable in the Netherlands?

Crypto transactions are taxable in the Netherlands and the Dutch tax authority-the Belastingienst has made it pretty clear that any transactions involving cryptocurrencies, even the ones where you just hold your assets and don’t dispose of them, will attract tax liabilities in the Netherlands.

4. What is the tax rate for capital gains on cryptocurrencies in the Netherlands?

Netherlands has a flat tax rate of 32%(36% for 2024) for all crypto related gains.

‍

All content on Kryptos serves general informational purposes only. It's not intended to replace any professional advice from licensed accountants, attorneys, or certified financial and tax professionals. The information is completed to the best of our knowledge and we at Kryptos do not claim either correctness or accuracy of the same. Before taking any tax position / stance, you should always consider seeking independent legal, financial, taxation or other advice from the professionals. Kryptos is not liable for any loss caused from the use of, or by placing reliance on, the information on this website. Kryptos disclaims any responsibility for the accuracy or adequacy of any positions taken by you in your tax returns. Thank you for being part of our community, and we're excited to continue guiding you on your crypto journey!

Are you an ardent crypto enthusiast or someone who wants to be one, but the very thought of crypto taxes intimidates you? Don’t worry you’re not alone, thousands of Norwegians share the same line of thought. Crypto being a new asset class is hugely unregulated across markets in the world and the taxation of such assets is barely talked about even in the crypto space. Therefore, it is no surprise that people barely know how such transactions are taxed.

So we took it upon ourselves to create this comprehensive crypto tax guide for Norway residents so that the prospect of crypto taxation is not as intimidating. So that people can clearly understand their tax liabilities and pay their taxes properly. This guide has everything you need to know about crypto taxation in Norway and it will be regularly updated to accommodate any new regulations issued by the Skatteetaten.

So let’s get into it…

Latest Updates/Guidelines

09/06/23 - Updated to accommodate DAO, gifts and donation taxes

09/06/23 - Updated to accommodate ICO taxes

How is Crypto Taxed in Norway?

Skatteetaten doesn’t consider crypto to be a form of currency and instead categorizes it as a form of capital asset. This essentially means any capital gains or income you make from crypto assets is taxable. Since Norway doesn’t have a dedicated capital gains tax, all your gains or income will be taxed as income at a flat rate of 22%.

Furthermore, if your total wealth surpasses 1,700,000 NOK, the province and states you reside in may impose a Wealth tax on any crypto assets you possess. The amount of tax you are required to pay is determined by the total value of your assets as of January 1st annually.

Your net wealth is calculated using the following formula:

Net Wealth = Total Value of Assets -  Any Deductible Debt

If you wish to get into the details of how wealth calculations work in Norway, you can visit this link here to know more.

Example: 

Consider the following ledger of transactions:

12/02/2022 - Lucy buys 1 BTC for 1,80,000 NOK

15/04/2022 - Lucy buys 10 ETH for 14,000 NOK each

02/05/2023-  Lucy sells 1 BTC for 2,00,000 NOK

05/06/2023 - Lucy sells 5 ETH for 18,000 NOK each

For this example’s sake let’s assume that Lucy already has 1,800,000 worth of assets in her portfolio and a 3,00,000 NOK debt before she was involved in any of the following transactions.

Now there were two disposals made by Lucy, so let’s calculate the capital gain/loss incurred from these disposals.

‍

1st Disposal

1 BTC sold for 2,00,000 NOK

This BTC was acquired for 1,80,000 NOK

Capital Gain =  Disposal amount - Cost basis = 2,00,000 - 1,80,000 = 20,000 NOK

‍

2nd Disposal

5 ETH tokens sold for 18,000 NOK each

Now these are the same tokens that were acquired for 14,000 NOK each on 15/04/2022

Capital Gain on 1 ETH disposal = Disposal amount - cost basis =  18,000 - 14,000 = 4,000 NOK

Total Gain for 5 ETH tokens = 5 * 4,000 = 20,000 NOK

Collective Gain for both disposals = 20,000 + 20,000 = 40,000 NOK

That’s the final amount you’ll pay income tax on.

Now, it’s time to calculate Lucy’s wealth to see whether she owes any wealth tax to the authorities.

Of course, the example assumes that Lucy didn’t make any other transactions for the entire year, except for the ones mentioned above.

Now Lucy has 5 ETH left that she didn’t sell, so that must be added to the total assets.

(Assuming the value of 1 ETH token at the time of calculations to be 20,000 NOK)

Total assets =  1,800,000 + 1,00,000 = 1,900,000 NOK

Net Wealth = Total value of Assets -  Deductible Wealth = 1,900,000 - 3,00,000 = 1,600,000 NOK

Since Lucy’s net wealth is less than 1,700,000 NOK, she is not required to pay any wealth tax.

Can Skatteetaten track crypto?

Yes, Skatteetaten can track your crypto transaction. It has various means to obtain your financial data and ensure that you are adhering to tax regulations. Hence, if you were contemplating omitting certain transactions to reduce your tax bill, we advise you to abandon the idea and instead report all your transactions to Skatteetaten. Below are some channels that provide access points for taxpayers' cryptocurrency transactions to Skatteetaten:

• All prominent cryptocurrency exchanges are obligated to perform Know Your Customer (KYC) verifications for all users
• Anti-Money Laundering (AML) Regulations mandate that exchanges and custodial wallets to divulge specific details about their users to government entities.
• Skatteetaten may conduct an audit of the tax document you will provide to check any malpractice or unreported crypto transactions

Crypto Gains Tax

The Norwegian tax administration doesn't consider crypto to be a form of currency and views it as a capital asset from a tax perspective. So if a person buys a crypto asset and later sells it for a profit, then it will be considered as a capital gain. However, Norway doesn't have a dedicated capital gains tax, and any gains incurred from the disposal of crypto assets are subject to income tax.

‍

‍

The following transactions can result in a capital gain according to the Skatteetaten:

• Selling crypto assets for NOK or any other fiat currency
• Buying goods or services with crypto assets
• Swapping one crypto asset for another

Capital Gains Tax Rate Norway

As discussed in the above section there is no capital gains tax in Norway, instead, all capital gains are taxed as income and are subject to a flat 22% income tax. The calculation of this rate is based on the aggregate value of cryptocurrencies held as of the first day of the tax year being assessed. It's important to note, however, that if an individual's monthly income surpasses 14,541 NOK or their annual income goes beyond 174,500 NOK, a progressive bracket tax will be imposed.

The income tax structure in Norway consists of a base rate (alminnelig inntekt) of 22%, which applies to the majority of taxpayers. However, residents of Finnmark and Nord-Troms benefit from a reduced rate of 18.5%. Additionally, Norway implements a progressive tax system known as the step tax (trinnskatt), often referred to as the bracket tax, which operates on four distinct levels as outlined below.

Initially, the first 198,349 NOK of personal income is exempt from step tax. Subsequently, a 1.7% step tax is levied on the income bracket ranging from 198,350 NOK to 279,149 NOK. Beyond that, a 4% step tax is applicable to the income bracket spanning 279,150 NOK to 642,949 NOK. However, for incomes between 642,950 NOK and 926,799 NOK, individuals are subject to a 13.5% step tax, which is reduced to 11.5% for residents of Finnmark and Nord-Troms.

Furthermore, an income bracket of 926,800 NOK to 1,499,999 NOK is subject to a 16.5% step tax. Finally, any earnings exceeding 1.5 million kroner are taxed at a rate of 17.5%.

How to Calculate Crypto Gains or Losses

‍

Capital gains or losses are calculated according to the following formula:

Capital Gains = (Gains incurred from disposal) - (Cost Basis)

And evidently, it’s a two-step process.

To streamline your crypto tax reporting, the initial step entails determining the cost basis for each asset you have swapped, sold, or gifted within a given tax year. This involves summing up the acquisition cost along with any applicable fees (such as transaction fees or gas fees) incurred during the acquisition process.

Once you have successfully determined the cost basis, calculating your capital gains or losses becomes a straightforward process. Simply subtract your cost basis from the disposal amount. If the result is positive, it signifies a gain and is subject to a flat income tax rate of 22%. Conversely, if the result is negative, it represents a loss. While no tax liabilities arise from losses, it is essential to actively track and report all losses to Skatteetaten. Doing so allows you to leverage them for reducing your overall tax bill effectively.

Example:

Consider the following transactions:

03/02/2022 - David buys 0.5 BTC for 80,000 NOK

06/04/2022 - David buys 3 ETH for 15,000 NOK each

05/06/2022 - David buys 1 BTC for 1,70,000 NOK and 2 ETH for 16,000 NOK each

13/06/2022 - David sells 1 BTC for 1,80,000 NOK

19/08/2023 - David sells 3 ETH for 19,000 NOK each

Now a total of two disposals were made by David during the year. So let’s calculate the gain for each disposal one at a time:

‍

1st Disposal

David sells 1 BTC for 1,80,000 NOK.

Note that we will be using the FIFO accounting method as recommended by Skatteetaten. We have discussed accounting methods in more detail later in the guide. For now, a simple way to understand how FIFO (First-In-First-Out) method works is to just assume that the first asset you buy is the first one you sell.

Now, there are two different types of BTC in this transaction. 

BTC-1, acquired on 03/02/2022 for 80,000 NOK and BTC-2, acquired on 05/06/2022 for 1,70,000.

Cost Base for BTC-1 = 80,000 NOK for 0.5 BTC

Disposal Amount =  85,000 NOK for 0.5 BTC (1 BTC was sold for 1,80,000)

Capital Gain for BTC-1 = 90,000 - 80,000 NOK =10,000 NOK

Similarly, BTC-2 was acquired for 1,70,000 NOK (85,000 NOK for 0.5 BTC)

Capital Gain for BTC-2 = 90,000 - 85,000 NOK = 5,000 NOK

Total Gain =  10,000 + 5,000 NOK = 15,000 NOK

‍

2nd Disposal

3 ETH sold for 19,000 NOK each.

If we use the FIFO accounting rules, these ETH tokens are the same ones that were acquired on 06/04/22 for 15,000 NOK.

Cost Base =  15,000 NOK

Disposal Amount = 19,000 NOK

Capital Gain for 1 ETH = 19,000 - 15,000 NOK = 4,000 NOK

So for 3 tokens, the total gain comes out to be = 3*4,000 NOK = 12,000 NOK

Total Gain for both disposals = 15,000 + 12,000 NOK =  27,000 NOK

‍

Crypto Losses

In Norway, taxpayers can offset capital losses against capital gains or other taxable income incurred in the same fiscal year. If the total amount of capital losses exceeds the aggregate amount of capital gains in a particular year, the excess can be carried forward and applied as a tax deduction for up to 10 years.

‍

‍

It is important to note that only capital losses from the sale of assets that would have generated taxable gains are eligible for deduction. Moreover, the tax deduction for capital losses is subject to certain limitations. For instance, the maximum amount that can be deducted in a tax year is the lower of 10,000 NOK or 10% of the taxpayer's total taxable income. 

You should maintain accurate records of your capital gains and losses and consult with a tax professional or the Norwegian Tax Administration for guidance on the rules and limitations regarding the use of capital losses as a tax deduction.

Lost or Stolen Crypto 

Taxpayers in Norway may claim a tax deduction on lost or stolen crypto under certain conditions. The taxpayer must provide evidence that the loss resulted from theft or embezzlement and that a police report has been filed.

It is important to note that the Norwegian tax authorities will require proof to support the deduction claim. This may involve submitting a police report or other relevant documents to support your claim, and the tax authorities may carry out their investigation to confirm the loss.

Moreover, the amount of the tax deduction may be subject to certain limitations or restrictions, and the specific circumstances surrounding the loss may also influence the tax deduction available.

Crypto Tax Breaks Norway

The Norwegian tax authorities offer some legal gateways to reducing your tax bill and here’s what you need to know about them:

1. Personal Tax Allowance

Every Norwegian resident is offered a basic deduction on any form of income including general income, business income, capital gain, or interest income. For the 2023 tax year, it’s set at NOK 79,600. 

However, it’s important to note that this allowance is significantly reduced when staying/living in Norway for only parts of the year.

2. Tax-Loss Harvesting

You can use your capital losses to offset your gains and reduce your tax bill. This has been thoroughly discussed in the section titled “Crypto Losses”.

3. Pension savings

You can deduct up to NOK 40,000 from your taxable income for pension savings.

4. Childcare Expenses

If you have children under the age of 12, you can deduct up to a certain amount for childcare expenses. For the 2022 tax year, the maximum deduction for childcare expenses is as follows:

• 25,000 NOK per child under the age of 6
• 15,000 NOK per child between the ages of 6 and 12

This means that if you have one child under the age of 6 and you have spent 30,000 NOK on childcare during the tax year, you can deduct 25,000 NOK from your taxable income.

Crypto Cost Basis Method Norway

In Norway, the accounting method used for cost basis calculations is the FIFO (First-In, First-Out) method. This means that when you sell your crypto assets or any other asset for that matter, the cost basis of the asset sold is calculated based on the price and date of the oldest asset you possess.

‍

‍

For example, if you purchased 100 ETH tokens for NOK 2,000 per token on January 1, 2020, and then purchased an additional 100 ETH tokens for NOK 2,100 per token on January 1, 2021, the cost basis for the first 100 tokens sold would be NOK 2.000 per token, and the cost basis for the second 100 tokens sold would be NOK 2,100 per token.

Note that the FIFO method is the default method used in Norway, but there are other methods available, such as the LIFO (Last-In, First-Out) method and the HIFO method. However, these methods require specific approval from the tax authorities and are generally only available to certain types of businesses or taxpayers.

Here’s how some of the other accounting methods work:

1. Last-In-First-Out- The first token you buy is the last token you sell.
2. Highest-In-First-Out- The most expensive token you buy is the first token you sell.

Crypto Wealth Tax Norway

Individuals holding cryptocurrencies may be subject to the wealth tax imposed by their municipality and state, as the value of their crypto assets is taken into account when calculating their net wealth as of January 1st of each year. In other words, owning cryptocurrencies can impact an individual's overall net worth and potential tax liabilities.

Your net wealth is calculated using the following formula:

Net Wealth = (Total Value of Assets) - (Deductible Debt)

Crypto Wealth Tax Rate Norway

Your net wealth is taxed based on your Tax Class and Net Asset Threshold as mentioned below:

Municipal Wealth Tax

‍

State Wealth Tax

‍

Tax-Free Crypto Transactions

Not all crypto transactions are taxable in Norway. Here are some transactions that are considered non-taxable by the Norwegian tax authorities:

• Lost/Stolen Crypto: Crypto assets that were stolen by phishing attacks, hacks, exchange frauds, or lost due to forgotten private keys are considered non-taxable and can even be used as tax-deductible in some instances.

• Transferring Crypto Between Wallets: Transferring crypto between your wallets is a non-taxable event as long as you can prove ownership of transferred assets.

• Buying Crypto with Fiat: Buying crypto with fiat currency is a non-taxable transaction as it doesn’t involve disposing of an asset.

• Gifting Crypto: Gifting Crypto is a non-taxable event in Norway as there are no gift taxes. However, make sure you keep detailed records of the transaction including the gift’s origin.

• Donating Crypto: Donating crypto to a registered charity with no connections to you or your business is also considered a non-taxable event.

Taxed Transactions

Listed below are some of the transactions that attract tax liabilities according to the Skatteetaten:

• Sale of Crypto Assets: If you sell your cryptocurrencies at a profit, the profit is subject to capital gains tax. The tax rate is 22% for individuals and 25% for companies.

• Crypto Mining: If you mine cryptocurrencies as a business, the income from mining is subject to ordinary income tax. The tax rate is based on your income tax rate.

• Crypto Staking: If you earn staking rewards by holding crypto assets in a proof-of-stake network, the rewards are subject to ordinary income tax. 

• Trading of crypto assets: If you trade crypto assets frequently, the profits are subject to ordinary income tax. The tax rate is based on your income tax rate.

• Using crypto assets to pay for goods and services: If you use crypto assets to pay for goods and services, the transaction is subject to value-added tax (VAT) at a rate of 25%.

Tax on Mining Crypto Norway

If you have earned any income from mining activities or received mining rewards you’re liable for income tax. Moreover, it is mandatory to declare the value of your mining earnings in NOK at the time of token receipt, and you should maintain records of the NOK market value of that time for each token. 

What Skatteetaten says about mining:

“Mining of virtual currency means that you receive virtual currency in return for verification activity. Mining usually requires computing power for the method ‘Proof of Work’ to verify transactions on the blockchain and to extract virtual currency.”

You may claim deductions for expenses like equipment, software, and electricity, with an annual depreciation of 30%. Furthermore, if you’re involved in a cooperative mining operation, you must distribute the deductions equally amongst all participants.

Tax on Staking Crypto

Although mining and staking are different in the way they add and validate new blocks of transactions on the blockchain, they’re treated the same from a tax perspective. Staking rewards are taxed as regular income similar to mining rewards and you need to report these transactions to the tax authorities to steer clear of any tax complications.

Crypto margin trading, futures, and CFDs Norway

While margin and futures trading in cryptocurrencies can yield higher profits, it also entails greater risk. Presently, there is no official guidance on how such activities are to be taxed in Norway. 

However, you can use the established regulations on margin, futures, and derivatives trading in conventional financial markets as a reference which explicitly states - any gains or losses arising from such trades are treated like regular income and will be subjected to income tax.

Gifts and Donation Taxes

Receiving crypto as a gift in itself is not a taxable event in Norway, you only pay taxes when you dispose of the gifted assets by selling or swapping them. Note that gifted assets inherit the cost base equal to the acquisition cost paid to acquire these assets by the gifter.

As far as gifting crypto is concerned, there are no clear guidelines on whether tax exemptions can be claimed on gifted assets. Crypto donations are in the same boat as well, because Skatteetaten is yet to release any guidelines on the matter. However, if we assume crypto donations to be similar to fiat donations, you can claim a tax deduction if certain criteria are met.

• The organization you’re making the donations to must comply with the tax law’s requirements for activity, purpose, and national scope.

• Each donation should be more than 500 NOK

• The donations must be pre-filled in the tax return

You can access a list of all approved organizations here. Note that you should never fill your donations yourself in the tax return, if your donations are not pre-filled you can contact the organization to report the donation on your fødselsnummer or birth number.

NFT Taxes in Norway 

According to Norway's taxation guidelines NFTs are classified as virtual assets and are subject to the same tax regulations as other virtual assets. Although there are various use cases for NFTs, they are all treated as assets and are subject to the following tax treatment.

Minting an NFT may be subject to income tax if the smart contract involved in the process burns crypto assets for minting the NFT on-chain, as this would result in a realization. However, minting an NFT without disposing of any assets, which may be the case with free mints, does not attract any tax liabilities.

Note: Realization typically refers to the conversion of an asset into cash or other forms of value, such as securities or goods.

When selling an NFT, the transaction is considered a realization and therefore, attracts income tax. 

DAO Taxes

Skatteetaten is yet to release guidelines on the taxation of income received from DAOs, however, from what we can extrapolate from the existing guidelines, it will be viewed the same way as income from other sources like staking, mining, and airdrops. 

We do suggest seeking advice from an experienced tax accountant for transactions concerning DAOs to avoid legal complications in the future.

ICO Taxes

ICOs are events that allow you to receive tokens from an unreleased project at a discounted price. It functions in a similar way as IPOs in the traditional securities market, you use mainstream tokens like BTC and ETH to fund the project and receive native tokens in return.

ICOs are viewed the same way as crypto-to-crypto trades from a tax perspective, you are taxed on the disposal of mainstream tokens like BTC and ETH at receipt and you pay taxes again when you decide to dispose of these assets. Note that the new tokens received inherit the cost base equal to the FMV of these tokens at the point of receipt i.e. the price you paid using mainstream tokens.

DeFi Crypto Taxes Norway

If you’re engaging in financial activities on a decentralized platform, also known as DeFi, it is crucial to be aware of the tax implications. While many countries, such as the USA and Germany, have not yet provided clear guidelines on DeFi taxes, taxpayers always take caution to avoid any potential issues.

Fortunately, in Norway, Skatteetaten has issued guidelines regarding DeFi transactions, which offer a detailed insight into the tax treatment of DeFi transactions.

Skatteetaten has split virtual currencies into seven categories, each with different subcategories for incoming and outgoing transactions. It's important to understand when you've "realized" a cryptocurrency, which means you've transferred ownership in exchange for payment and stopped owning it.

If you're involved in decentralized finance (DeFi) transactions, you need to keep records of your realizations and pay income tax. Moreover, you must figure out whether you've made a profit, loss, or income from your DeFi transactions. Norway has some specific rules for DeFi that are different from other countries. 

Here are a few examples:

• If you swap or exchange cryptocurrency or tokens, it's considered a realization. 
• The same goes for exchanging wrapped tokens, making deposits in liquidity pools, and receiving returns from those pools. 
• Any income you receive from participation in the liquidity pool is taxable, even if it's not a change in value. 
• Finally, if you receive a management token, it's considered income when you receive it, and any sale or exchange of that token is also considered a realization.

How are Airdrops and Forks Taxed in Norway?

Airdrops are typically regarded as gifts offered by either the blockchain or token holder. And although airdrops are generally small or negligible in value, you are liable for income tax. In some cases, the value of an airdrop at the time of acquisition may be zero, and if so, you can assign a zero acquisition cost. Moreover, you will still be liable to pay income tax when you sell the received assets.

Similar to airdrops, hard forks are also considered as income at the time of receipt. If there is no market value available for the received currency, you may set the acquisition cost to NOK 0. However, you will still be required to pay taxes upon the disposal of the received assets.

When To Report Crypto Taxes in Norway?

The deadline for reporting cryptocurrency taxes in Norway usually falls on April 30th. However, taxpayers may be given an extension because April 30th lands on a weekend which means this year, the deadline will be extended to May 2nd. If you’re a prior taxpayer or have filed tax earlier, you will receive an email notification containing your preliminary tax return information between March 14th and March 31st.

Deadline Extention       To May 2nd due to the Weekend  (if possible create a new image)

How To File Crypto Taxes in Norway?

If you are a crypto trader or investor in Norway, you must know how to report your crypto taxes. Fortunately, Skatteetaten has simplified the process and made it more convenient with its online tax portal.

You can submit your taxes online or by mail, depending on your preference and you need to submit your wealth, capital gains, and income tax together. If you have any questions regarding taxes or if you need assistance, you can contact Skatteetaten between 9:00 and 15:00 on weekdays. 

Living outside Norway? No problem.

Dial +47 22 07 70 00 or 800 80 000, and the Norwegian tax authority is at your service guiding you through all the steps of your crypto taxation. Moreover, Skatteetaten offers a video guide on how to file your crypto taxes, which might be helpful for you if it’s your first time filing crypto taxes. 

Our guide will primarily cover how to file your crypto taxes online in Norway. If you choose to use Skattetaten's online platform, follow these steps to ensure a hassle-free process and avoid potential tax complications down the line:

Option 1: If you wish to enter information for each cryptocurrency

1. Go to skatteetaten.no and scroll down to the "Finans" heading
2. Click on "Andre finansprodukter og virtuell valuta/kryptovaluta" and then "Virtuell valuta/kryptovaluta"
3. Check the box saying "Jeg vil legge inn opplysninger for hver enkelt" (I will enter information for each individual)
4. For each cryptocurrency, fill out the following information:

• Name of the cryptocurrency/digital currency
• Amount owned on 31 December in the income year
• Property value
• Taxable gains
• Deductible losses
• Other taxable capital income (e.g., mining, staking, etc.)
• Wallet address used for this currency

Option 2: If you wish to enter aggregated tax information for many virtual currencies/cryptocurrencies

1. Go to skatteetaten.no and scroll down to the "Finans" heading

2. Click on "Andre finansprodukter og virtuell valuta/kryptovaluta" and then "Virtuell valuta/kryptovaluta"

3. Check the box saying "Jeg vil legge inn summertime skatteopplysninger for mange virtuelle valuta/kryptovaluta og må laste opp vedlegg som viser detaljer" (I want to enter aggregated tax information for much virtual currency/cryptocurrency and need to upload attachments showing details)

4. Upload a PDF file that shows your total wealth, gains, losses, and other capital income for the year, along with the exchanges and wallet addresses you have used

5. Fill out the following information:

• Property value
• Taxable gains
• Deductible losses
• Other taxable capital income

After entering your information with either option, scroll down to "Årsak til endring/nye opplysninger" (reason for the change/new information), tick the box "Lagt til opplysninger som manglet" (Added information that was missing), and click "Ok". After you click “Ok”, you have successfully submitted your crypto tax return to Skattetaten. 

However the process may seem cumbersome, there's no need to worry. You can sign up for online platforms like Kryptos which can simplify the procedure by offering step-by-step guidance, identifying potential deductions and credits, and facilitating the direct e-filing of your tax return with Skatteetaten.

What crypto records will the Skatteetaten want?

Skatteetaten would ask you to maintain sufficient documentation to substantiate the positions taken on your tax returns. Some of these documents are as follows.

• The market value of your crypto assets on the day of purchase
• The market value of your crypto assets on the day of sale
• A detailed record of all profits and losses
• Date and time of each transaction
• Proof of all sales and purchases
• Documentation of all transfers made between personal and external wallets

How to File Crypto Taxes Using Kryptos?

Now that you’re aware of how your crypto transactions are taxed and what forms you need to fill out to complete your tax report, here’s a step-wise breakdown of how Kryptos can make this task easier for you:

1. Visit Kryptos and sign up using your email or Google/Apple Account
2. Choose your country, currency, time zone, and accounting method 
3. Import all your transactions from wallets and crypto exchanges
4. Choose your preferred report and click on generate report option on the left side of your screen and let Kryptos do all the accounting.
5. Once your Tax report is ready, you can download it in PDF format.

If you still need clarification regarding the integrations or generating your tax reports, you refer to our video guide here.

How to avoid crypto taxes in Norway

Although there is no legal way to avoid crypto taxes entirely, the Norwegian tax authorities do offer some legal gateways to lower your tax bill:

1. Use the tax allowances and credits to lower your tax bill
2. Use tax loss harvesting to lower your tax base
3. If you’re paying child support, you can claim a deduction as long as your children are less than 12 years of age.
4. Pension savings are tax deductible, you can deduct up to 40,000 NOK from your tax base as pension savings.

FAQs

1. Is crypto legal in Norway?

Yes, cryptocurrency is legal in Norway. The Norwegian government recognizes cryptocurrency as an asset and a means of payment. In 2019, the Norwegian Financial Supervisory Authority (FSA) issued new regulations that required cryptocurrency exchanges operating in Norway to register with the FSA and comply with anti-money laundering (AML) and counter-terrorist financing (CTF) regulations. Additionally, cryptocurrency mining is also legal in Norway, and there are no restrictions on individuals or businesses holding cryptocurrencies.

2. How is crypto taxed in Norway?

Crypto transactions are considered taxable by the Skatteetaten and are subjected to two separate classes of tax. The first is income tax and the second is a wealth tax. Any gains or income that you make as a result of crypto transactions is taxed under the income tax laws and your crypto assets are considered in your net wealth calculations and therefore attract a marginal wealth tax as well. This has been thoroughly discussed in the above sections of the tax guide.

3. Do you have to pay taxes on buying crypto in Norway?

No, buying crypto in itself is not a taxable event. However, if it involves the disposal of another asset, then it is most certainly a taxable event. In other words, buying crypto with fiat is not taxable, however, buying one crypto asset and making the payment with another is a taxable event.

4. How to file crypto taxes using Kryptos?

We’ve already discussed how to file your crypto taxes in the above sections of the guide offering a step-wise breakdown of the entire process. However, we agree that it is unreasonably complicated even for someone with a fair amount of prior knowledge. Although there’s an easy way to file your crypto taxes using a crypto tax software called Kryptos.

Where all you need to do is log in on the platform, add all your trading accounts, wallets, and DeFi accounts and sip coffee while Kryptos does all the heavy lifting for you. The platform can auto-fetch all your transaction from the tax year and generate a legally compliant tax report within a matter of minutes while also suggesting ways to lower your tax bill. It works like magic, all you need to do is try it once.

‍

All content on Kryptos serves general informational purposes only. It's not intended to replace any professional advice from licensed accountants, attorneys, or certified financial and tax professionals. The information is completed to the best of our knowledge and we at Kryptos do not claim either correctness or accuracy of the same. Before taking any tax position / stance, you should always consider seeking independent legal, financial, taxation or other advice from the professionals. Kryptos is not liable for any loss caused from the use of, or by placing reliance on, the information on this website. Kryptos disclaims any responsibility for the accuracy or adequacy of any positions taken by you in your tax returns. Thank you for being part of our community, and we're excited to continue guiding you on your crypto journey!

Cryptocurrency has taken the world by storm, and Germany is no exception. But with the rise of crypto profits comes the responsibility of paying taxes on those gains. As a crypto investor in Germany, it's essential to understand the intricacies of crypto taxation to avoid legal issues or hefty fines. That's why we've created this comprehensive tax guide to help you navigate the complexities of crypto taxation in Germany. From calculating your taxes to reducing tax liabilities by HODLing assets, and everything in between, this guide has got you covered. 

Latest Updates/Regulations

09/06/23 - Updated to accommodate DAO, gifts, and donation taxes

09/06/23 - Updated to accommodate ICO taxes

EU’s sixth anti-money laundering directive

DAC-8

How Is Crypto Taxed In Germany?

‍

‍

As per the guidelines set forth by the Federal Ministry of Finance or, Bundesfinanzministeriums (BMF), all cryptocurrencies you’re holding are digital representations of value that are not issued or guaranteed by a central bank or public authority. This means that your crypto assets are not considered legal tender or currency, but are instead viewed as private assets for tax purposes.

Since cryptocurrency is considered a private asset, which is different from a property and has specific tax implications, any profits made from such transactions will be subject to individual Income Tax rather than Capital Gains Tax. Selling your crypto for fiat currency, swapping one crypto for another, or gifting crypto is considered a disposal in Germany and attracts tax liabilities. Capital gains are categorized as short-term or long-term based on the duration you hold them for. If you dispose of your assets within a year of acquisition, your gains will be considered short-term and will be subjected to income tax. An annual exemption of €600 is allowed per individual when it comes to short-term gains.

Holding your assets for over a year before disposal makes the transaction tax-free in Germany.

Tokens received as mining or staking rewards are considered additional income and you need to pay income tax on them. Every taxpayer is allowed an exemption limit of €256 when it comes to additional income. 

‍

Example:

‍

Consider the following transactions:

2022/02/13 - Sonia Buys 1 BTC for €10,000

2022/04/16 - Sonia Sells the BTC for €13,000

Capital Gain = €13,000 - €10,000 = €3,000

Now since it’s higher than the exemption amount of €600, it is taxable, but you can still reduce the exemption amount from your gain to get your actual tax base.

Tax Base = €3,000 - €600 = €2,400

Similarly, consider another set of transactions:

2022/05/19 - Sonia receives 6.25 BTC as mining rewards

Now assuming the market price of BTC at receipt to be €12,000

The total value of the tokens received = €12,000 * 6.25 = €75,000

And it’s way over the additional income exemption amount of €256. But you can reduce this amount from your income to get your tax base.

Tax base =  €75,000 - €256 = €74,744

This is the final amount you will have to pay taxes on.

Can the BZSt track crypto?

‍

If you’re wondering whether you can hide some of your transactions from the BZSt by not reporting them on your tax report. The answer is a big no with an exclamation mark because the BZSt can access all your records and easily correlate your tax report with their database and figure out what’s wrong.

Ever since the EU’s sixth anti-money laundering directive was transposed into national law in December 2020, regulated entities in EU member states were mandated to comply with the new regulations by 3rd June 2021. These entities include any exchange offering financial services in the crypto space that now had to comply with harsher guidelines around when and how they identify their customers.

Anticipated to be implemented later this year, the forthcoming DAC-8 EU directive focused on data sharing is set to empower the Bundeszentralamt für Steuern (German Federal Central Tax Office) with the ability to authenticate an individual's ownership of cryptocurrencies. In accordance with the proposed directive, the German tax authority will be granted the authority to examine the financial documentation of cryptocurrency businesses, enabling them to obtain a comprehensive understanding of their crypto holdings.

Capital Gains Tax Germany

‍

As previously mentioned, in Germany, short-term capital gains are treated as income and are subject to the standard rules of income tax. On the other hand, long-term gains are exempt from taxation. Therefore, it is advisable to adopt a cautious strategy by holding your assets for a period exceeding one year before selling them.

How to Calculate Crypto Gains & Losses

Calculating the gains or losses from your cryptocurrency investments is essential in tax jurisdictions that impose income tax on crypto sales. To determine your capital gain, you subtract the selling price from the purchase price, and if the result is positive, it’s gain, otherwise, it’s a loss. It's important to note that, for taxpayers in Germany, all values used in capital gains calculations must be denominated in Euros.

‍

‍

The standard formula to calculate capital gain is as follows:

Capital gain = Selling price – Purchase price

The selling price represents the value of the cryptocurrency at the time of disposal, and you can obtain it from an exchange or a popular price aggregator. However, establishing the purchase price can be challenging because you need to accurately determine the actual price you paid to acquire the asset.

Example

Consider the following transactions:

2022/03/14 - Michael bought 1 BTC for €12,000

2022/04/16 - Michael bought 3 ETH tokens for €1,400 each

2022/06/15 - Michael Sold 1 BTC for €20,000

2023/05/01 - Michael sold 3 ETH for €1,800 each

Now since the BTC disposition was within a year of acquisition, the gains will be taxable under the income tax rules.

Capital Gain =  Disposal amount - Cost Basis = €20,000 - €12,000 = €8,000

However, the ETH disposition was done after holding the tokens for over 12 months. Hence, the transaction attracts no tax obligation.

Crypto Losses Germany

In the event that you have sold cryptocurrency within a year and experienced a loss instead of a gain, you will not be obligated to pay taxes on it. However, it is crucial to maintain records of these losses, as they can be utilized to offset any forthcoming gains, resulting in a decrease in your overall tax obligations.

If you do not have any gains to offset, the German Tax Act permits you to carry forward your losses to subsequent financial years. This provision allows you to reduce your tax liability on potential future gains, providing a beneficial mechanism for optimizing your tax situation.

Lost and Stolen Crypto

In the unfortunate event that you have suffered the loss of your cryptocurrency as a result of fraudulent activity or crypto rug pulls, there may be a possibility to claim it as a loss. However, it is important to note that the specific criteria for claiming such a loss have not been explicitly defined by the BZSt (Bundeszentralamt für Steuern, German Federal Central Tax Office).

We recommend contacting the BZSt directly to discuss your situation and provide them with all the relevant information, such as:

• When you acquired and lost the private key
• The wallet address
• The cost incurred to acquire the lost or stolen cryptocurrency 
• Amount of cryptocurrency in the wallet at the time of loss 
• Evidence that the wallet was under your control 
• And any transactions linked to your identity or a verified account on a digital currency exchange. 

If your claim is approved by the BZSt, it can be used to offset other income tax you have in the same tax year.

Crypto Tax Breaks Germany

Although there is no legal way to avoid paying crypto taxes entirely, here are some ways you can pay less crypto taxes:

1. HODL your assets for over a year
2. Use tax-free exemptions such as €600 for short-term gains and €260 for additional income
3. Track and harvest losses to lower your tax bill
4. Use DeFi transactions strategically to avoid paying taxes on such transactions
5. Gift your assets to your spouse if they fall in a lower tax bracket
6. Keep track of allowable expenses like gas, transaction, slippage, and network fees and deduct them to lower your tax bill.

Crypto Cost-Basis Method Germany

If you're unable to determine the purchase price, a conservative approach would be to consider it as zero. However, you'll have to pay tax on the full amount, which may result in extra taxes.

‍

But it would be unfair for you to pay tax on the full amount.

The BZSt has clear guidelines on how to calculate the purchase price or cost basis of your crypto assets. Individual identification can be used when possible, and you must have access to supporting documents. However, when individual identification is not possible, the recommended method for accounting is First in First out (FIFO), which involves selling the oldest coins first.

Example

Consider the following transactions:

2022/01/13 - Selim bought 1 BTC for €11,000

2022/01/23 - Selim bought another BTC for €11,500

2022/02/13 - Selim bought 2 ETH tokens for €1,000 each

2022/04/11 - Selim bought 1 ETH for €1,200

2022/06/04 - Selim sold 1 BTC for €14,000

2022/06/24 - Selim sold 1 Eth for €1,300

2022/08/26 - Selim sold the remaining BTC for €15,000 and the balance ETH tokens for €1,500

Note that we’re using the FIFO accounting method for capital gain calculations.

Now, as evident from the above ledger of transactions a total of 3 disposals were made. 

‍

Gain from 1st Disposal

The first disposal was made on 2022/06/04.

1 BTC sold for €14,000

Since we are using the FIFO accounting method, this BTC is the same one acquired on 2022/01/13 for €11,000

Capital Gain = Disposal Amount - Cost Basis = €14,000 - €11,000 = €3,000

‍

Gain from 2nd Disposal

The 2nd disposal was made on 2022/06/24.

1 ETH sold for €1,300.

This ETH token is the same one acquired on 2022/02/13 for €1,000

Capital Gain =  Disposal amount - Cost Basis =  €1,300 - €1,000 = €300

‍

Gain From 3rd Disposal

 The 3rd disposal was made on 2022/08/26.

2 ETH sold for €1,500

1 BTC sold for €15,000

Now the BTC disposal is pretty straightforward. It’s the same one that was acquired on 2022/01/23 for €11,500.

Gain from BTC disposal = €15,000 - €11,500 = 3,500

The ETH disposal is somewhat complicated because if we go by the FIFO accounting rule, one of the ETH tokens disposed of was acquired for €1,000 (let’s call it ETH1) while the other was acquired for €1,200 (let’s call it ETH2). So the gains will be different for both tokens:

Gain for ETH 1 = €1,500 - €1,000 = €500

Gain for ETH 2 = €1,500 - €1,200 = €300

‍

Total Capital Gain

Total Gain = €3,000 + €3,00 + €3,500 + €500 + €300 = €7,600

And since the tax authorities offer an exemption of €600 when it comes to short-term gains, you can deduct that from the total amount to get your tax base.

Tax Base =  €7,600 - €6,00 = €7,000

Crypto Income Tax Germany

As cryptocurrencies are classified as private property, they are not subject to Capital Gains Tax as is the case with stocks or equities. However, gains from the sale of cryptocurrencies are subject to Income Tax 

Short-Term Trade

If you have held your cryptocurrency for less than a year before disposing of it, you will be subject to regular income tax on the resulting profits. This covers all forms of disposition, including selling cryptocurrency for fiat currency, exchanging it for a different type of cryptocurrency, or using cryptocurrency to purchase goods or services. Moreover, it’s worth noting that you're allowed a tax-free limit of €600 per calendar year.

Long-Term Trade

Want to save crypto tax in Germany?

Waiting for at least a year before selling your crypto can help you avoid taxes altogether, which is good news for German crypto investors who are willing to exercise patience.

In addition to the previously mentioned long-term and short-term taxable events, certain cryptocurrency transactions such as mining or staking rewards are also classified as income and are subject to Income Tax.

We will discuss them in detail, before that, let's now delve into the Income Tax rates to gain insight into how much you might owe.

Income Tax Rate Germany

The amount of tax you pay will depend on your individual Income Tax rate, which can range from 0% to 45% based on your total income during the tax year. This table shows the Income Tax Rates for the year 2022.

Income Tax Rate

‍

‍

Planning ahead? Here’s the tax rate for 2023.

‍

‍

It's important to note that these tax rates don't include the additional solidarity surcharge tax (Solidaritätszuschlag or 'Soli') of 5.5%, which applies to single taxpayers who pay more than €16,956 in income tax and married taxpayers who pay more than €33,912.

How to Calculate Crypto Income

As already mentioned, most transactions that result in a gain are taxed as income, moreover, income from mining and staking is considered additional income and is taxed under the income tax regime as well.

So all you need to do is add up the individual gains and losses from the pile of transactions and the tax base you end up with is your final income.

Tax-Free Crypto Transactions Germany

If you’ve been involved with any of these transactions you are not liable for tax (except for a few cases) in Germany. 

• Selling cryptocurrency held for more than one year
• Giving cryptocurrency as a gift to friends and family
• Earning less than €600 in short-term gains and income within a year
• Purchasing cryptocurrency using EUR
• Selling staked or loaned cryptocurrency after one year
• Transferring cryptocurrency between wallets
• Receiving an airdrop without any action on your part

• New coins received through hard forks
• Receiving and redeeming utility tokens

Note: In some cases, airdrops and hard forks are tax-liable crypto transactions, which we will discuss later.

Taxed Crypto Transactions Germany

If you engage in any of the following activities within one year, you may be subject to taxation.

• Selling cryptocurrency for fiat currency 
• Exchanging cryptocurrency for another coin
• Using cryptocurrency to purchase goods or services
• Investing in an ICO or IEO, earning cryptocurrency as income, &
• Receiving Cryptocurrency through mining or staking activities

Tax on Mining Crypto Germany

In Germany, engaging in mining activities triggers taxable events, regardless of the type of token being mined. If you have participated in mining and have received tokens as rewards, these tokens will be subject to income tax.

‍

‍

It's important to keep in mind that any expenses associated with the mining process can be claimed as tax deductions. These costs should be subtracted from the fair market value of the tokens at the time of receipt. The resulting value will serve as your taxable income base.

Furthermore, when you decide to dispose of these assets by selling, swapping, or gifting them, you will be required to pay income tax on the day of the transaction.

Tax on Staking Crypto Germany

Although mining and staking activities are vastly different, both mining and staking rewards are treated the same for tax purposes. The BZSt has clarified that any staking rewards will be taxed as additional income and will inherit the cost base equal to the fair market value of the tokens on receipt.

You’ll also be taxed if you ever decide to dispose of these tokens incurring a capital gain, although if you hold these tokens for over a year before disposing of them, you’ll have to pay no taxes.

Crypto Margin Trading, Futures and CFDs

Crypto users who engage in margin and futures trading can make higher gains but also face more risk. Currently, there is no official guidance on how such trading should be taxed in Germany, but existing regulations on margin, futures, and derivatives trading in traditional financial markets can be leaned on. If trading positions are settled in cryptocurrency, they will be subject to Income Tax, and if settled in non-crypto assets, they will likely be subject to Capital Income tax. Taxation occurs at the time the position is closed, and it is recommended to seek advice from a professional tax advisor for specific situations.

Crypto Gifts and Donations Tax

In Germany, gifting Bitcoin or other cryptocurrencies to your loved ones is treated like any other gift. Gifts are exempt from taxes up to €20,000 for friends and up to €500,000 for spouses. Amounts exceeding these limits are subject to the "Schenkungssteuer," which has varying tax rates depending on the recipient (e.g., spouse, children, parents, siblings, or friends). Tax rates for gifts range from 7% to 50%. The tax exemption limits reset every 10 years.

Crypto donations on the other hand are a grey area when it comes to crypto taxation in Germany, we will add more details regarding their taxation as soon as more guidelines on the matter are accessible.

NFT Taxes Germany

NFTs are treated by tax authorities in a manner similar to other tokens, resulting in comparable tax implications for these crypto assets, unless you happen to be the creator of the NFTs.

If you own NFTs and decide to sell them within one year of acquiring them, any gains obtained will be subject to income tax. However, if you hold onto them for more than a year, all the gains derived from their sale will be considered tax-free.

On the other hand, if you are a creator who mints NFTs from the blockchain and sells them for a profit, the income generated will be regarded as artistic or business income from a tax perspective, thus attracting income tax. There is a possibility that these transactions may also be subject to trade tax. However, the BMF (Federal Ministry of Finance) has yet to release guidelines concerning the taxation of NFTs. Therefore, we recommend consulting a tax expert to gain a better understanding of the tax implications associated with NFTs.

Crypto ICO Taxes

Crypto ICOs are special fundraiser events that allow investors to buy tokens from an unreleased project, similar to IPOs in traditional securities markets. The transactions usually involve mainstream tokens like BTC and ETH. 

The BZSt views these transactions as crypto-to-crypto trades and these transactions constitute a taxable event. The tokens inherit the cost base equal to the FMV of these tokens at the time of receipt.

Note that you only pay taxes when you dispose of these tokens within a year of receiving them. If you’ve held these tokens for over a year before disposing of them, you’ll attract no tax obligations.

DAO Taxes

There is no clear guidance from BZSt when it comes to income from DAOs. Although there’s a high chance that this income will be treated as additional income and taxed accordingly, we suggest seeking guidance from an experienced tax advisor regarding income from DAOs.

We will be adding more details here as soon as new guidelines hit our radar.

DeFi Crypto Taxes Germany

DeFi, or decentralized finance, is a relatively new market, and like many other tax offices, the BZSt in Germany is yet to release detailed guidance on how DeFi investments will be taxed. However, this does not mean that DeFi investors will not have to pay taxes on their transactions. Instead, investors will need to interpret the current guidance on crypto tax from the BZSt and apply it to their DeFi investments. Alternatively, consulting with an experienced crypto accountant is recommended to navigate the complex tax landscape surrounding DeFi.

When it comes to DeFi tax implications, there are a couple of potential scenarios to consider. 

First, earning new tokens via DeFi protocols, such as staking, liquidity mining, or yield farming, is likely to be viewed by the BZSt as additional income. As such, new tokens or coins received through these transactions will be subject to Income Tax upon receipt if the investor's additional income exceeds €256.

Second, trading tokens that accrue value in DeFi protocols can also result in taxable transactions. Many DeFi protocols issue liquidity pool tokens instead of new tokens, which represent the investor's capital in the pool and can accrue value based on the rewards received from being in the pool. When an investor withdraws their capital by trading their liquidity pool tokens back, they realize a profit, which may be subject to taxation depending on how long they have held their original capital and their liquidity pool tokens.

How are Airdrops and Forks taxed in Germany?

Airdrops

Tokens received via airdrops may or may not be taxable depending on the recipient's actions. If the recipient acted to be eligible for the airdrop, then the airdrops will be considered as income and will therefore attract income tax.

If the recipient didn’t do anything in return for the airdrop, the sale of the assets received will not be considered a taxable event by the tax authorities.

Forks

Since soft forks result in no new tokens being issued to the users, it is considered a non-taxable event. As far as hard forks are concerned the BMF has clarified that for private investors, you do not need to pay Income Tax upon receipt of crypto as a result of a hard fork. However, if you sell this crypto within one year of receipt, you'll need to pay Income Tax if it's valued at more than €600.

When to Report Crypto Tax in Germany

As a taxpayer, the deadline to submit your tax return for the previous year is May 31st of the following year. For example, if you earned income in 2022, you are required to submit your tax return by May 31st, 2023.

However, if you engage a tax advisor, they can submit your tax return by December 31st of the following year. For instance, if you engage a tax advisor for the 2022 tax year, they would have until December 31st, 2023 to submit your tax return.

How to File Crypto Taxes in Germany

Any profits or income you’ve made from crypto assets must be reported to the BZSt on your tax report. So once you’ve figured out your taxable income and capital gains base, you can choose any one of the following channels to file your taxes:

1. Through ELSTER(online tax filing portal)
2. Using paper forms

Filing taxes using ELSTER

Follow the steps listed below to file your taxes online without facing any blockers midway through:

1. Go to the ELSTER website and register for an account. You will need your personal information, including your name, address, and tax identification number (TIN).

2. After registering, download the ELSTER software to your computer. The software is available for free on the ELSTER website.

3. Open the ELSTER software and enter your tax information. The software will guide you through the process, and you can save your progress and come back to it later if needed.

4. When you have completed your tax return, submit it using the ELSTER software. You will receive a confirmation that your tax return has been submitted.

5. After submitting your tax return, you will need to sign it electronically using your ELSTER certificate. If you don't have an ELSTER certificate yet, you can apply for one on the ELSTER website.

6. After submitting your tax return, you will receive a tax assessment from the tax office. This will let you know if you owe additional taxes or if you are entitled to a refund.

Filing Taxes Using Paper Forms

To file your taxes the traditional way using paper forms. You will need the following forms to accurately report all your transactions:

1. Hauptvordruck ESt 1 A (The General Tax Form)

You need to fill out Form Hauptvordruck ESt 1 A to report all your capital gains and income made from any source except crypto. This form solicits regular income tax data.

2. Anlage SO(For Other Income)

This form is for the capital gains and income you’ve made from crypto assets. You need to report all your crypto transactions and the gains you’ve made over the entire tax year.

What Crypto Records Will the BZSt Want?

Like most other tax authorities, the BZSt expects you to keep a detailed record of all your transactions from the past 5 years. You’re expected to maintain the following records:

1. Date of your crypto transactions
2. The value of crypto at the time of the transaction
3. Details about the nature of the transaction and the participants involved

Maintaining these records manually is an intimidating task and you may end up in legal trouble if you miss reporting some transactions. A smarter way to record-keeping is to use tax software like Kryptos, which can auto-fetch all your transactions from across a pool of more than 1,200 exchanges and wallets to the central dashboard and even accounts for real-time transactions with features like auto-sync. 

How to File Crypto Taxes Using Kryptos?

Now that you’re aware of how your crypto transactions are taxed and what forms you need to fill out to complete your tax report, here’s a step-wise breakdown of how Kryptos can make this task easier for you:

1. Visit Kryptos and sign up using your email or Google/Apple Account
2. Choose your country, currency, time zone, and accounting method 
3. Import all your transactions from wallets and crypto exchanges
4. Choose your preferred report and click on generate report option on the left side of your screen and let Kryptos do all the accounting.
5. Once your Tax report is ready, you can download it in PDF format.

If you still have any doubts regarding the integrations or generating your tax reports, you refer to our video guide here.

What Crypto Records will the BZSt want?

Similar to many tax offices around the globe, the BZSt expects you to maintain detailed records from the past 5 years. Given below is a list of records tax authorities expect you to maintain in Germany:

• Data and time of crypto Transactions
• The fair market value of your assets at the time of disposal
• The specific circumstances of the transaction and the parties involved in it

How to File Crypto Taxes Using Kryptos?

Now that you’re aware of how your crypto transactions are taxed and what forms you need to fill out to complete your tax report, here’s a step-wise breakdown of how Kryptos can make this task easier for you:

1. Visit Kryptos and sign up using your email or Google/Apple Account
2. Choose your country, currency, time zone, and accounting method 
3. Import all your transactions from wallets and crypto exchanges
4. Choose your preferred report and click on generate report option on the left side of your screen and let Kryptos do all the accounting.
5. Once your Tax report is ready, you can download it in PDF format.

If you still have any doubts regarding the integrations or generating your tax reports, you refer to our video guide here.

How to Avoid Tax on Crypto in Germany

Although it’s impossible to avoid your crypto taxes entirely in a legally compliant way. However, you can reduce your tax bill without getting into legal trouble with the tax authorities. Here are some of them:

• Hold your assets for more than a year to avoid paying any taxes
• Use tax-loss harvesting to reduce your capital gains
• Choose your assets strategically when getting involved in DeFi transactions
• Utilize your tax-free thresholds 
• Gift crypto assets to your spouse if they happen to be in a lower tax bracket
• Mining expenses, gas fees, transaction fees, and software preparation fees are tax-deductible expenses in Germany, use them to lower your tax bill

FAQs

1. Is crypto Legal in Germany?

Yes, cryptocurrency is legal in Germany. The German government recognizes cryptocurrencies as a digital representation of value and a form of private money. The use of cryptocurrencies is not restricted in Germany, and individuals and businesses can buy, hold, and trade cryptocurrencies freely. However, businesses that deal with cryptocurrencies are subject to regulatory requirements, such as registration with financial authorities and compliance with anti-money laundering regulations. Additionally, cryptocurrency-related income is subject to taxation in Germany, and individuals and businesses are required to report their cryptocurrency holdings and transactions to the tax authorities.

2. How to Calculate and File Your Crypto Taxes in Germany Using Kryptos?

Filing your crypto tax all on your own is quite a cumbersome task and you might need some assistance to make sure nothing goes wrong and you don’t end up in legal trouble just because you missed reporting a couple of transactions on your tax report. Kryptos can help you with this with its smart software-based crypto taxation solution that can auto-fetch all your transactions and generate a legally compliant tax report in a matter of minutes. And all of this while you chill on your couch.

3. How is Crypto taxed in Germany?

In Germany, cryptocurrencies are considered private money or assets and are therefore subject to taxation. The taxation of cryptocurrencies in Germany depends on the individual circumstances of the taxpayer and the purpose for which the cryptocurrency was acquired.

• Capital Gains Tax: If you buy and sell cryptocurrencies as a private investor, any gains you make are subject to capital gains tax. If you hold the cryptocurrency for more than one year, you may be eligible for a reduced tax rate.

• Income Tax: If you receive cryptocurrencies as payment for goods or services, you must declare the value of the cryptocurrency received as income and pay income tax on it.

• Mining: If you mine cryptocurrencies as a business, any income you receive is subject to income tax.

• VAT: Cryptocurrency transactions are generally exempt from VAT in Germany. However, if you sell goods or services for cryptocurrency, you may have to pay VAT on the value of the goods or services sold.

4. How can Kryptos help you in filing your crypto taxes?

We agree that filing your crypto taxes is an unreasonably complicated task, even for someone with a fair amount of prior knowledge. However, there’s an easy way to file your crypto taxes using a crypto tax software called Kryptos.

All you need to do is log in on the platform, add all your trading accounts, wallets, and DeFi accounts and sip coffee while Kryptos does all the heavy lifting. The platform can auto-fetch all your transaction from the tax year and generate a legally compliant tax report within minutes while suggesting ways to lower your tax bill. It works like magic all you need to do is try it once.

5. How much tax do you pay on crypto in Germany?

The amount of tax you pay on crypto in Germany depends on your circumstances and the purpose for which the cryptocurrency was acquired.

For capital gains tax, the tax rate is determined by your income tax rate and the length of time you held the cryptocurrency before selling it. If you hold the cryptocurrency for more than one year, you may be eligible for a reduced tax rate. The capital gains tax rate in Germany ranges from 0% to 45%, with a maximum rate of 25% for long-term gains.

For income tax, the tax rate is based on your income tax rate and the value of the cryptocurrency received as income.

For mining, the tax rate is based on your income tax rate and the income received from mining activities.

It's important to note that the tax treatment of cryptocurrencies in Germany is complex and can vary depending on individual circumstances. It's recommended to consult with a tax professional or accountant to ensure you comply with all applicable tax laws and to determine the exact amount of tax you will need to pay.

‍

All content on Kryptos serves general informational purposes only. It's not intended to replace any professional advice from licensed accountants, attorneys, or certified financial and tax professionals. The information is completed to the best of our knowledge and we at Kryptos do not claim either correctness or accuracy of the same. Before taking any tax position / stance, you should always consider seeking independent legal, financial, taxation or other advice from the professionals. Kryptos is not liable for any loss caused from the use of, or by placing reliance on, the information on this website. Kryptos disclaims any responsibility for the accuracy or adequacy of any positions taken by you in your tax returns. Thank you for being part of our community, and we're excited to continue guiding you on your crypto journey!

Updated upto  09/04/24 to accommodate ICO, Gifts, Donation Taxes and DAO taxes

The CRA (Canada Revenue Service) classifies crypto as a commodity for tax purposes, which essentially means that any gains derived from the disposal of such assets will be considered capital in nature and attract capital gains tax. However, you only pay taxes on 50% of your gains in Canada. Although there are instances where transactions can be categorised as business income such as-

• If you indulge in crypto transactions for commercial reasons
• You’re involved in promoting a product or service
• You show the intent of making a profit
• You are involved in repetitive transactions

Note that unlike most countries where there are separate tax rates for long-term and short-term capital gains tax, Canada doesn’t have a dedicated capital gains tax structure. Instead, crypto capital gains are taxed based on the prevailing Federal Income Tax and Provincial Income Tax rates. The federal income tax rates range between 15-33% while the provincial income tax rate varies based on where you live in Canada. This guide covers all the different types of crypto transactions that entail tax liabilities such as mining, staking, or trading crypto assets. It also answers some crucial questions like “How to calculate my income or capital gains?”,  “Are there any tax-free crypto transactions?”, and “How can I pay less taxes on my crypto gains/income?” to help resolve all your crypto-tax related queries.

How is Crypto Taxed in Canada?

As previously mentioned, the Canada Revenue Agency classified crypto assets as a commodity, which means that any gains you make by disposing of such assets are taxable and attract capital gains tax. However, you only need to pay CGT on 50% of your gains in Canada. Moreover, depending on the nature of your transactions your income may also be categorised as business income and you will be required to pay income tax on the full amount. 

The CRA makes individual assessments for every taxpayer to determine whether certain transactions will be categorised as business income or capital gains. It is entirely possible for an individual to have a mix of business income and capital gains transactions

The following transactions are considered taxable in Canada:

• Trading one type of cryptocurrency for another type (e.g., selling Bitcoin for Ethereum)
• Selling cryptocurrency for Canadian dollars or any other currency
• Using cryptocurrency to purchase goods or services
• Mining cryptocurrency as a business or commercial activity
• Receiving cryptocurrency as payment for goods or services
• Receiving cryptocurrency as a reward for staking or participating in a proof-of-stake network
• Receiving cryptocurrency as a result of a hard fork or airdrop

‍

Capital Gains Tax

In Canada, there are no specific capital gains tax rates for short or long-term crypto investments. Instead, crypto capital gains are subject to taxation based on the prevailing Federal Income Tax and Provincial Income Tax rates. It's important to note that as an individual holding crypto, you will only be taxed on 50% of your total capital gains. However, professional day traders are required to pay taxes on the full 100% of their gains.

The following transactions attract capital gains tax in Canada-

• Selling crypto for fiat
• Gifting crypto
• Buying a product or service with crypto
• Swapping crypto for other crypto assets

 Listed below are the federal income tax rates for the 2023-24 tax year:

‍

You can view a detailed list of provincial taxes for all the provinces in Canada here.

Income Tax

In the event that you appear to be making a regular or recurring income from crypto assets, you will be liable to pay income tax to the authorities. Listed below are some transactions that attract income tax in Canada.

• Getting paid in crypto
• Minting crypto or NFTs from blockchain
• Referral awards
• Rewards from staking
• Selling self-curated NFTs

Moreover, any take-home profits you make from play-2-earn or engage-2-earn platforms may also qualify as income and be taxed accordingly. Some examples of such platforms are-

• Earnings from CoinMarketCap Learning and Binance Learning platforms
• Earnings from P2E games like Axie Infinity and Decentraland
• Any income made from browse-2-earn platforms like Brave and Permission.io
• Income made from Watch-2-Earn platforms like Odysee

The income tax rates in Canada are the same as the Provincial income tax rates and the federal income tax rates as mentioned in the “Capital Gains Tax Rate” section above. You can revisit the section or look at a comprehensive list of income tax rates in Canada here.

Note that it’s mandatory to declare crypto transactions in your tax return and failing to do so might result in legal trouble as the CRA is more than capable when it comes to tracking investor activity.  Here’s how the CRA tracks crypto transactions:

• The CRA can track the crypto investments of Canadians
• It is also working with crypto exchanges to obtain customer information
• The CRA is using the information to track Canadian crypto investors to ensure accurate reporting of investments and taxes.
• Money service businesses in Canada have to report transactions greater than CA$ 10,000 to the CRA.
• The CRA is registered with FINTRAC which investigates money laundering and tax evasion.
• Crypto exchanges registered with FINTRAC in Canada are required to obtain a government-issued ID and proof of address.
• It is yet to specify which crypto exchanges they're working with other than Coinsquare.
• Most crypto exchanges operating in Canada have had the same data request from the CRA.

Classification of Cryptocurrency for Tax Purposes 

Crypto assets are not considered a currency and are categorised as property for tax purposes. This implies that any gains made from the disposal of these assets will be considered capital gains. From a tax perspective, this translates to the disposal of capital assets being taxable, and the gains incurred will be subjected to capital gains tax.

Although there are some instances where gains derived from crypto assets may be considered as income due to their recurring nature and in which case they shall be taxed as income. But since, there is no dedicated capital gains tax in Canada, the tax rates remain the same for both these transactions.

How to Calculate Crypto Income in Canada?

Calculating your crypto income is simple. All you need to do is to find the fair market value of the assets at the time you receive them and do it for all the assets you’ve received over a tax year and then add them all up. The number you get is your taxable income base and you can apply the federal and provincial income tax rates to them to calculate how much you owe as income tax to the CRA.

However, calculating your capital gains is not that simple. When you dispose of your cryptocurrency assets through selling, swapping, or gifting, you create a capital gain or loss, whether it was intentional or unintentional. This capital gain or loss represents the difference between the amount received from the disposal and your cost basis. Now, cost basis is simply the price you pay to an exchange to acquire a certain crypto asset. But because investors usually buy multiple assets of the same kind at different prices, determining the cost basis becomes tricky. That’s exactly why investors should use dedicated cost basis methods as specified by the tax authorities for cost basis calculations. 

‍

‍

In Canada, the average cost basis method is employed for calculating the cost basis of crypto assets. This is a fairly simple method that considers the average acquisition price across all assets of the same type as the cost basis. For instance, if Josh buys BTC 3 times within the tax year for CA$ 31,000, CA$26,000, and CA$ 30,000 respectively. The cost basis would simply be equal to CA$ 29,000 (average of CA$ 31,000, CA$ 26,000, and CA$ 30,000). 

‍

‍

For more complex transactions where more than 1 BTC is acquired at separate instances, investors are required to take the weighted average as the cost basis.

Consider the following transaction block.

24/07/23 - Jocelyn bought 2 BTC for CA$ 31,000

16/12/23 - Jocelyn bought 1 BTC for CA$ 38,000

08/01/24 - Jocelyn bought 2 BTC for CA$ 30,000

In this case, the cost basis will be equal to the weighted average of all the acquisitions.

Cost Basis = CA$ (2*31,000 + 1*38,000 + 2*30,000)/5 = CA$ 32,000

It's essential to note instances where investors attempt to fabricate gains by selling an asset and repurchasing it shortly afterward, creating artificial losses to offset gains. This practice, known as wash trading, is addressed by Canadian authorities through the superficial gains rule. According to this rule, if an investor buys the same asset within 30 days before or after its disposal, they are not permitted to deduct the losses.

Exemptions and Deductions Available in Canada

The CRA offers the following tax breaks to Canadian residents:

1. Personal Tax Allowance

The CRA offers a tax-free allowance of CA$ 15,000 to every resident which means that the first CA$ 15,000 you make will be tax-free in Canada.

2. Spousal Tax Credit

The spousal tax credit allows you to transfer your unused tax credit to your married or legal partner. If your income is CA$ 8,000 while your partner makes CA$ 20,000, you can transfer the remaining CA$ 7,000 (CA$ 15,000 - CA$  8,000) of your tax credit to your partner.

3. 50% Capital Gains Taxation

As mentioned above, only 50% of your capital gains are taxable in Canada, therefore you don’t need to worry about your entire earning being taxed.

4. Use a Tax Free Savings Account or a Registered Retirement Savings Plan 

Contributions to the TFSA account are capped at CA$ 6,500 while the RRSA contributions are 18% of one’s previous year’s income or CA$ 30,780 (whichever is lower). Contributions to both are tax deductible.

Tax-Free Crypto Transactions

Although crypto transactions are taxable in Canada, some transactions are tax-free:

• Buying crypto with fiat currency
• Holding crypto 
• Crypto being gifted to you
• Creating a DAO
• Moving crypto assets between wallets

Treatment of Crypto Losses

Don’t worry if a market correction has left you with a pile of losses, you won’t be taxed on any of it. But instead of just letting it all go to waste, you can use them to reduce your tax bill by offsetting them against your capital gains. Remember that you can only offset 50% of your losses against your gains in a tax year similar to the capital gain taxation rule. If you still have leftover losses after that, you can carry them forward into the subsequent tax year as future losses and write them off against future gains.

Even if you’ve made no capital gains in a tax year, you can report all your capital losses to the CRA and carry them forward as a contingency write-off fund for any future gains you make.

Note that Canada has a Superficial Loss Rule to prevent investors from generating fictitious losses, which states that an individual can’t claim a capital loss if they buy the same crypto 30 days before or after a disposal.

Taxation of Crypto Specific Activities

Now that we have a good grip on how crypto taxes work and how to calculate them. Let’s look at how specific crypto transactions are taxed.

Crypto Mining Taxes

‍

Your mining activities are taxed based on your intentions and the nature of your returns. If you’re seen as an individual doing it as a hobby, you will attract capital gains tax. While if you appear to be mining as a business, the gains will be taxed as income.

Mining as a Hobby

If you’re mining as a hobby, you will not attract income tax. The tokens received as mining rewards will inherit the cost basis equal to CA$ 0. Which makes sure that all your gains are taxed once you dispose of these tokens by selling, swapping, or gifting these assets.

Mining as a Business

Mining as a business is different from mining as an individual. Any tokens that you own are considered an inventory and you have to value these assets using any one of the following methods:

• Value each asset by the acquisition cost or their fair market value at the end of the tax year.
• Value the entire inventory at its fair market value at the end of the tax year.

When determining the value of your inventory, you have the option to use either the cost or fair market value. If you go with the former, you can choose the lower value for each particular cryptocurrency you own, which is a great way to plan for taxes. 'Cost' refers to the price paid for acquiring the property, as well as all relevant expenses associated with its purchase. Maintaining consistency in the method used to value your property year after year is crucial.

Note that the CRA has made new amendments to the Excise Tax Act in section 188.2 which define “crypto assets” for the specific purpose of applying goods and services / harmonised sales tax (GST/HST) to crypto asset mining activities.

Where a taxable property or service is exchanged for cryptocurrency, the GST/HST that applies to the property or service is calculated based on the fair market value of the cryptocurrency at the time of the exchange.

If your business accepts cryptocurrency as payment for taxable property or services, the value of the cryptocurrency for GST/HST purposes is calculated based on its fair market value at the time of the transaction.

Crypto Staking Taxes

Staking is how proof-of-stake networks add and validate new transactions onto their blockchain. The chain selects a network participant to add and validate the most recent set of transactions on-chain, and in return offers them a reward. This reward is called staking rewards and they are the same as mining rewards as far as their taxation is concerned. 

These tokens are taxes as income and inherit a cost base equal to the fair market value of on receipt, to ensure that any gains upon disposal are taxes appropriately as capital gains.

Airdrops and Forks

The CRA is yet to release dedicated guidelines for the taxation of airdrops and forks but based on the interpretation of the existing guidelines, it is highly improbable that any tokens received through airdrops and forks will be taxes as income. Although you might have to pay capital gains tax on any gains you make upon disposal. 

For more clarity on the subject, do consult an experienced tax professional.

Crypto Gifts and Donation Taxes

Gifting crypto in Canada constitutes a taxable event as it is seen as the disposal of crypto assets. You’re liable to pay CGT when you gift crypto to others if the value of the asset has increased since acquisition. 

Note that you only pay CGT on 50% of your gains.

Crypto donations to a registered charity are also considered as a disposition of assets and entail a gains tax liability if the value of donated assets has increased. 

When you donate crypto to a registered charity, it is classified as a Gift of Kind donation. As such, it falls under the deemed fair market value rule. This requires you to inform the charity about the acquisition date of your crypto asset. If the asset was received and donated within three years of the acquisition date, the charity may issue a tax receipt based on the value at the time of acquisition.

Defi Transactions

The CRA is yet to release guidelines on the taxation of Defi transactions. However, that doesn’t mean that you won’t have to pay any taxes on Defi transactions, the following can be said based on the existing guidelines about Defi transactions and their taxation.

When you receive tokens as compensation for provisioning a service or selling a product, it will be taxed as income. However, when you sell these tokens in an open market for a profit, the gains will attract capital gains tax. 

Here are some details about specific Defi transactions and how they will be taxed according to what we could find and extrapolate:

• Earning Interest from Defi protocols: Income tax
• Borrowing funds from Defi protocols: No tax
• Paying Interest in Defi protocols: CGT
• Selling or Swapping NFTs: Income tax if you’re the creator, CGT if you’re not
• Buying NFTs: CGT when bought with crypto
• Staking on Defi protocols: Income tax
• Yield and Liquidity Farming: Income tax
• Adding/Removing Liquidity: CGT
• Returns from Defi Margin trades: CGT

We do suggest contacting a tax consultant for more clarity on the subject.

ICOs and Token Sales

It’s still not clear whether income from ICOs is viewed as business income or just regular income by the CRA. We will be adding more details regarding the taxation of tokens received from ICOs once the guidelines regarding the same hit our radar.

Crypto Lending and Borrowing

There are no specific guidelines on how lending and borrowing of crypto assets will be taxed. However, based on the current guideline, interesting income from lending crypto assets will most likely be taxed as income since it is a form of recurring income. 

Also, borrowing crypto is a tax-free transaction as taking a debt is tax-free in most instances.

NFTs and DAOs

NFTs

The CRA is yet to release relevant guidelines on NFT taxation. However, it is highly likely that they would be considered as crypto assets for tax purposes. Which essentially means that they will be regarded as capital property and taxed accordingly.

• Creating and selling NFTs is considered business income and is taxed according to the income tax rates
• Buying NFT for crypto, selling NFT for crypto or fiat, and swapping NFT for another attracts capital gains tax
• Gifting NFTs attracts capital gains tax due to the increase in value of the asset from the time you acquired it to the time you gifted it.

DAOs

DAOs (Decentralised Autonomous Organizations) are gaining popularity in the crypto space. These member-owned communities operate without central leadership, allowing stakeholders to make governing decisions collectively. Instead of a centralised authority, DAOs rely on token holders to vote on important matters. For instance, Uniswap is an exemplary DAO where UNI token holders vote on protocol-related issues such as fee allocation and new feature implementation.

DAO members can derive benefits from the organisation in various ways. They may receive a share of profits or sell their DAO tokens for investment purposes.

The taxation of DAOs lacks specific guidance from the CRA. However, since DAOs are not registered entities and lack centralised control, they are similar to flow-through entities. In this interpretation, any income distributed to DAO members would likely be subject to Income Tax, and capital gains taxes would apply to the sale of appreciated DAO tokens acquired over time.

Crypto Margin Trades, Futures, and CFDs

The taxation of margin trades, futures, and CFDs depends on whether you’re seen as an individual investor or day trader which depends on the scale of transactions.

Individual Investor

If the CRA considers you to be a private investor, any gains from margin trades, derivatives, and other CFDs will be subject to Capital Gains Tax. You won't owe any tax when you initiate a position. Instead, the tax is applicable only when you settle your position, and any gains resulting from it will be subjected to Capital Gains Tax.

Day Trader

On the other hand, if the CRA perceives you as a day trader who trades frequently at the same level of scale, you'll be liable to pay Income Tax on all the profits you earn from your trades. As discussed earlier you won't owe any tax on initiating a position while margin trading, dealing in derivatives, or other CFDs. Instead, you'll be taxed only when you close your position and realise any profits.

How to Avoid Paying Tax on Cryptocurrency in Canada?

Although you can’t avoid paying crypto taxes entirely there are some ways you can bring down your tax liabilities legally:

1. Invest in a TFSA

Canadian residents can use a Tax-Free Savings Account (TFSA) for tax-free profits. Instead of directly buying cryptocurrency, they can invest in Bitcoin ETFs on the Toronto Stock Exchange, such as Purpose Bitcoin ETF (BTCC), Evolve Bitcoin ETF (EBIT), and CI Galaxy Bitcoin ETF (BTCX). These ETFs track Bitcoin's price and offer a convenient way to invest without the complexities of self-custody and with potential management fees.

2. Invest in RSP

Investing in a Retirement Savings Plan is the best way to ensure a secure future and lower your tax bill at the same time. Contributions to RSP are tax deductible and can be used to lower your tax bill. You can even contribute to your spouse’s RSP and claim a tax deduction on that too.

3. Use Tax Loss Harvesting

Use your losses as an offset against your gains to lower your tax bill. You can close positions with potential losses and use them as an offset against any gains you’ve made within the tax year. 

Reporting Requirements, Compliances, and Deadlines

The tax-year in Canada is the same as the calendar year running from January 1st to December 31st. All crypto-related income, capital gains, and losses must be reported to the CRA by April 30th, 2023.

In the event that the deadline falls on a weekend, taxpayers can file their taxes by May 1st, 2023. It would be best to not delay the affair as individuals can start filing their tax returns by the end of February.

Please note that your tax payment will be considered timely only if it is received or processed by the CRA on or before May 1st each year

How to File Crypto Taxes in Canada

There are several ways you can choose to file your taxes in Canada. We have listed some of them below:

1. File your taxes using tax software

You can use certified tax software like Kryptos.io to file your taxes in Canada. It is quite convenient and creates a legally-compliant tax report in a matter of minutes by auto-fetching all your transactions and incorporating any deductions that are possible. With certified tax software, you can complete your tax returns within 2 weeks.

2. File your taxes through a tax accountant

A tax accountant is someone well-versed in the tax infrastructure and can help you save a lot of time and money by utilising existing loopholes in the system. The only demerit of using this option is the high accountant consulting fee which may not make sense to you if you have a nominal income.

3. File your taxes through a volunteer tax clinic

Tax clinics have volunteers who can file your taxes for free. All you need to do is find one and hand over your transaction records. Note that this might not be the ideal option for someone with a complex set of transactions and high income.

4. Through a Discounter(preparer)

A Discounter is a tax preparer who provides an upfront discounted tax refund by computing your refund amount, even before submitting your tax return. Filing your tax return through a tax preparer is the fastest way to file your taxes because the discounter pays you a discounted return right away before filing your taxes.

What Tax Records Will the CRA Want

The CRA has issued clear guidelines regarding the record-keeping of transactions for tax purposes. Here’s a list of documents you should maintain according to the CRA:

• Date and time of transaction
• Receipts of all buy/sell transactions
• A record of the fair market value of assets at the time of purchase
• Transaction description crypto address of other parties involved
• Additional charges 
• Exchange records
• Digital wallet records and wallet addresses

How to File Crypto Taxes Using Kryptos?

Now that you’re aware of how your crypto transactions are taxed and what forms you need to fill out to complete your tax report, here’s a step-wise breakdown of how Kryptos can make this task easier for you:

1. Visit Kryptos.io and sign up using your email or Google/Apple Account
2. Choose your country, currency, time zone, and accounting method 
3. Import all your transactions from wallets and crypto exchanges
4. Choose your preferred report and click on the generate report option on the left side of your screen and let Kryptos do all the accounting.
5. Once your Tax report is ready, you can download it in PDF format.

If you still have any doubts regarding the integrations or generating your tax reports, you refer to our video guide here.

Resources and Support

Canada Revenue Agency

Provincial Income Tax Rates

Frequently Asked Questions(FAQs)

1. Is crypto legal in Canada?

Yes, crypto is legal in Canada. The Canadian government does not consider cryptocurrency  as legal tender, but it is recognized as a commodity subject to tax laws. The country has a regulatory framework for cryptocurrencies and exchanges called the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), which requires cryptocurrency businesses to register with the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) as money services businesses (MSBs) and comply with certain anti-money laundering and know-your-customer (KYC) requirements.

2. How is Crypto Taxed in Canada?

In Canada, cryptocurrency is subject to taxation and is treated as a commodity for tax purposes. The Canada Revenue Agency (CRA) treats cryptocurrency transactions similar to barter transactions, meaning that buying, selling, or trading cryptocurrencies can result in capital gains or losses. Here are some ways crypto is taxed in Canada:

• When you sell or dispose of cryptocurrency, you may incur capital gains or losses that are taxable. Capital gains are calculated by subtracting the cost of the cryptocurrency from the proceeds of the sale.

• If you earn cryptocurrency as payment for goods or services, it is considered business income and is subject to income tax. The amount of tax you owe will depend on your marginal tax rate.

• If you mine cryptocurrency as a business, the value of the coins mined is considered business income and is subject to income tax.

• Cryptocurrency transactions may be subject to the Goods and Services Tax/Harmonized Sales Tax (GST/HST), depending on the type of transaction and the parties involved.

3. How much tax do you pay on crypto in Canada?

The amount of tax you pay on crypto in Canada depends on the type of transaction, the amount of profit or gain you make, and your overall income tax bracket. Here are some examples:

• Capital Gains Tax: When you sell or dispose of cryptocurrency, any gains you make are subject to capital gains tax. The tax you pay depends on your marginal tax rate, which ranges from 20% to 53.53% in Canada. However, only 50% of the capital gains are taxable.

• Income Tax: If you earn cryptocurrency as payment for goods or services, the income is considered business income and is subject to income tax. The amount of tax you pay depends on your marginal tax rate and income.

• Mining Income: If you mine cryptocurrency as a business, the value of the coins mined is considered business income and is subject to income tax. The amount of tax you pay depends on your marginal tax rate and the amount of income you earn.

• GST/HST: Cryptocurrency transactions may be subject to the Goods and Services Tax/Harmonized Sales Tax (GST/HST), depending on the type of transaction and the parties involved.

4. Which crypto exchanges are banned in Canada?

There are thousands of crypto exchanges in Canada operating under the nose of tax authorities and offering their services without their approval, and we can’t mention all of them here. Instead, we have prepared a list of crypto exchanges approved by the CRA in Canada. 

• Bitbuy
• Coinberry
• CoinSmart
• Coinsquare
• NDAX
• Netcoins
• Newton

All content on Kryptos serves general informational purposes only. It's not intended to replace any professional advice from licensed accountants, attorneys, or certified financial and tax professionals. The information is completed to the best of our knowledge and we at Kryptos do not claim either correctness or accuracy of the same. Before taking any tax position / stance, you should always consider seeking independent legal, financial, taxation or other advice from the professionals. Kryptos is not liable for any loss caused from the use of, or by placing reliance on, the information on this website. Kryptos disclaims any responsibility for the accuracy or adequacy of any positions taken by you in your tax returns. Thank you for being part of our community, and we're excited to continue guiding you on your crypto journey!

Tax authorities in Finland consider crypto to be a form of personal asset instead of recognising it as legal tender, which essentially means that most crypto transactions in Finland would attract tax liabilities in the region. Luckily, the Finnish Tax Authority has released relevant guidelines regarding the taxation of different kinds of crypto transactions.

However, it may be quite overwhelming for regular investors to go through these guidelines and interpret them on their own. Therefore, we decided to offer a detailed transcript of these guidelines that is more digestible and offers a clear understanding of how specific crypto transactions are taxed in Poland. The goal of this guide is to equip investors with enough information so that they can file their own taxes without having much trouble.

Bear in mind that cryptocurrency taxes are complex, and this guide goes at length to explain certain guidelines and concepts. However, we will do our best to simplify and tabulate the data to make this guide more digestible. We suggest reading it thoroughly to avoid overlooking any important details. 

Key Information

Latest Updates/Guidelines

16/04/24-  Updated to accommodate ICO, crypto gifts and donation taxes

16/04/24- Updated to accommodate DAO taxes

Understanding Crypto Taxation in Finland

Vero defines Cryptocurrencies “as a form of digital value that can be used to settle liabilities, electronically transferred, saved, and exchanged, and are not issued by any central bank or public authority.”

In Finland, cryptocurrency purchases and transfers between wallets and exchanges are tax-free. However, profits generated from selling or exchanging cryptocurrencies are subject to Capital Gains Tax and are considered capital income. 

Income generated from mining and staking activities is subject to Income Tax, while capital gains from crypto assets are taxed at varying rates. For capital gains up to €30,000, the tax rate is 30%. Any amount exceeding this threshold is taxed at 34%. This implies that the tax liability on your crypto profits will either be 30% or 34%, depending on your total capital income for the tax year.

Assets received as compensation for a product or service are considered income and subjected to income tax. Three different types of income taxes are levied on crypto income:

1. National Taxes
2. Municipal Taxes
3. Church Taxes

National income taxes are progressive and range from 12-44% based on the total value of your reported income. Municipal taxes are flat tax rates levied by individual municipalities that vary from 16.5-23.5%. 

The church tax applies to members of the Evangelical Lutheran, Orthodox, or Finnish German churches. It is imposed at a flat rate ranging from 1.0% to 2.1%, depending on where you live.

Consider this example to understand how these taxes work.

Here’s a list of all transactions Emir was involved in during 2022:

Transaction-1: 13/02/2022 - Bought 1 BTC 

Transaction-2: 15/04/2022 - Received 2 BTC as compensation for a sale

Transaction-3: 18/04/2022 - Received 2 ETH as mining reward

Transaction-4: 21/05/2022 - Bought 1 ETH 

Transaction-5: 04/06/2022 - Sold 1 BTC

Transaction-6: 17/09/2022 - Sold 1 ETH

From the above ledger of transactions, transactions 5 and 6 will attract capital gains taxes while transactions 2 and 3 are income tax-bearing transactions.

Let’s assume gains incurred in the BTC and ETH disposal were €20,000 and €1,500 respectively.

Total Gain = € 21,500 

This is your total capital gain, and a capital gains tax will be levied on it.

Now assuming that the FMV (Fair Market Value) of the BTC and ETH token on receipt in transactions 2 and 3 were €20,000 and €1,800 respectively, at the time of receipt.

Total Income = 6.25 * 20,000 + 2 * 1,800 = €1,28,600

This is your taxable income base, and income tax will be levied on it.

How Does Capital Gains Tax Work in Finland?

As already discussed, cryptocurrencies are categorised as ‘personal assets’ from a tax perspective. This means that the disposal of such assets attracts capital gains tax in Finland. Here’s what categorises as a disposal in Finland-

• Trading one cryptocurrency for other cryptocurrencies.
• Converting a cryptocurrency into fiat currency such as USD or EUR.
• Using cryptocurrency to purchase goods or services.
• Trading NFTs.
• Participating in cryptocurrency staking.
• Earning income from margin/futures trading in cryptocurrency.

Tax Rates

Note that capital gains for amounts up to €30,000 will be taxed at 30% while anything above this will be taxed at 34%.

Decoding Income Tax in Finland

Crypto assets received as compensation for provisioning a service or selling a product will be considered income similar to when you receive compensation in fiat currency for your work. This income will be taxed at the regular income tax rates.

In Finland, the following activities are known to generate taxable income and should be reported accordingly.

• Mining rewards
• Income (e.g., freelancing, salary, rewards, online gaming)
• Create & Sell NFT

Tax Rates

Finland has a progressive tax system, meaning that the tax rate increases as the total taxable income increases. There are three categories of income tax-

1. National Taxes 
2. Municipal Taxes 
3. Church Taxes.

National taxes come with a tax-free allowance of €19,000 for the 2022 tax year, with tax rates ranging from 12% to 44% above this threshold, depending on your total income. You can understand the national tax rates with the table below.

In contrast, municipal taxes are applied at a flat rate and set by individual municipalities, with tax rates ranging from 16.5% to 23.5%.

Finally, there's the church tax that applies to all members of the Evangelic Lutheran, Orthodox, or Finnish German church. The church tax is also levied at a flat tax rate, varying between 1.0% and 2.1%, depending on where you live in Finland.

What Happens When You Don’t Report Crypto Transactions in Finland?

If you are wondering whether you can omit certain transactions from your tax report to pay less taxes, we strongly recommend against it as this would attract some unwanted legal repercussions. If you’re an individual engaged in crypto transactions in Finland, you might have undergone a Know-Your-Customer (KYC) verification process while signing up for an exchange. Therefore, it is likely that Vero possesses a record of these activities, and they can easily track your crypto transactions.

Made a Loss? Here’s How to Use it to Your Advantage

Losses are inevitable when you are involved with speculative assets like crypto. However, there are ways you can claim concessions on these losses.  Under § 50 of the Income Tax Act, you can claim tax deductions for losses resulting from the sale of cryptocurrencies as long as the total sales price is over €1,000.

Moreover, the losses you make can be used to offset gains from the same or other crypto assets made during the same year. Excess losses can be carried forward for upto 5 years. If the value of your currencies has decreased but you still hold them, you cannot claim any losses for tax purposes. It is crucial to consider these factors when assessing your overall tax situation related to cryptocurrency investments.

Lost Or Stolen Crypto

If you've had your cryptocurrency stolen, you won't be required to pay taxes on them. The same goes for instances where you've experienced losses due to chain hacks, scams, or lost private keys. 

It would be unfortunate if you've had to go through such a situation, but keep all the relevant documentation as proof of evidence for any unknown circumstances.

Tax Credits/Incentives in Finland

Listed below are some strategies that allow you to pay fewer taxes without getting into legal trouble:

1. Write Off Your Losses

Under § 50 of the Income Tax Act, you can claim tax deductions for losses resulting from the sale of cryptocurrencies, as long as the total sales price is over €1,000.

2. Gift Crypto Assets

Crypto gifts under €5,000 are tax-free in Finland.

Cost Basis Calculations in Finland

Not every investor transaction is a simple buy/sell transaction. There are instances where an investor buys multiple assets of the same kind at different prices. This leads to a lot of complications upon disposal, because one gets confused picking the right acquisition cost for an asset. That’s why it’s imperative to use specialised cost basis methods as specified by the tax authorities.

Tax authorities have proposed guidelines regarding the use of accounting methods for cost-basis calculations. Two commonly used methods are FIFO (First-In-First-Out) and LIFO (Last-In-First-Out). These methods help determine the cost basis of assets and minimise discrepancies in tax reports. By following these guidelines, investors can navigate the complexities of cost-basis calculations more effectively.

1. FIFO Accounting- Under FIFO accounting, the first asset you buy is considered the first asset you sell
2. LIFO Accounting-  Whereas under LIFO accounting, the last asset you buy is considered the first one you sell. 

Consider the following transactions:

02/01/22 - Emilio bought 1 BTC for €18,000

15/04/22 - Emilio bought 1 BTC for €20,000

18/06/22 - Emilio bought 1 BTC for €23,000

20/07/22 - Emilio sold 1 BTC for €25,000

Now, if Emilio uses the FIFO accounting method, the BTC sold would be the one bought on 02/01/22 for €18,000.

Cost Basis = €18,000

Disposal Amount = €25,000

Capital Gain = €25,000 - €18,000 = €7,000

And if he decides to use the LIFO accounting method, the BTC he disposed of would be the one bought on 18/06/22 for €23,000

Cost Basis = €23,000

Disposal Amount = €25,000

Capital Gain = €25,000 - €23,000 = €2,000

Deemed Acquisition Cost Method 

Sometimes it may be difficult for you to determine the original purchase price of your cryptocurrency due to reasons like - losing access to your trading history. You can tackle this situation with the Finnish Tax Administration's exclusive method called the Deemed Acquisition Cost Method. This method allows you to deduct a fixed percentage of the sales price instead of the purchase price.

The process is straightforward. Here's how it works- If you have held your cryptocurrency for less than 10 years, the deemed acquisition cost is 20% of the selling price. On the other hand, if you have held your crypto for more than 10 years, the deemed acquisition cost is 40% of the selling price. This calculation helps determine the taxable amount based on the duration of your cryptocurrency holding.

This method is more suited for transactions where one cannot determine the cost basis due to the inability to access the transactions history. However, if you decide to use this method for reporting your crypto taxes, you may be required to provide evidence that the previous records are inaccessible. This documentation is necessary to support your use of the deemed acquisition cost method for accurate tax reporting purposes.

Tax-Free Crypto Transactions in Finland

Not all crypto transactions attract tax liabilities, here are some crypto transactions that are considered tax-free by Vero.

• Buying crypto with fiat currency
• Moving crypto between personal wallets
• Crypto received as a gift
• Lost or stolen crypto
• Donating any crypto without seeking profits
• Crypto Forking

Taxed Crypto Transactions

If you’re engaging in any of the following activities during the tax year, you may result in potential tax liabilities to Vero:

• Selling cryptocurrency for fiat currency 
• Trading one cryptocurrency for another 
• Using cryptocurrency to purchase goods or services 
• Earning cryptocurrency as income 
• Borrowing or lending crypto
• Receiving cryptocurrency through mining or staking activities
• Receiving cryptocurrency as a gift (subject to gift tax rules)
• Creating or Selling NFTs

Mining Crypto in Finland? Here’s How the Taxes Work

Mining rewards are viewed as a form of income and taxed based on the existing income tax rules. If you mine crypto tokens, then you’re required to report the value of mined income in euros at time of receipt.

To calculate your income from mining, you can use the average exchange rate for the period you are reporting, be it daily or monthly. Also, you have to remain consistent with your chosen period throughout the year.

Some costs related to mining can be deducted from your income to lower your tax base. Some of them are listed below.

1. Expenses that you incur while mining can be deducted from your income (only the portion that is directly related to mining) 
2. Any energy used for the computer or device that is not directly involved in mining cannot be tax-deductible
3. The purchase price of mining equipment is deductible 
4. If the equipment is used for personal use occasionally, you can still deduct some expenses based on the frequency of personal use.

This table will help you understand the deduction based on occasional personal use of equipment.

Note that if you use the mining hardware for more than three years, then you should make deductions as a series of depreciating expenses at a rate of 25% per year.

Understanding Crypto Staking Taxes in Finland 

Based on Vero’s Guidelines on crypto staking, any rewards acquired by staking crypto tokens are viewed as capital gains and not as income. Here’s the official statement that highlights why Staking rewards are treated as capital gains instead of income.

“...taxation is based on the idea that you are receiving income because you own virtual currency previously.  What you own previously is seen as your capital. Accordingly, the amount added to it is capital income.”

The guidance further clarifies that the taxation of assets occurs when you acquire them and dispose of them. Moreover, the guidance also extends to transactions where gains are derived from previously owned tokens, including staking on Defi protocols.

How are Airdrops and Forks taxed in Finland?

While Vero does not offer explicit guidance on the taxation of airdrops, we hold the view that treating airdrops as capital income rather than earned income, for tax reporting purposes is appropriate. This perspective is based on the similarity between airdrops and staking rewards, thus suggesting that they share comparable characteristics.

Once Vero releases updated guidance on the tax treatment of airdrops, we will incorporate this information into our guide and provide further clarification.

Receiving crypto from a hard fork does not incur tax liabilities However, selling the received assets may be subject to capital gains tax. In this case, the cost of acquiring the newly received cryptocurrency is considered €0, and taxes are calculated based on the total market value when disposing of the assets.

Gifting or Donating Crypto in Finland? Here’s Some Good News For You

 Vero has this to say about gifts and their taxation.

“If the total value of the gifts you receive from the same donor in 3 years is €5,000 or more, you must pay gift tax.”

As evident from the above statement, gifts, in general, do not attract tax liabilities for the gifter. However, the person receiving these assets might have to pay gift tax, if the total value of the asset received from the same person over 3 years exceeds €5,000.

Vero is yet to release specific guidelines on the taxation of crypto donations. Existing guidelines do not offer a clear picture of how such transactions are taxed. Therefore, we advise seeking guidance from an experienced tax professional to help you navigate through this.

What About Crypto Margin Trades, Futures, and CFDs?

Individual investors participating in margin trading, crypto futures, and contracts for difference (CFDs) should consider the tax treatment based on securities and derivatives regulations, as specified in the guidelines.

In margin trading, where investors borrow funds to take leveraged positions, profit or loss resulting from trades after factoring in margin fees is considered realised. It's crucial to understand that realised profits from margin trading are subject to capital income tax. However, losses incurred during property transfers can be offset against gains made in the same tax year and carried forward for up to five years after the tax year.

Participating in ICOs? Here’s What You Owe to Vero

Vero offers guidance on taxation for initial coin offerings (ICOs). According to this guidance, investors are considered to have acquired virtual currency, and any realised growth in its value is subject to Capital Gains Tax.

NFT and DAO Taxes Finland

NFTs

In Finland, the following transactions attract taxation.

1. Create or Sell NFTs
2. Resell NFTs

If you are the creator or artist of the NFT, any income earned from its sale or commissions on subsequent sales is considered earned income and is subject to taxation. The realised income is based on the value of the received cryptocurrency in euros at the time of the sale and you’ll be liable for income tax in Finland.

However, as the artist, you may deduct expenses incurred while making the art, such as NFT marketplace fees and drawing software expenses. These expenses are reported under the same section as mining expenses: "Expenses for the production of other income than wage income."

The resale of NFTs is treated similarly to trading cryptocurrency. Any gains from the resale of an NFT should be reported and is subject to capital gain tax.

You can refer to the complete NFT tax guide here.

DAOs

Currently, there is a lack of clear guidance on the taxation of income from DAOs. However, it is reasonable to assume that such income would be subject to income tax, just like mining rewards and salary earned for work. To ensure compliance and minimise any potential complications, it is recommended that you seek the advice of an experienced tax professional who can offer personalised guidance.

Decoding Defi Taxes in Finland

Vero is yet to offer definitive guidelines on how Defi transactions will be classified for tax purposes. With Defi being a nascent and constantly evolving field, offering novel ways of earning income worldwide, it is not possible to include all Defi transactions and returns within a standardised set of tax regulations.

Note that engaging in Defi transactions that result in an income or capital gain could trigger tax obligations. The following are some Defi transactions that may incur tax liabilities as determined by Vero:

• Receiving liquidity tokens or new tokens as rewards from Defi protocols.
• Using collateral to obtain a loan from Defi protocols or private lenders.
• Realising profits from margin trading activities within Defi protocols.
• Participating in staking, yield farming, and adding or removing liquidity from liquidity pools.

When to Report Crypto Taxes in Finland

You may be wondering about the deadline for filing taxes in Finland. While Vero has not yet released specific dates, the past trend suggests the deadline could be April 1st, May 10th, May 17th, or May 24th (any of these dates). 

So, hang tight as the deadline approaches, and the official date may be announced by the end of March or April.

How to File Crypto Taxes in Finland?

When you’re done with your capital gain calculation you can start filing the taxes to Vero. You can file your crypto taxes online or offline in Finland. However, in this guide, we’ll mainly focus on the online mode for filing taxes. So, stick to these steps to make sure everything goes smoothly and you don’t end up with tax problems at the end of it:

1. Log in to the MyTax platform.
2. Navigate to the “Individual income tax” section and select the year you want to report your crypto taxes for (e.g. the Tax year 2021).
3. Select "Check pre-completed tax return".
4. Click "Correct" on the new page that appears.
5. Navigate to the "Other income" section and select "Yes" in the box for "Capital gains".
6. Click "Add new transfer" and select "Virtual currencies".
7. Enter details for all the capital gains transactions you made in 2021 or enter the total sales price and acquisition cost of all cryptocurrencies sold during the year.
8. Enter any expenses directly related to your purchases or sales in the appropriate fields.
9. In the "Property acquisition costs" field, you can input expenses directly linked to your purchases. Likewise, in the "Selling costs" field, enter any expenses related to your sales as required.
10. Click on the "Add file" button located at the end of the capital gain calculation, then choose "Attachment" and specify that it pertains to virtual currencies. If you have manually calculated your crypto taxes, you can select your PDF file, and your filing is completed.

Note: For transactions with both gains and losses, use separate fillable fields in MyTax for each calculation - one for gains and one for losses.

Additionally, to report mining, staking, NFT, and airdrop income, go to the "Other income" section of MyTax. Additionally, you can input your mining expenses by selecting Deductions > Expenses for the production of income > Expenses for the production of other income than wage income.

Although these steps may seem overwhelming, there's no need to fret. You can opt for an online crypto tax platform such as Kryptos.io that can assist you throughout the process. This platform can provide you with step-by-step guidance, aid you in locating deductions and credits, and even file your tax return directly with Vero.

What Crypto Records will the Vero want?

If you’re filing tax returns to Vero, you should maintain sufficient documentation to substantiate the claims made on their tax returns. 

1. Transaction date
2. Crypto involved in the transaction
3. Type of transaction
4. Quantity of cryptocurrency bought, sold, or exchanged
5. Euro value of the cryptocurrency at the time of the transaction
6. Records from exchanges and any other pertinent documents
7. Wallet addresses for which you possess the private keys.

How to File Crypto Taxes Using Kryptos?

Now that you’re aware of how your crypto transactions are taxed and what forms you need to fill out to complete your tax report, here’s a step-wise breakdown of how Kryptos can make this task easier for you:

1. Visit Kryptos.io and sign up using your email or Google/Apple Account
2. Choose your country, currency, time zone, and accounting method 
3. Import all your transactions from wallets and crypto exchanges
4. Choose your preferred report and click on the generate report option on the left side of your screen and let Kryptos do all the accounting.
5. Once your Tax report is ready, you can download it in PDF format.

If you still need clarification regarding the integrations or generating your tax reports, you refer to our video guide here.

How to Avoid Crypto Taxes in Finland

There’s no legal way to avoid crypto taxes legally. However, you can use these strategies to lower your tax bill. 

1. Offset your capital losses to lower your tax bill. Vero allows you to offset your losses as long as the disposal is worth more than €1,000.
2. Gifting crypto assets is tax-free for the gifter in Finland. The recipient might have to pay gift taxes if the total value of assets received from one person over 3 years exceeds €5,000.

Frequently Asked Questions (FAQ)

1. Is crypto legal in Finland?

Yes, crypto is legal in Finland and is considered a "personal asset" rather than a currency by the Finnish Taxation Authority, Vero. As such, cryptocurrency is subject to taxation following specific guidelines issued by Vero, which include different tax rules and regulations.

2. Do you pay tax on crypto in Finland?

As per the tax laws in Finland, cryptocurrency is classified as property, and any profits or losses incurred through buying, selling, or trading crypto are subject to capital gains tax. The rate of tax is variable and determined by several factors, including the amount of gain realised and the individual's income tax bracket.

Moreover, it is necessary to report crypto tax annually, and always seek advice from a tax professional or accountant to understand your particular tax liabilities regarding cryptocurrency. They can provide you with guidance on the specific requirements and help you file your crypto taxes accurately and on time.

3. How is staking taxed in Finland?

As per the tax regulations, mining rewards are categorised as earned income, whereas staking rewards earned by locking up existing cryptocurrency holdings are classified as capital income. This classification means that staking rewards are liable for Capital Gains Tax, not Income Tax.

4. Do crypto gifts attract tax liabilities in Finland?

If you receive cryptocurrency as a gift and you’ve decided to sell it within one year, the acquisition value of the donor will be transferred to you. As a result, you would be required to pay taxes on the difference between the selling price and the acquisition value.

Furthermore, if the cumulative value of gifts received from the same donor exceeds €5000 over three years, you are liable to pay gift tax according to the Vero gift tax guidelines.

‍

All content on Kryptos serves general informational purposes only. It's not intended to replace any professional advice from licensed accountants, attorneys, or certified financial and tax professionals. The information is completed to the best of our knowledge and we at Kryptos do not claim either correctness or accuracy of the same. Before taking any tax position / stance, you should always consider seeking independent legal, financial, taxation or other advice from the professionals. Kryptos is not liable for any loss caused from the use of, or by placing reliance on, the information on this website. Kryptos disclaims any responsibility for the accuracy or adequacy of any positions taken by you in your tax returns. Thank you for being part of our community, and we're excited to continue guiding you on your crypto journey!

Still, wondering how much taxes you will pay this year? The Agenzia Entrate has issued new guidelines around crypto taxation to accommodate the new crypto tax bill passed by the parliament in December 2022. So taxes this year will be different from what you’re used to. And since we don’t want you to get confused between the old and the new tax rules, we curated a comprehensive crypto tax guide, to garner all the relevant details of the new tax system in one place.

This guide is structured in a way that makes it skimmable and easy to understand. Note that this guide is dynamic and will be updated regularly to accommodate any new rules or notifications issued by the authorities. So we suggest you keep revisiting the guide to stay updated on the new taxation trends.

So now that we’ve got that out of the way, let’s hop straight into the guide.

‍

Latest Updates/Guidelines

‍

09/06/23 - Updated to accommodate DAO, gifts and donation taxes

09/06/23 - Updated to accommodate ICO taxes

‍

Can the Agenzia Entrate Track Crypto?

‍

Agenzia Entrate has multiple ways to obtain data related to crypto transactions and ensure compliance with tax regulations. Although crypto transactions may seem anonymous and decentralised, most investors use centralised crypto exchanges to buy, sell, and trade crypto. These exchanges are directed by the European Union to implement "Know Your Customer" or KYC identification processes and collect customer data to ensure tax compliance and prevent money laundering.

Furthermore, the proposed update to the EU directive on administrative cooperation, DAC8, aims to extend EU tax transparency rules to cover crypto assets. As such, it is essential to adhere to tax regulations and seek guidance from a tax professional with expertise in cryptocurrency taxation in Italy to ensure compliance.

‍

How is Crypto taxed in Italy?

‍

Before 2023, any gains derived from the disposal of crypto assets weren't taxable as crypto assets were considered non-speculative in nature. However, if the total value of your assets exceeded €51,645.69 for seven consecutive days within a tax year, then they would be viewed as capital gains and taxed at a flat rate of 26%. This was based on Resolution No. 72/E/2016.
‍

The absence of a concrete regulatory framework for crypto assets and clear guidelines around their taxation was the biggest roadblock to crypto adoption in Italy up until 2023. In December 2022, the Italian Senate introduced new tax regulations for crypto gains within the framework of the 2023 budget legislation. Under these rules, any crypto gains exceeding €2,000 will be subject to a 26% tax rate.

Part of the new tax legislation approved by the Italian Senate in December 2022 includes a provision called the "substitute value tax." This option allows taxpayers like you to declare their digital asset holdings as of January 1st every year and pay a reduced tax rate of 14%. The aim is to incentivize taxpayers to report their crypto holdings in their tax returns by offering a significantly lower tax rate.

‍

Example:

‍

Consider the following transactions:

03/01/2022 - Alessandro buys 2 BTC for €18,000 each

05/02/2022 - Alessandro buys 13 BTC for €15,000 each

15/04/2022 - Alessandro buys 30 ETH tokens for €1,500 each

17/06/2022 - Alessandro sells 13 BTC for €20,000 

23/08/2022 - Alessandro sells 30 ETH for €2,000 each

01/01/2023 - Alessandro sells 1 BTC for €23,000

As evident from above, a total of 3 disposals were made. So let’s see how these disposals will be taxed one at a time.

‍

1st Disposal 

‍

13 BTC sold for €20,000 each on 17/06/2022

Note that this transaction was made before the Italian senate approved the new set of taxation rules, so it will only be taxable if the gain exceeds €51,645.69.

Since the LIFO accounting method is used in Italy for capital gain/loss calculations, these BTC tokens are the same ones acquired on 05/02/2022 for €15,000 each

Cost Basis = €15,000

Disposal Amount = €20,000

Capital Gain/loss (for 1 BTC token) = Disposal Amount - Cost Basis = €20,000 - €15,000 = €5,000

Total Gain for 13 BTC tokens = 13*5,000 = €65,000

Now since the gain is more than €51,645.69, it will attract a 26% flat tax.

‍

2nd Disposal 

‍

30 ETH sold for €2,000 each on 23/08/2022

This disposal was also made before the new guidelines were approved by the Senate and will follow the same rules as the first disposal.

These ETH tokens are the ones acquired on 15/04/2022 for €1,500 each

Cost Basis = €1,500

Disposal Amount = €2,000

Capital Gain/Loss = €2,000 - €1,500 = €500 (for 1 ETH token)

Total Gain = 30*500 = €15,000

Since the total gain is less than €51,645.69, this transaction is not taxable 

‍

3rd Disposal

‍

1 BTC sold for €23,000 on 01/01/2023

Now, since the disposal was made after the new tax laws came into force, any gains exceeding €2,000 will be taxed.

This token is the same one acquired on 03/01/2022 for €18,000

Cost Basis = €18,000

Disposal Amount = €23,000

Capital Gain/loss = €23,000 - €18,000 = €5,000

Total gain exceeds €2,000 and will be taxed at 26% under the new tax laws.

‍

Crypto Gains Tax

‍

Before December 2022, Agenzia Entrate didn’t have a thought-out taxation model and crypto taxation was governed by a small set of regulations issued by the authority, that didn’t consider crypto to be a speculative asset and ruled crypto gains to be tax-free. However, if the total value of your portfolio exceeded €51,645 for seven consecutive days in a tax year, all your gains would be taxable at a flat rate of 26%.

‍

‍

This changed after the Italian Senate formulated new tax rules for crypto taxation and passed them as part of the new budget legislation in December 2022. According to the new tax rules, any gains amounting to €2,000 or more will be taxed at a flat rate of 26%.

More importantly, the “Substitute Value Tax” concept was put into place to encourage Italian residents to report all their crypto holdings in their tax returns. According to this rule, if you declare the total value of your assets as of January 1st of every year, your gains will be taxed at a discounted tax rate of 14% instead of 26%.

The Agenzia Entrate is still not too clear on what constitutes a gain in the context of crypto transactions because they are yet to disclose the transactions that are counted as disposal. However, from the number of insights we have access to we can extrapolate that the following transactions are generally considered as disposal in Italy:

• Selling crypto for fiat
• Swapping one crypto asset for another
• Buying goods or services with crypto assets

‍

Capital Gains Tax Rate Italy

‍

All your capital gains will be taxed at a flat rate of 26% regardless of your income level.

‍

How to Calculate Crypto Gains and Losses

‍

Now that you have an idea about how your gains will be taxed. It’s time to calculate the gains you’ve made so you can reasonably predict the amount of taxes you owe to the tax authorities. Lucky for you, calculating capital gains or losses is a fairly simple task and all you need to do is use the formulae given below:

Capital Gain/Loss =  (Disposal Amount or Selling Price) - (Cost Basis)

Now this is a fairly simple equation and all you need to do is insert values and you will have your gains or losses. The only apparent complication here is the cost basis. Your cost basis is simply the amount you pay to acquire an asset including any additional fees like gas fees or transaction fees paid in the process. Once you have your cost base, simply subtract it from the disposal amount. If the resulting amount is positive it’s a gain, otherwise, it’s a loss. 

Example:

Consider the following transactions:

03/02/2022 - Brian buys 2 BTC for €15,000 each

06/04/2022 - Brian buys 3 ETH for €1,400 each

05/06/2022 - Brian buys 1 BTC for €17,000 and 2 ETH for €1,600 each

13/06/2022 - Brian sells 1 BTC for €20,000

19/08/2023 - Brian sells 3 ETH for €2,000 each

As you can see, Brian made two disposals. Let’s calculate the gain for each disposal one at a time.

‍

1st Disposal

Brian sells 1 BTC for €20,000

Please be aware that in this guide, we will be using the LIFO accounting method as recommended by Agenzia Entrate. A more comprehensive discussion of accounting methods is provided later in the guide. For now, a straightforward way to comprehend how the LIFO (First-In-First-Out) method operates is to imagine that the last asset you purchase is the first one you sell.

Now, this is the same BTC acquired on 05/06/2022 for €17,000

Cost Basis = €17,000

Disposal Amount = €20,000

Capital Gain/Loss = Disposal Amount - Cost Basis = €20,000 - €17,000 = €3,000

‍

2nd Disposal

3 ETH sold for €2,000 each.

If we use the LIFO accounting rules, there are two types of ETH tokens involved in this transaction. 2 ETH tokens are the ones acquired on 05/06/2022 for  €1,600 each and one token is from 06/04/2022 for €1,400.

Now for tokens acquired for €1,600

Cost Base =  €1,600

Disposal Amount = €2,000

Capital Gain for 1 ETH = €2,000 - €1,600 = €400 

So for 2 tokens, the total gain comes out to be = 2*400 = €800

And for the 1 ETH token acquired for €1,400

Cost base =  €1,400

Disposal Amount =  €2,000

Capital Gain =  €2,000 -  €1,400 =  €600

Collective gain for all the 3 tokens =  €1,400

Total Gain for both disposals = €3,000 + €1,400 = €4,400

‍

Crypto Losses

‍

The latest crypto tax rules in Italy have a specific provision that allows for the deduction of losses greater than €2,000 from crypto investments. These losses can now be offset against profits and carried forward for up to five years, which presents an excellent opportunity for taxpayers to potentially minimise their tax obligations over an extended period. By employing a crypto loss harvesting strategy, investors can take advantage of this new provision to optimize their tax planning.

Lost or Stolen Crypto 

The Agenzia Entrate has not provided any guidance on whether lost crypto due to scams, hacks, or misplaced private keys qualifies as a capital loss for the deduction. If you have experienced such losses, it is recommended to consult with a crypto accountant for advice on whether you are eligible to claim them as a capital loss. This will provide clarity on your tax obligations and enable you to potentially lower your tax liability through proper planning.

Crypto Tax Breaks Italy

The only tax break offered by the new tax rules is the exemption amount of €2,000. You only pay taxes when you make gains above the exemption amount. But there are a few transactions that help you reduce your tax bill and listed below are some of them:

• HODL your crypto assets, you won’t be making any gains unless you sell them

• According to the new Italian crypto tax rules, losses over €2,000 will now be considered tax-deductible and can be carried forward for up to five years.

• Both individuals and corporate donors have the opportunity to deduct their charitable contributions from their income tax liability. Donors may claim up to 10% of their declared income, with a cap of €70,000 per tax year. This provision offers a valuable incentive for charitable giving while also providing potential tax benefits for donors.

• Opt-in for the “substitute value tax” option. This will help you significantly reduce your tax bill by paying a 14% tax on holdings as of January 1 of each year.

Crypto Cost Basis Method Italy

The LIFO accounting method is recommended by the Agenzia Entrate for cost basis calculation in Italy. LIFO accounting stands for "last in, first out" and is a method used for inventory management and accounting. It assumes that the last item purchased is the first one that is sold. The LIFO accounting method will be better understood with an example.

Let's say that on January 1st, 2022, Giuseppe purchased 1 Bitcoin for €30,000. On February 1st, he bought another Bitcoin for €35,000, and on March 1st, he bought a third Bitcoin for €40,000.

Later in the year, on October 1st, Giuseppe sold 1 Bitcoin for €45,000. At this point, he would use the LIFO method to determine which Bitcoin was sold and what the cost basis of that Bitcoin was.

According to LIFO, the last Bitcoin that Giuseppe purchased for €40,000 would be considered the first one sold since it was the newest in his inventory. Therefore, the €45,000 sale price would be matched with the €40,000 cost basis, resulting in a capital gain of €5,000.

The remaining 2 Bitcoins in Giuseppe's inventory would be valued at the purchase price of €30,000 and €35,000, respectively. If Giuseppe were to sell one of those remaining Bitcoins at a later date, he would use the same LIFO method to determine the cost basis and gain or loss on the sale.

Crypto Income Tax Italy

‍

The Imposta sui redditi delle persone fisiche (IRPEF), also known as Personal Income Tax, consists of national, regional, and municipal income taxes. While Agenzia Entrate has not provided clarity on the taxation of crypto, it is commonly accepted by tax authorities globally that mining and staking rewards should be considered as income. Therefore, it is reasonable to assume that Agenzia Entrate may adopt the same stance.

Income Tax Rate Italy

The IRPEF, being a national income tax is progressive, meaning that the more income you have, the more taxes you pay. You can refer to the table below to identify your tax bracket.

‍

‍

In contrast, regional and municipal income tax rates offer a considerably lower financial burden. Depending on your place of residence, regional income tax ranges from 1.23% to 3.33%, while municipal income tax can fall anywhere between 0% and 0.9%.

How to calculate your crypto income?

To calculate your crypto income, it's crucial to know the gains you’ve made over a tax year in fiat currency beforehand. This involves tracking the fair market value of the assets you acquired in EUR on the day you obtained them. This value will serve as the basis for calculating the Income Tax you owe.

Tax-Free Crypto Transactions

Listed below are some of the tax-free crypto transactions in Italy:

• Buying crypto with fiat
• HODLing crypto in your wallets or exchange accounts
• Donate Crypto 
• Transferring crypto between your wallets

Taxed Crypto Transactions

Following are the crypto transactions that attract tax liabilities in Italy:

• Disposing of crypto assets
• Swapping one crypto asset for another
• Buying goods or services with crypto assets
• Mining or staking crypto 
• Gifting crypto

Tax on Mining Crypto Italy

Agenzia Entrate has not officially released guidelines on how to tax mining rewards. Although two published resolutions have discussed the tax implications for businesses and individuals who deal with cryptocurrencies, they do not offer any specific guidance for mining.

However, not having guidance does not mean that mining rewards are tax-exempt. We suggest reporting your mining rewards as general income on your annual tax returns to be in a safe spot. This approach is also consistent with how mining rewards are currently taxed in most other countries.

Tax on Staking Crypto

Crypto mining and staking are two entirely different ways of adding and validating new blocks of transactions to public ledgers where PoW (proof-of-work) networks support mining, PoS networks support staking. 

However, mining and staking rewards are treated the same for tax purposes. The Agenzia Entrate is yet to release new guidelines on the taxation of staking rewards, but this does not mean that mining rewards are tax-free. There’s a consensus among tax offices globally that mining and staking rewards are to be treated as general income and should be taxed at receipt. Moreover, any gains incurred from the disposal of such assets shall be subjected to a capital gains tax.

Although we suggest seeking guidance from an experienced tax advisor to better understand how these transactions are taxed.

Crypto Margin Trading, Futures, and CFDs

The Italian tax authority is yet to issue any official guidelines on how to tax crypto margin trading, futures trading, and CFDs.

Nevertheless, based on our active deliberations with tax experts and their interpretation of current tax guidelines, we have discovered that any gains over €2,000 are subject to a flat tax rate of 26%. Similar tax treatment may apply to gains from crypto-related activities.

Crypto Gifts and Donation Taxes

Italy has an inheritance and gift tax that applies to various types of assets, but the specific application to cryptocurrency is currently unclear, and no official guidance has been provided thus far.

If the inheritance and gift tax does apply to crypto transfers, the tax rate can range from 4% to 8%, depending on the relationship between the donor and recipient. However, it's important to note that the gift tax may not apply to certain foreign assets. Therefore, if cryptocurrency is considered a foreign asset, the gift tax may not be applicable in such cases. To obtain accurate and reliable information, it is advisable to consult with an experienced accountant who can provide guidance specific to your situation, especially if you have already gifted or are planning to gift cryptocurrency.

Although there are no dedicated guidelines on the taxation of crypto donations, if we consider crypto donations to be the same as fiat transactions, there are ways you can claim a tax deduction on donations. Individual and corporate donors can deduct contributions from their income tax, up to 10% of their declared income or a maximum of €70,000 per tax year.

NFT Taxes Italy

Agenzia Entrate has not given specific guidance on the matter, but it is highly likely that individuals who earn more than €2,000 in profits from trading crypto assets, such as NFT tokens, must pay a flat tax rate of 26%. Remember that taxes may need to be paid when disposing of NFT tokens.

It is still being determined how NFT creation and transfer are taxed in Italy. There’s a possibility that individuals engaged in these activities may not need to pay taxes, but Agenzia Entrate must provide additional guidance to confirm this.

DAO Taxes

The Agenzia Entrate is yet to release guidance on how income from DAOs will be viewed from the tax perspective. However, receiving payment in cryptocurrency, whether as a salary or for freelance services, is subject to similar tax treatment as receiving payment in traditional fiat currencies. From a tax perspective, there is no significant difference between the two, and the income received will be taxed as regular income regardless of the currency type. Therefore, it’s safe to assume that income from DAOs will be taxed the same way.

We do suggest seeking guidance from an experienced tax professional to avoid legal complications in the future.

DeFi Crypto Taxes 

The Agenzia Entrate hasn’t released specific guidance on how to tax DeFi transactions yet. However, the tax treatment will likely depend on the type of DeFi transaction involved.

For instance, if you have earned interest on your cryptocurrency through a DeFi lending platform, this income may be subject to income tax in Italy. Moreover, if you have participated in a DeFi liquidity pool and earned income from fees or rewards, this income may be subject to taxation.

ICO Taxes

The Agenzia Entrate has not provided guidance on the tax treatment of income from ICOs. We recommend consulting with experienced tax professionals for guidance and staying updated on any new guidelines in this regard to ensure compliance and avoid legal issues.

We will add all relevant details here as soon as the tax authorities release new guidelines regarding the same.

How are Airdrops and Forks taxed in Italy?

Agenzia Entrate is yet to provide specific guidance on the taxation of Airdrops and Forks in Italy, similar to mining, DeFi, and Staking. However, any profits gained from airdrops and forks exceeding €2,000 may be subject to a flat tax rate of 26%. We will continue to update our information if the Italian tax authorities issue further guidance.

When to Report Crypto Taxes in Italy?

In Italy, the tax year runs from January 1st to December 31st, and you can submit a tax return in two different types of forms: Form 730 and the Modello Redditi form. 

Both tax forms have different deadlines, as mentioned below.

Form 730 is for individuals with employment income, credits, and deductions to claim and has a deadline of September 30th of the year following the tax year. 

‍On the other hand, you can use Form Modello Redditi for reporting employment income, tax withheld, capital gains (using Form RT), foreign income/assets (using Form RW), and other transactions, including cryptocurrency. The filing deadline for the Modello Redditi form is November 30th of the year following the tax year. 

How to File Crypto Taxes in Italy

Here is a step-by-step tutorial to help you file crypto taxes in Italy using the Agenzia Entrate portal, if you’re an individual taxpayer.

1. First, you need to register for the Agenzia Entrate portal if you haven't already. You can do this by visiting the Agenzia Entrate website and clicking on the "Registrati" (Register) button on the top right corner of the page. Follow the instructions to create an account.

2. Once you have an account, log in to the Agenzia Entrate portal.

3. Click on "fatture e Corrispettivi" on the left-hand side of the screen, then click on "Criptovalute" (Cryptocurrencies).

4. Here, you have to enter information about your cryptocurrency transactions, including the type of cryptocurrency, the date of acquisition, the date of sale, the purchase price, and the sale price. You can also enter information about fees or commissions associated with the transactions to claim your possible deductions.

5. Once you have entered all of your cryptocurrency transactions, the portal will automatically calculate your capital gains or losses. You can then download the tax return form for your capital gains/losses.

6. Now, you can complete the tax return form, including all of your cryptocurrency transactions for the year.

7. Submit the tax return form through the Agenzia Entrate portal.

8. After the submission, you will receive a confirmation that your tax return has been received and processed. If you owe taxes, you will need to pay them through the Agenzia Entrate portal as well.

9. Keep records of all of your cryptocurrency transactions, including purchase and sale prices, as well as any fees or commissions associated with the transactions. This will help you accurately report your capital gains or losses and avoid any penalties for underreporting.

Does this long tax filing procedure make you feel overwhelmed? 

With the ever-changing tax laws and regulations, it can be challenging to keep up and ensure that you're complying with all the requirements. 

But fret not, help is on the way. Allow me to introduce you to Kryptos, the ultimate tax filing tool that can make the process of preparing and submitting your taxes a breeze. While it's true that tax laws can change, Kryptos stays up-to-date with the latest updates and developments to ensure that you are always in compliance and helps you throughout the tax filing process.

What Crypto Records Will the Agenzia Entrate Want?

While there is no official list of records or bookkeeping details that Agenzia Entrate may require for cryptocurrency transactions during a tax audit, it is prudent to maintain certain records as a minimum. These records include:

• The date of the transaction
• The type of cryptocurrency involved in the transaction
• The type of transaction (buy, sell, or exchange)
• The amount of cryptocurrency bought, sold, or exchanged
• The value of the cryptocurrency in euro at the time of the transaction
• Exchange records and any other relevant statements

By keeping accurate records of your cryptocurrency transactions, you can ensure compliance with tax regulations and facilitate any potential tax audits.

How to File Crypto Taxes Using Kryptos?

Now that you’re aware of how your crypto transactions are taxed and what forms you need to fill out to complete your tax report, here’s a step-wise breakdown of how Kryptos can make this task easier for you:

1. Visit Kryptos and sign up using your email or Google/Apple Account
2. Choose your country, currency, time zone, and accounting method 
3. Import all your transactions from wallets and crypto exchanges
4. Choose your preferred report and click on generate report option on the left side of your screen and let Kryptos do all the accounting.
5. Once your Tax report is ready, you can download it in PDF format.

If you still need clarification regarding the integrations or generating your tax reports, you refer to our video guide here.

How to Avoid Tax on Cryptocurrency in Italy

There’s no legal way to avoid crypto taxes entirely, here are some ways you can avoid taxes in Italy:

• HODL your crypto assets

• Deduct any losses over €2,000 from your gains to lower your tax bill.

• Donate crypto to a registered charity and claim tax deductions on your tax bill. Both individuals and corporate donors have the opportunity to deduct their charitable contributions from their income tax liability.

• Opt in for the “substitute value tax” option and pay a discounted tax rate of 14% instead of the regular 26%.

FAQs

1. Is crypto legal in Italy?

Yes, cryptocurrency is legal in Italy. The Italian government has been taking steps to regulate the use of cryptocurrency in the country. In 2019, Italy implemented a regulatory framework for cryptocurrency service providers, which requires them to register with the Italian authorities and comply with anti-money laundering (AML) and counter-terrorism financing (CTF) regulations. Additionally, Italy has also clarified that the purchase and sale of cryptocurrencies are exempt from Value Added Tax (VAT). However, it's worth noting that cryptocurrency regulations can vary by country and are subject to change over time.

2. How is Crypto taxed in Italy?

In Italy, cryptocurrency is subject to taxation. The Italian Revenue Agency has guided how cryptocurrencies should be taxed.

For individuals, profits from cryptocurrency transactions are considered capital gains and are subject to a flat tax rate of 26% on the net gain. The net gain is calculated by subtracting the purchase price from the sale price, or the cryptocurrency's fair market value at the time it was received if it was acquired through mining or as payment for goods or services.

In addition, if an individual holds cryptocurrency for more than 7 days, they are required to declare it on their tax return. Failure to declare cryptocurrency holdings can result in fines and penalties.

For businesses, cryptocurrency transactions are subject to corporate income tax, and profits are treated as business income.

It's important to note that cryptocurrency tax regulations are subject to change and can vary by jurisdiction, so it's always a good idea to consult with a tax professional or accountant for guidance on how to comply with tax regulations in your specific situation.

3. Is any crypto tax-free in Italy?

No, no cryptocurrency is tax-free in Italy. All profits from cryptocurrency transactions, regardless of the type of cryptocurrency, are subject to taxation.

However, it's worth noting that Italy has clarified that the purchase and sale of cryptocurrencies are exempt from Value Added Tax (VAT), which is a tax on goods and services. Meaning individuals and businesses are not required to pay VAT when buying or selling cryptocurrencies.

4. How to file crypto taxes using Kryptos?

We’ve already discussed how to file your crypto taxes in the above sections of the guide offering a stepwise breakdown of the entire process. However, we agree that it is unreasonably complicated even for someone with a fair amount of prior knowledge. Although there’s an easy way to file your crypto taxes using a crypto tax software called Kryptos.

Where all you need to do is log in on the platform, add all your trading accounts, wallets, and DeFi accounts and sip coffee while Kryptos does all the heavy lifting for you. The platform can auto-fetch all your transactions from the tax year and generate a legally compliant tax report within minutes while suggesting ways to lower your tax bill. It works like magic, you need to do is try it once.

‍

All content on Kryptos serves general informational purposes only. It's not intended to replace any professional advice from licensed accountants, attorneys, or certified financial and tax professionals. The information is completed to the best of our knowledge and we at Kryptos do not claim either correctness or accuracy of the same. Before taking any tax position / stance, you should always consider seeking independent legal, financial, taxation or other advice from the professionals. Kryptos is not liable for any loss caused from the use of, or by placing reliance on, the information on this website. Kryptos disclaims any responsibility for the accuracy or adequacy of any positions taken by you in your tax returns. Thank you for being part of our community, and we're excited to continue guiding you on your crypto journey!

Since the TAA(Tax Authority Austria) released revised guidelines on crypto taxation effective March 1st, 2022, completely overhauling the crypto tax infrastructure, there has been an air of confusion and uncertainty in the Austrian crypto space. People need clarification about whether their investments and holdings fall under the old or new tax regime. And this led to friction for crypto enthusiasts across the country.

Therefore, we decided to curate an extensive crypto tax guide for Austrian residents covering crypto taxation before and after the new guidelines came into effect. The idea is to clarify new rules clearly for investors so they don’t have to be intimated by the tax guidelines and can file their taxes conveniently.

The new guidelines make things more complicated for us to explain. And although we have tried our best to segment this guide in a way that’s convenient for you to understand, we suggest going through the sections carefully to avoid missing out on crucial details.

With that out of the way, let’s get into it.

Latest Updates/Guidelines

09/06/23- Updated to accommodate DAO, Gifts and Donation Taxes

09/06/23- Updated to accommodate ICO taxes

Tax Treatment of Cryptocurrencies

How is Crypto Taxed in Austria?

Austria saw a new tax reform being implemented on March 1st, 2022 that has changed the way crypto transactions are taxed. The amount of taxes you pay on crypto transactions depends on the nature of transactions in Austria. It is important to note that unlike other tax jurisdictions Austria doesn't have a dedicated capital gains tax and any profits generated by selling, swapping, or spending crypto assets is taxed under the existing income tax laws.

Example:

Consider the following transactions:

06/01/2021 - Alex bought 1 BTC for €15,000

08/03/2021 - Alex bought 2 ETH for €2,000 each

16/04/2021 - Alex bought 1 BTC for €18,000

18/06/2021 - Alex sold 1 ETH for €2,200

13/01/2022 - Alex sold 1 BTC for €20,000

17/04/2022 - Alex sold 1 BTC for €22,000

Now as evident from above, a total of three disposals were made. So let’s look into the capital gains calculations of each one and the tax consequences arising from them.

‍

1st Disposal

I ETH sold for €2,200 on 18/06/2021

Now, since we’re using the FIFO accounting method as recommended by the BMF,

This is the same ETH token that was acquired on 08/03/2021 for €2,000

Disposal Amount = €2,200

Cost basis = €2,000

Capital Gain = Disposal Amount - Cost Basis = €2,200 - €2,000 = €200

And since the disposal was made within a year of acquiring the tokens, the gains are taxable.

‍

2nd Disposal 

1 BTC sold for €20,000 on 13/01/2022

If we go by the FIFO accounting rule, this is the same BTC acquired on 06/01/2021.

Note that this disposal was made after holding the BTC for a little over a year. Since the disposal was made before March 1, 2022, under the old tax regime, the gains incurred from this disposal will be considered long-term gains and will attract no tax liabilities.

3rd Disposal

1 BTC sold for €22,000 on 17/04/2022

Based on the FIFO accounting this is the same BTC acquired on 16/04/21 for €18,000.

Note that this disposal was also made after holding the BTC for over a year. But since the disposal was made after March 1, 2022, under the new tax regime, the gains incurred will be taxable.

Disposal Amount = €22,000

Cost Basis = €18,000

Capital Gain =  €22,000 - €18,000 = €4,000

Additionally, an interest-bearing tax applies to transactions where you earn interest income. All transactions that generate interest income are taxed at a flat rate of 27.5%. The following transactions fall under the interest-bearing tax category in Austria:

• Staking crypto.
• Lending crypto.
• Yield farming.
• Liquidity mining.

Can the BMF Track Crypto?

Indeed, Austria's crypto tax reform has made it clear that investors are required to report their crypto transactions to the BMF and fulfil their tax obligations accordingly. In line with the practices of other European tax authorities, the BMF is working with prominent crypto exchanges to acquire KYC (Know Your Customer) data. Furthermore, the forthcoming EU directive, DAC8, grants BMF the authority to verify crypto ownership and scrutinize the accounts of crypto companies.

Crypto Capital Gains

Old Tax Regime

Before the enforcement of the new regulations on March 1st, 2022, Austria did not have a dedicated capital gains tax structure in effect. Instead, all proceeds obtained from the disposal of assets were subjected to taxation under the income tax regulations. If the assets were held for less than one year before being sold, they were treated as short-term capital gains and incurred tax obligations as per the income tax rules. Conversely, if the assets were held for over one year before their sale, no taxes were imposed on the resulting gains.

The rate at which your short-term gains are taxed depends on your income level and the type of transaction you’re involved in. Here are the tax rates based on income level:

You might be wondering how these tax rules apply to investors in 2023. Well, any assets that were purchased before March 1st, 2022, will continue to be taxed based on the previous tax rules. Additionally, assets that were acquired on or before February 28th, 2022, and are still held by investors are considered non-taxable under the new guidelines.

It is important to note that certain transactions involving interest-bearing activities such as staking, lending, liquidity mining, and yield farming will be subject to a fixed interest-bearing tax rate of 27.5%.

New Tax Regime

‍

‍

The recent tax reform brings about significant changes that impact crypto investors. The rates at which gains are taxed have been altered, and long-term capital gains are no longer exempt from taxes, except for specific legacy holdings, which we will delve into shortly. However, it's worth noting that the taxation of interest-bearing transactions remains unchanged even after the tax reform, providing a sense of stability.

The latest tax reform has introduced a notable shift for crypto investors, as all transactions resulting in short-term capital gains are now subject to the stock tax rate of 27.5%. Furthermore, any assets that were held before the implementation of the new tax regime will be categorized as legacy holdings and will not be subject to taxation under the revised tax laws.

You can voluntarily opt-in to the new tax laws from January 1 2022, if you wish to.

But why would someone want to do that?

Well, because it can save you money.

Note that in the previous tax regime, your gains were taxed based on your income, so if you happen to be in the higher income group, attracting a 35-40% tax rate, you can opt-in to the new tax regime where you only have to pay a flat tax rate of 27.5%.

One important addition to the tax framework has been the allowance for taxpayers to offset their capital losses against their capital gains, which was previously not allowed.

Capital Gains Tax Rate

We’ve already discussed the tax rate from the previous tax regime in the table above. After the tax reform, all your gains will be subjected to a flat stock tax rate of 27.5%.

How to Calculate Crypto Gains and Losses

‍

‍

Now that you understand how your gains will be taxed and the taxes you'll be responsible for, it's crucial to determine the extent of your gains to estimate the corresponding tax amount owed to the tax authorities.

Calculating your capital gain or loss is relatively straightforward. You can use the following formula:

Capital Gain/Loss = (Disposal Amount or Selling Price) - (Cost Basis)

For an accurate calculation of your capital gain or loss, two key pieces of information are required: the disposal amount or selling price of the asset and the cost basis. If you are uncertain about the cost basis, there is no need to be concerned. It simply refers to the total amount you paid to acquire the asset, including any additional fees like gas or transaction fees.

It is essential to understand that when determining the cost basis, one should adhere to the accounting method recommended by the tax authorities, which is typically the First-In-First-Out (FIFO) method. We will provide more comprehensive information regarding this accounting method later in the guide.

Example: 

Consider the following transactions:

03/02/2022 - Andrew buys 2 BTC for €14,000 each

06/04/2022 - Andrew buys 3 ETH for €1,400 each

05/06/2022 - Andrew buys 1 BTC for €18,000 and 2 ETH for €1,600 each

13/06/2022 - Andrew sells 1 BTC for €20,000

19/08/2023 - Andrew sells 3 ETH for €2,000 each

As you can see, Andrew made two disposals. Let’s calculate the gain for each disposal one at a time.

‍

1st Disposal

Andrew sells 1 BTC for €20,000

Please be aware that in this guide, we will be using the FIFO accounting method as recommended by the BMF. A more comprehensive discussion of accounting methods is provided later in the guide. For now, a straightforward way to comprehend how the FIFO (First-In-First-Out) method operates is to imagine that the first asset you purchase is the first one you sell.

Now, this is the same BTC acquired on 03/02/2022 for €14,000

Cost Basis = €14,000

Disposal Amount = €20,000

Capital Gain/Loss = Disposal Amount - Cost Basis = €20,000 - €14,000 = €6,000

‍

2nd Disposal

3 ETH sold for €2,000 each.

If we use the FIFO accounting rules, these ETH tokens are the same ones that were acquired on 06/04/22 for €1,400 each

Cost Base =  €1,400

Disposal Amount = €2,000

Capital Gain for 1 ETH = €2,000 - €1,400 = €600 

So for 3 tokens, the total gain comes out to be = 3*600 = €1,800

Total Gain for both disposals = €6,000 + €1,800 = €7,800

Crypto Losses

Old Tax Regime

Before March 2022, taxpayers were not allowed to offset their capital losses and had to do away with them without availing of tax benefits.

‍

New Tax Regime

Under the new tax regime in Austria, taxpayers are granted the ability to offset their capital losses with their capital gains, considering that cryptocurrencies are now recognized as tangible assets. However, it's important to note that you can only offset your losses against gains by applying the same taxation principles. This means that if you intend to neutralize your crypto losses, you can only do so by offsetting them against capital gains that fall within the 27.5% tax bracket.

In simpler terms, losses incurred before March 1, 2022, cannot be utilized to offset gains achieved after the implementation of the tax reform, unless you voluntarily choose taxation under the new tax regulations.

Lost or Stolen Crypto 

The BMF is yet to release specific guidance on how lost or stolen crypto is viewed from a tax perspective. However, it is likely that these losses will be assessed on a case-by-case basis and may be deducted from your overall income to lower your tax bill, given that you can offer all the supporting documents to prove the ownership of assets before theft.

Crypto Tax Breaks Austria

Most countries offer tax breaks to crypto investors, and Austria is no exception. The Austrian tax authorities offer multiple tax breaks under both the old and new tax regimes. Listed below are some of them:

Old Tax Regime

1. Personal Income Tax Allowance: Under the old income tax laws, you wouldn’t have to pay any taxes on your gains if your total income was less than €11,000.

2. HODling Crypto: Under the previous tax laws, long-term capital gains were exempt from taxation. This meant that if you held onto your assets for a period exceeding 12 months before selling them, the resulting gains were not subject to taxes.

New Tax Regime

1. Speculative Trade Allowance: If you make less than €440 in speculative trades in a tax year, then your gains or profits are considered tax-free.

Crypto Cost Basis Method Austria

The FIFO (First-In First-Out) cost basis method is recommended for cost basis calculations in Austria. This method assumes that the first assets purchased or acquired is also the first assets sold or disposed of.

In crypto investments, FIFO would mean that the first cryptocurrencies purchased are also the first ones sold.

Here's an example of how the FIFO accounting method works:

Consider the following transactions made by Mark:

• Bought 1 BTC for €10,000 on 01/01/2021
• Bought 1 ETH for €1,000 on 01/02/2021
• Bought 1 BTC for €20,000 on 01/03/2021
• Bought 2 ETH for €2,000 each on 01/04/2021
• Bought 3 BTC for €30,000 each on 01/05/2021
• Bought 3 ETH for €3,000 each on 01/06/2021

Let's say you decide to sell 2 BTC on 01/07/2021 when the price is €35,000 per BTC. 

Using the FIFO accounting method, you would sell the 2 BTC you purchased on 01/01/2021 and 01/03/2021 as they were the first two BTC purchased.

For the BTC purchased on 01/01/2021, the cost basis is €10,000 and for the BTC purchased on 01/03/2021 the cost basis is €20,000.

So the collective cost basis for both BTC tokens would be = €10,000 + €20,000 = € 30,000

Now the total amount received on the disposal of 2 BTC = €70,000

Capital Gain/Loss = €70,000 - €30,000 = €40,000

Crypto Income Tax Austria

As previously mentioned, the tax authorities regarded gains from crypto-related transactions as income and subjected them to taxation according to income tax laws. However, under the new tax guidelines, a new overarching tax known as the stock tax has been introduced, replacing the previous income tax system. This change signifies a shift in the taxation framework for crypto-related gains.

We have discussed it in detail in the above section titled “Crypto Capital Gains”.

How to Calculate Crypto Income 

For assets bought before March 1, 2022, your net income is simply the sum of capital gains made for all short-term trades, as any disposal made after over a year of holding these assets is not taxable under the old tax guidelines. You can refer to the above section titled “How to calculate crypto gains and losses” if you have any doubts about how to calculate your capital gains.

Tax-Free Crypto Transactions

Listed below are some tax-free transactions in Austria under both the new and old tax laws:

1. Buying crypto with fiat
2. HODLing crypto 
3. Transferring crypto between wallets
4. Disposing of crypto assets acquired before February 28, 2022, after having held them for over a year
5. Gifting crypto

In addition to this, by opting into the new tax reform, you can avail of some additional tax benefits:

1. Swapping one crypto asset for another
2. Staking rewards from PoS networks

Taxed Crypto Transactions

Listed below are some of the taxed crypto transactions in Austria:

1. Selling crypto
2. Earning interest income from lending, staking, and yield farming
3. Mining crypto 
4. New tokens received from hard forks and airdrops

Tax On Mining Crypto in Austria

Mined tokens are taxed based on the timing of the mining activity. If the tokens were mined on or before February 28, 2022, they would be subject to income tax and if the tokens were mined on or after March 1, 2022, they would be taxed upon receipt at a flat rate of 27.5%.

When disposing of these mined tokens, if the disposal occurs before March 1, 2022, income tax will be imposed on the transactions, with the tax rate varying based on your income bracket. However, if the disposal takes place after March 1, 2022, a flat rate of 27.5% will be applicable.

Starting from March 1, 2022, the trading of mined coins is tax-free. Furthermore, if you mined coins before February 28, 2021, and held them for over a year, these holdings will be considered as legacy assets. As a result, any profits from selling, trading, or utilizing these coins will not be subject to tax.

Tax on Staking Crypto

The BMF under the new tax reform clearly states that income deemed to be generated is taxable. According to a document titled Tax Treatment of Cryptocurrencies published by the Federal Ministry Republic of Austria

 “...current income is not deemed to be generated if:

the service associated with processing the transaction consists primarily of investing (staking) existing cryptocurrency…”

However, tokens received as staking rewards inherit a cost basis of zero to ensure that all your gains are taxed once you decide to dispose of these tokens.

Crypto Margin Trades, Future, and CFDs

The BMF lacks a definitive framework for determining the tax implications of trading activities involving crypto margin trading, futures, and other CFDs. Nonetheless, it's worth noting that the 27.5% tax rate that applies to capital gains from financial assets, including derivatives, generally also pertains to crypto. It's recommended that you consult with a tax expert for specialized guidance regarding the taxation of crypto derivatives and other CFDs.

DAO Taxes

Although the BMF guidelines do not specifically mention income from DAOs, they do mention cryptocurrency holding acquired using a technical activity involving transaction processing services are deemed to be currency income and are subject to income tax.

However, the nature and scope of these technical activities should not extend beyond simple asset management work. Otherwise, the income would be classified as income from commercial activity. Working at a DAO involves completing more complex tasks. and therefore income from DAOs may be categorised as income from commercial activity. 

We suggest seeking advice from an experienced tax advisor to understand how income from DAOs is taxed.

ICO Taxes

ICOs are events that allow investors to own native tokens from unreleased projects at a discounted price. It is similar to IPOs from traditional markets and involves swapping mainstream tokens like BTC and ETH to get access to project-native tokens.

Although the guidelines do not specifically mention how income from ICOs will be taxed, these transactions will likely be viewed as crypto-to-crypto trades. The BMF does not consider crypto-to-crypto trades as taxable.

However, it is advisable to seek guidance from an experienced tax accountant to avoid legal complications in the future.

Crypto Gifts and Donations Taxes

If you're considering gifting or donating crypto assets in Austria, there is good news for you. Gifting crypto is not subject to taxation. However, there are certain reporting requirements to be aware of. If you are gifting assets to your relatives, any donations exceeding €50,000 should be reported to the BMF. While if you are gifting to friends or third parties, the reporting threshold decreases to €15,000.

While the BMF still needs to provide specific guidelines for crypto donations, based on existing knowledge about fiat donations, it is reasonable to assume that crypto donations made to registered charities are eligible for tax deductions. Furthermore, you are not required to report these transactions to the BMF. The organization receiving the grant is responsible for reporting the transactions to the BMF, and the information will be automatically included in your employee tax assessment report.

NFT Taxes Austria

In Austria, the taxation of NFTs largely depends on their intended use and the specific circumstances of their acquisition and sale.

If an individual buys an NFT as an investment and later sells it for a profit, any capital gains realized from the sale will be taxed based on the date of disposal. If acquired and disposed of on or after March 1 2022, the gains will be subjected to a flat rate of 27.5% in the new tax regime, and if disposed before that, the gains will be subjected to the regular income tax rates. 

On the other hand, if an NFT is acquired and sold as part of a business activity, the transaction may be subject to Value Added Tax (VAT) at a rate of 20%. This would be the case. For example, if a company creates and sells NFTs as part of its regular business operations.

DeFi Crypto Taxes Austria

The BMF is yet to release clear guidelines on the taxation of DeFi transactions. However, this does not imply that DeFi transactions are tax-free. It just means that you need to interpret the current guidelines and apply them to your DeFi transactions to calculate your NFT taxes.

Lucky for you we deliberated this matter with tax professionals, and here’s what we found about the taxation of DeFi transactions:

• Interest income from DeFi Protocols: A flat 27.5% tax on receipt of tokens and upon disposal
• Borrowing Crypto assets from DeFi Protocols: Tax-Free

• Paying interest back to DeFi Protocols:  The transaction is considered tax-free until you’re making interest payments using fiat currency.

• Staking and Liquidity Mining on DeFi Protocols: A flat 27.5% tax on the tokens upon receipt.

• Yield Farming: A flat 27.5% tax rate on tokens upon receipt and disposal.

• Adding/Removing Liquidity: Tax-Free

• Income from Engage/play to Earn DeFi Protocols: A flat 27.5% tax rate on tokens upon receipt and disposal.

• Income from Margin Trades and Futures on DeFi Protocols: A flat 27.5% tax on any realized gains.

How are Airdrops and Forks Taxed in Austria

Soft forks are non considered taxable by the BMF as no new tokens are redistributed among the chain participants. 

Tokens received through airdrops and hard forks are treated similarly for tax purposes. They are not taxed upon receipt and have a cost basis of €0, which is not good news. This means that when you sell your tokens, you will be taxed on their entire value, not just the gains. If you sell these tokens on or before February 28, 2022, regular income tax rules will apply, but if you sell them after that date, a flat tax rate of 27.5% will be charged on the sale.

When to Report Crypto Taxes in Austria

The financial year in Austria runs from January 1 to December 31. Taxpayers must file their returns by April 30 (for paper forms) or June 30 (for online returns) of the following year. For instance, the current financial year is from January 1, 2022, to December 31, 2022, and the deadline for postal returns is April 30, 2023, while for online returns, it's June 30, 2023. It's essential to keep these dates in mind to avoid penalties for late submissions.

Note that if you file your tax return through a registered tax professional, the deadline extends to 31st March 2022.

How to Report Crypto Taxes in Austria

When filing taxes in Austria, cryptocurrency investments are considered part of the taxpayer's annual return. Such investments should be reported electronically using the FinanzOnline portal before the 30th of June. Specifically, individuals should report their cryptocurrency investments under the "other income" category on their Income Tax Return - E1.

How to File Crypto Taxes in Austria

Here’s a step-wise tutorial on how to file your crypto taxes using the online Finanz portal:

1. Create a FinanzOnline account - If you don't already have one, you must register with the Austrian tax authorities by creating a FinanzOnline account. You can do this by visiting the FinanzOnline website and following the registration process.

2. Gather all necessary information - Before starting the tax filing process, you should gather all the relevant information and documents to complete the process. This includes your income information, deductions, and any crypto investments you made during the tax year.

3. Log in to your FinanzOnline account - Once you have all the necessary information, log in to your FinanzOnline account using your username and password.

4. Select the tax return form - From the menu, select the tax return form that applies to you. For example, if you are an individual, select the "Income Tax Return - E1" form.

5. Fill out the tax return form - You will be directed to the tax return form, which you need to fill out with your income and expense details. Ensure that you accurately report all your crypto investments under the category of "other income."

6. Submit the tax return - After filling out the form, you need to submit it electronically by clicking the "Submit" button. Once submitted, you will receive a confirmation message that your tax return has been successfully filed.

7. Pay any outstanding tax - If you owe any tax, you will be required to make the payment electronically via the FinanzOnline portal. You can do this using various payment options provided by the portal.

8. Track the status of your return - You can check the status of your tax return by logging into your FinanzOnline account and selecting the "Tax Return Status" option from the menu.

Note that you need to complete all your income calculations and review them thoroughly before you file your taxes so that you can validate the tax calculations made by the software. One way to avoid this is by using crypto tax software like Kryptos to do these calculations. The platform can auto-fetch all your transactions and calculate the cost basis for each one of them, generating legally compliant tax reports in a matter of minutes. 

How to File Crypto Taxes Using Kryptos?

Now that you’re aware of how your crypto transactions are taxed and what forms you need to fill out to complete your tax report, here’s a step-wise breakdown of how Kryptos can make this task easier for you:

1. Visit Kryptos and sign up using your email or Google/Apple Account
2. Choose your country, currency, time zone, and accounting method 
3. Import all your transactions from wallets and crypto exchanges
4. Choose your preferred report and click on the generate report option on the left side of your screen and let Kryptos do all the accounting.
5. Once your Tax report is ready, you can download it in PDF format.

If you need clarification regarding the integrations or generating your tax reports, you refer to our video guide here.

What Crypto Records Will the BMF Want?

The BMF hasn’t released an official list of documents that taxpayers need to maintain, but as a general rule, maintain the following documents to avoid complications while filing taxes:

• The date of the transaction
• Which cryptocurrency was part of the transaction
• Type of transaction
• How much was bought, sold, or exchanged
• The value of the cryptocurrency in euro at the time of the transaction
• Exchange records and other relevant statements
• Wallet addresses

How to Avoid Tax on Cryptocurrency in Austria 

There is no legal way to avoid crypto taxes altogether in Austria and you might end up in trouble with the tax authorities if you choose to do so. However, there are ways you can reduce your tax bill and pay less taxes. We’ve already discussed most of them in detail in prior sections of the guide under the section titled “Crypto Tax Breaks Austria''. Here’s a summary:

• HODL assets bought on or before Feb 28 2022, as long-term capital gains were not considered taxable under the old tax laws
• Swap one crypto asset for another. It’s considered non-taxable after the tax reform.
• Opt-in for taxation under the new tax rules as it might significantly reduce the rate at which your gains will be taxed, especially if you fall in the higher tax bracket.
• Donate because gifts to registered charities are tax-deductible.

FAQs

1. Is Crypto legal in Austria?

Yes, crypto is legal in Austria. Austria has a clear regulatory framework for cryptocurrencies and has recognised them as a means of payment since 2019. The country has implemented anti-money laundering (AML) regulations that apply to cryptocurrency exchanges and service providers, and the Financial Market Authority (FMA) is the responsible regulatory body for overseeing compliance with these regulations. Overall, Austria has been proactive in embracing blockchain technology and cryptocurrencies, with several initiatives aimed at promoting innovation in this field.

2. How is Crypto taxed in Austria?

In Austria, cryptocurrencies are treated as assets and are subject to capital gains tax. Therefore, any profit from buying and selling cryptocurrencies is subject to taxation, just like any other investment.

When calculating capital gains tax, the cost basis of the cryptocurrency is determined based on the value at the time of acquisition. If the cryptocurrency is held for more than one year, the tax rate on the capital gains is 27.5%. If the cryptocurrency is held for less than one year, the gains are taxed as income, with a progressive income tax rate that ranges from 0% to 55%.

It's also worth noting that any income received in cryptocurrency, such as through mining or airdrops, is subject to income tax. Additionally, if a business accepts cryptocurrency as payment, the transaction is subject to value-added tax (VAT) in the same way as any other transaction.

3. Is any crypto tax-free in Austria?

In Austria, there is no tax-free cryptocurrency. All gains from buying and selling cryptocurrencies are subject to taxation, just like any other investment. Even if you receive cryptocurrencies as a gift or through an airdrop, they are still subject to taxation as income.

4. How to file crypto taxes using Kryptos?

We’ve already discussed how to file your crypto taxes in the above sections of the guide offering a stepwise breakdown of the entire process. However, we agree that it is unreasonably complicated even for someone with a fair amount of prior knowledge. Although there’s an easy way to file your crypto taxes using a crypto tax software called Kryptos.

Where all you need to do is log in on the platform, add all your trading accounts, wallets, and DeFi accounts and sip coffee while Kryptos does all the heavy lifting for you. The platform can auto-fetch all your transactions from the tax year and generate a legally compliant tax report within a matter of minutes while also suggesting ways to lower your tax bill. It works like magic, all you need to do is try it once.

‍

All content on Kryptos serves general informational purposes only. It's not intended to replace any professional advice from licensed accountants, attorneys, or certified financial and tax professionals. The information is completed to the best of our knowledge and we at Kryptos do not claim either correctness or accuracy of the same. Before taking any tax position / stance, you should always consider seeking independent legal, financial, taxation or other advice from the professionals. Kryptos is not liable for any loss caused from the use of, or by placing reliance on, the information on this website. Kryptos disclaims any responsibility for the accuracy or adequacy of any positions taken by you in your tax returns. Thank you for being part of our community, and we're excited to continue guiding you on your crypto journey!

Crypto investments are fun, but crypto taxes aren’t. Most Denmark residents have no idea how crypto gains are taxed, and that’s because the guidelines around crypto taxation in Denmark are comparatively new and still evolving. Danish tax authorities consider crypto to be personal assets from a tax perspective, which essentially means that you will pay taxes on them whenever you treat them as a speculative asset or use them for business purposes.

The guidelines around crypto taxation are comprehensive and cover almost every aspect of crypto taxation. However, one might find it overwhelming to get acquainted with the guidelines and then decode them to cater to their specific transactions.

That’s why we’ve put together this comprehensive guide on crypto taxes in Denmark to help you keep up with the new and existing guidelines issued by the Danish tax authority Skattestyrelsen. 

Once you finish this tax guide, you’ll have everything you need to know about crypto taxation in Denmark. This guide will be regularly updated as the tax authorities issue new guidelines. So make sure you keep revisiting this guide to stay updated.

Key Information

Latest Updates/Guidelines

17/04/24- Updated to accommodate ICO Taxes

17/04/24- Updated to accommodate NFT and DAO taxes

Understanding Crypto Taxation in Denmark

Bitcoin and other cryptocurrencies are classified as personal assets in Denmark, which essentially means that every time someone treats crypto as a speculative asset or uses it for business, tax liabilities follow.

Note that any crypto you purchase and hold is considered a speculative asset by default, resulting in taxable gains or losses. If you’re not sure whether or not your assets classify as speculative, you also have the option to request a personal assessment.

According to Skattestyrelsen the tax treatment of crypto assets depends on the specific nature of the transactions. Activities like capital income from trading, receiving crypto through airdrops, or earning crypto through mining are considered personal income and are subject to a variable tax rate that may go up to 52%. On the other hand, trading in stablecoins is recognised as deriving gains from a financial contract, leading to it being classified as capital income and subject to a capital gains tax of up to 42%.

Here’s an example to better understand how taxes work in Denmark.

Consider the following transactions:

22/01/13 - Fredrik buys 2 BTC for 1,20,000 DKK each

22/02/22 - Fredrik buys 1 ETH for 10,000 DKK

22/03/28 - Fredrik buys 1 ETH for 11,000 DKK

22/05/21 - Fredrik sells 2 BTC for 1,50,000 DKK each

22/06/04 - Fredrik sells 1 ETH for 15,000 DKK

As evident from the above ledger of transactions, two disposals were made, so let’s see how these disposals will be taxed.

1st Disposal

2 BTC sold for 1,50,000 DKK each

These tokens were acquired for 1,20,000 DKK each on 22/01/13

Cost Basis (Acquisition Price) = 1,20,000 DKK

Disposal Amount = 1,50,000 DKK

Capital Gains = Disposal Amount - Cost Basis = 1,50,000 - 1,20,000 = 30,000 DKK (for 1 BTC)

Gain from 2 BTC = 2*30,000 = 60,000 DKK

2nd Disposal

1 ETH sold for 15,000 DKK

Since two ETH tokens are acquired at different dates and prices, calculating the acquisition price becomes a little complex.

Here we have to use an accounting method to identify which ETH token was disposed of. Every country suggests a specific accounting method for calculating the cost base. 

Skattestyrelsen recommends using the FIFO accounting method. We will discuss more about this method later in the guide. For now, a simple way to understand how FIFO accounting works is that the first asset you buy is the first asset you sell.

So the first ETH was acquired on 22/02/22 for 10,000 DKK

Cost basis = 10,000 DKK

Disposal Amount = 15,000 DKK

Capital Gain/loss = Disposal amount - Cost Basis = 15,000 - 10,000 = 5,000 DKK

Collective gain from both disposals = 60,000 + 5000 = 65,000 DKK

This is your tax base and taxes will be levied on it.

Cost Basis Calculations in Denmark

Sometimes when investors buy the same asset multiple times at different prices, calculating the acquisition price or cost basis for disposal becomes very challenging. That’s exactly why one must rely on specialised accounting methods as specified by the tax authorities.

The Danish tax authorities recommend using the FIFO accounting method to calculate the cost basis if you’re a Danish resident. The FIFO or First-In-First-Out accounting method implies that the first token you buy is the first token you sell. And this accounting method is beneficial when dealing with multiple transactions from across your portfolio of tokens.

‍

‍

Here’s an example to better understand how it works.

Consider the following transactions:

2022/01/13 - Astrid bought 1 BTC for 1,10,000 DKK

2022/03/12 - Astrid bought 1 BTC for 1,20,000 DKK

2022/04/15 - Astrid sold 1 BTC for 1,50,000 DKK

As evident from the above ledger of transactions, two BTC tokens were purchased at two different dates and prices. So to determine which token was sold on 2022/04/15, we will use the FIFO accounting method.

Since the first token purchased will be the first one to be disposed of. The BTC token purchased on 2022/01/13 will be the one disposed of on 2022/04/15.

Cost Basis = 1,10,000 DKK

Disposal Amount = 1,50,000 DKK

Capital Gain/loss = Disposal Amount - Cost Basis = 1,50,000 - 1,10,000 = 40,000 DKK

How Does Capital Gains Tax Work in Denmark?

The Skattestyrelsen doesn't consider crypto as fiat currency but as a personal asset for tax purposes. And personal assets are only taxed in Denmark under two specific circumstances:

1. If the assets are associated with your business
2. If it is considered a speculative asset

However, if you think you can evade crypto taxes just by HODLing your assets, you might be in for a surprise because the Danish tax authorities view your holdings as speculative and hence subject to taxes.

If you have any doubts regarding whether your assets are speculative or not, you can get your holdings audited by them. 

The Danish tax authorities differentiate between Bitcoin, altcoins, and stablecoins. If you happen to be involved in transactions with Bitcoin and altcoins, chances are that you’ll attract income tax liabilities. However, if you’ve been trading and investing in stablecoins, the gains, if any, will be considered capital gains and taxed accordingly.

Capital Gains Tax Rate

Denmark doesn’t have separate tax rates for short-term and long-term capital gains. The tax on capital gains in Denmark is 42%.

How to Calculate Crypto Gains and Losses

The first step in determining your gains or losses involves calculating the cost basis for each asset within your portfolio. Your cost basis represents the amount you paid to acquire the asset, including any associated fees like gas fees or transaction fees.

Once you have the cost basis, you can simply subtract it from the disposal amount to ascertain your gain or loss. If it’s a gain, you will be required to pay a flat income tax on that amount. Conversely, if it results in a loss, you are not obligated to pay any taxes. However, it's important to note that you may be able to offset these losses against certain gains if specific criteria are met, as discussed in the preceding sections.

Here’s an example to better understand how capital gains are taxed.

Consider the following transactions:

2022/01/19 - Emma buys 2 BTC for 1,00,000 DKK

2022/03/12 - Emma buys 3 ETH for 11,000 DKK

2022/04/11 - Emma buys 1 BTC for 1,10,000 DKK

2022/06/14 - Emma sells 1 BTC for 1,40,000 DKK

2022/08/10 - Emma sells 2 BTC for 1,50,000 DKK

2022/10/14 - Emma sells 2 ETH for 15,000 DKK

As seen in the above ledger of transactions, three disposals were made. We will calculate the gains for each disposal one at a time.

1st Disposal

1 BTC sold for 1,40,000 DKK

This BTC is the same one acquired on 2022/01/19 for 1,00,000 DKK

Cost Basis = 1,00,000 DKK

Disposal Amount = 1,40,000 DKK

Capital Gain/loss = Disposal Amount - Cost Basis = 1,40,000 - 1,00,000 = 40,000 DKK

2nd Disposal

2 BTC sold for 1,50,000 DKK each

There are two different types of tokens in this bunch. 

BTC-1 from 2022/01/19 was acquired for 1,00,000 DKK and BTC-2, was acquired on 2022/04/11 for 1,10,000 DKK.

So for disposal of BTC-1:

Cost basis = 1,00,000 DKK

Disposal Amount = 1,50,000 DKK

Capital Gain = 1,50,000 - 1,00,000 = 50,000 DKK

And for disposal of BTC-2:

Cost Basis = 1,10,000 DKK

Disposal Amount = 1,50,000 DKK

Capital Gain = 1,50,000 - 1,10,000 = 40,000 DKK

Total Gain = 50,000 + 40,000 = 90,000 DKK

3rd Disposal

2 ETH sold for 15,000 DKK each

These tokens were acquired on 2022/03/12 for 11,000 DKK

Cost Basis = 11,000 DKK

Disposal Amount = 15,000 DKK

Capital Gain = 15,000 - 11,000 DKK = 4,000 DKK (for 1 ETH)

Gain from 2 ETH tokens = 2*4000 = 8,000 DKK

Collective Gain from 3 Disposals = 40,000 + 80,000 + 8,000 = 1,28,000 DKK

Decoding Crypto Income Tax in Denmark

Transactions that result in a gain may attract income tax or capital gains tax depending on the nature of those gains. If you trade or invest in crypto assets, the gains you make would be treated as income. While if you hold stablecoins and use them as an investment instrument, then the gains will attract CGT.

Income Tax Rate Denmark

The personal income tax rate in Denmark constitutes four discrete tax brackets:

1. Bottom-Bracket Tax

All income earners pay a flat 12.11% bottom bracket tax. The income is taxed after deducting the personal allowance and the 8% labour market tax.

2. Top-Bracket Tax

Individuals earning above 552,500 DKK in Denmark are liable to pay the top tax bracket, which is an extra levy of 15% on their income. It is worth noting that this tax is calculated after accounting for labour market contributions.

3. Municipal and Labour Market Tax

In Denmark, all taxpayers are required to pay the labour market tax and municipal tax. The labour market tax is fixed at 8%, whereas the municipal tax varies, with the mean rate being  25%. Although crypto assets are exempt from the 8% market tax, understanding this tax is important  for effective tax planning.

Note that a regulation in Denmark limits the total amount of an individual's bottom-bracket tax, top-bracket tax, and municipal taxes. According to this regulation, these taxes combined must not exceed 52.06% of the individual's income. This serves as a threshold to ensure that the tax burden remains within a limit for taxpayers in Denmark.

How to Calculate Crypto Income

If you have a crypto income, let’s say from ICOs, crypto-to-crypto trades, or as salary you need to be able to calculate your net income and report it to the tax authorities on your tax return. For calculating your crypto income, you should keep track of the fair market value of the tokens in DKK on the day of receipt and add them all together to calculate your net income.

What Happens When You Don’t Report Crypto Transactions in Denmark?

It might get you into a lot of trouble as the Skattestyrelsen can trace your crypto transactions from as far back as 2019. The Danish tax agency collaborated with major crypto exchanges operating within Denmark, gaining access to KYC details of investors. Moreover, the tax agency has sent letters to cryptocurrency investors who are suspected of evading taxes.

So you should dismiss any ideas of underreporting your crypto income on your tax return immediately because such actions could lead to severe consequences and legal trouble. It is highly recommended to comply with the tax regulations and accurately report crypto income to avoid any potential repercussions.

Made a Loss? Here’s How to Use it to Your Advantage

Crypto losses are a complicated piece of the Danish crypto tax puzzle. Generally, you’re not supposed to write off any of your losses against your gains, but there are certain circumstances under which you can do that.

If you have bought or sold the same assets over a financial year while simultaneously making gains or losses, you can write these losses off against your gains, given that you haven’t purchased new assets in that span.

For instance, if you have bought 20 ETH tokens and then sold 5 tokens twice within the financial year, making a gain in one and a loss in another. Then you can offset your loss against these gains. However, if you sold 5 tokens twice and bought 3 new tokens after that, then you cannot write off your losses.

Also, it’s important to note that you cannot offset the losses from one token against the gains made from another token.

Lost or Stolen Crypto

Based on previous rulings by the Danish Tax Agency, the loss of access to cryptocurrency does not constitute a disposal event, and therefore, cannot be claimed as a tax deduction. However, if you can substantiate the permanent loss of access to your cryptocurrency, you may request a binding ruling and write them off as a special case.

However, you might need assistance from tax experts and legal consultants to make the binding case strong enough to be considered by the tax authorities.

Tax Credits/Incentives Denmark

Although there is no dedicated tax break program in Denmark, there are some existing laws that allow you to reduce your tax bill to some extent.

1. Personal Tax Allowance: Individuals taxpayers in Denmark have a personal tax-free personal allowance of 46,700 DKK that they can deduct from their gains. Moreover, if your spouse has some unused personal tax-free allowance, they can transfer it to you. 

2. HODLing Crypto for Non-Speculative Purposes: Note that one only pays taxes on gains if they arise from speculative assets, and there are certain scenarios where crypto investments aren’t considered speculative by the authorities. If you want to know whether or not your investments fall under this category, then you can request a personal assessment of your assets from the Danish Tax Agency.

3. Gifting Crypto: According to a previous ruling dated 13 Feb 2019 which sets the precedent for crypto gifts to be completely tax-free if they’re non-speculative and low value, you can gift up to DKK 69,500 for 2022 or DKK 68,700 for 2021 tax-free, but it will only be considered tax-free when you gift the assets to the following people:

• Offsprings, step-children and their kids
• Parents 
• The surviving spouse of a deceased child or a stepchild
• Foster children who have lived with you for more than 5 years
• Step Parents and grandchildren
• Someone you’re living with for more than 2 years

4. Donating Crypto: Donations to charities that are approved by the tax agency may qualify for a tax deduction. Individuals can deduct upto DKK 17,000 worth of donations, as the deduction rate is set at 26%. Note that for a donation to be deductible, the charity must report your donations to the tax authority along with your civil registration number (CPR-nr).

Some Tax-Free Crypto Transactions

Although most crypto transactions attract tax liabilities in Denmark, the Danish tax authority considers some transactions to be tax-free:

• Buying crypto assets with Danish krone or any other fiat currency
• HODLing crypto
• Transferring crypto between your wallets
• Donating crypto 

Taxed Crypto Transactions

All cryptocurrency transactions that involve exchanging crypto for fiat currency or other assets, or that generate income, are considered taxable in Denmark. Listed below are some of these transactions:

• Buying and selling cryptocurrencies for speculative purposes is considered taxable in Denmark. This includes both short-term and long-term trades.

• Income generated from cryptocurrency mining is also considered taxable. If you receive cryptocurrency as a reward for mining, the value of the cryptocurrency received will be taxed as income.

• Staking cryptocurrency involves holding cryptocurrency in a wallet to support the network and earn rewards. Therefore, staking is also a taxable transaction in Denmark.

• If you receive cryptocurrency as payment for goods or services, the value of the cryptocurrency received will be taxed as income.

• If you receive cryptocurrency as a donation, the value of the cryptocurrency received will be taxed as income.

Mining Crypto in Denmark? Here’s How the Taxes Work

According to a recent notification published by the Danish tax authorities, crypto mining is considered a hobby business from a tax perspective, and the tokens received as mining rewards are subject to income tax.

Upon receipt, these tokens will be subject to income tax based on their fair market value at that time. Apart from that, any subsequent disposition will also attract income tax liabilities.

Understanding Crypto Staking Tax in Denmark

Staking rewards are considered to be personal income from a tax perspective and hence attract income tax. However, according to a recent notification issued by the tax authority, your gains are only taxed when you can finally transact with them. This is particularly useful for those involved in ETH staking, because users receive ETH staking regards much later.

Note that any gains you make by selling the staking rewards later will be taxed as capital gains.

How are Airdrops and Forks Taxed in Denmark?

Forks

According to the latest ruling by the tax authorities, soft forks are non-taxable since no new tokens are created, while tokens received from hard forks attract income tax liabilities at the time of disposal. However, it’s important to note that these tokens inherit a cost basis equal to 0 DKK. 

Airdrops

The tax authorities are yet to issue clear guidelines on the taxation of airdrops. However, we can infer from the existing guidelines that the tax treatment of tokens received as airdrops will be similar to that of gifts.

Gifting or Donating Crypto in <Country>? Here’s Some Good News For You

Based on the latest ruling published by the Skattestyrelsen, crypto gifts can be tax exempt if they are considered speculative by the tax authorities.

In Denmark, gifts are typically tax-free up to a maximum threshold of 69,500 DKK. However, this exemption is applicable only if you’re gifting your assets to your child, stepchild, grandchild, parent, stepparent, or an individual with whom you’re sharing your living space with for at least 2 years.

In cases where the value of the gift exceeds this threshold, a gift tax rate of 15% will be levied.

Crypto donations are tax deductible in Denmark as long as you’re donating to a registered charity. When you donate to a registered charity, you automatically receive your tax deduction because the charity will report the donation to the tax authorities against your civil registration number. The maximum allowable deduction was 17,200 DKK in 2022.

What About Crypto Margin Trades, Futures, and CFDs?

In a decision dated 3rd April 2018, tax authorities clarified that margin trades are to be treated as future contracts since they are speculative in nature based on the guidelines covered in section 29(1) of the capital gains act.

Note that the gains and losses incurred will be taxed separately for every contract, and the capital gains and losses will be calculated on a rolling basis. Therefore, regardless of whether you realise your gains or losses at the end of the tax year, you will have to report these gains or losses in the contract and pay your taxes.

In Denmark, only losses within the same investment class can offset gains. Losses from one type of investment cannot be used to offset gains from another type. For example, losses from margin trades cannot be used to offset gains from CFDs. To qualify as a write-off pair, the losses and gains must belong to the same investment class.

Participating in ICOs? Here’s What You Owe to the Skattestyrelsen

Based on a previous ruling, the tax authorities have specified that any new tokens received through ICOs should be treated as assets. This means that ICO gains are subject to taxation under the State Tax Act.

The State Tax Act states that speculative assets must be treated as taxable income. Therefore, individuals are required to report their ICO gains/losses and pay income tax on the gains, exempt from labour market contributions, while any losses incurred can be deducted.

ICO taxation is similar to that of crypto-to-crypto trades, where one exchanges tokens, and the valuation is based on local currency.

NFT and DAO Taxes Denmark

NFTs

In Denmark, NFTs are generally taxed in the same way as other cryptocurrencies, such as Bitcoin, altcoins, and stablecoins. The tax treatment of NFTs depends on the purpose for which they are acquired and whether they are held as an investment or used for business purposes.

If you acquire NFTs as an investment, any profits made from the sale or exchange of the NFTs are considered taxable and subject to capital gains tax. 

If you use NFTs for business purposes, such as in the creation and sale of digital art, the income generated from the sale of the NFTs is considered taxable and subject to income tax.

DAOs

The Danish tax authority is yet to release concrete guidelines on the taxation of income from DAOs. We are constantly on the lookout for new guidelines on the same and will add all relevant details here as soon as new guidelines hit our radar.

Meanwhile, we suggest seeking guidance from experienced tax professionals on how such transactions are taxed to avoid legal complications in the future.

Decoding Defi taxes in Denmark

The Danish tax authorities have not yet provided clear guidelines on how to tax income from Defi transactions. However, we can infer from existing policies and taxation trends that the tax treatment of Defi transactions will likely resemble that of Bitcoin, altcoins, NFTs, and stablecoins.

Existing guidelines clarify the taxation of income from crypto staking. They classify staking rewards as personal income, subjecting them to income tax. However, there is a condition: staking income is taxable only when you receive the tokens and can dispose of them as part of your portfolio. If you do not have the rewards in your wallet or portfolio, no taxes need to be paid on them.

When to Report Crypto Taxes in Denmark?

In Denmark, the tax year runs from 1st January to 31st December and taxpayers must pay their taxes by 1st of May every year. Individuals with non-Danish income, the deadline extends to 1st of July. Note that starting mid-March 2023, individuals can use the online portal, E-tax, to fulfil their tax reporting requirements.

How to File Crypto Taxes in Denmark?

You can report your crypto taxes through Skattestyrelsen’s E-tax portal from the comfort of your home. Here’s a stepwise tutorial on how to do that:

Step 1- Log in to the E-Tax Portal

Go to the E-tax portal and log in with your Civil Registration Number and E-tax password. If you don't have it you can apply for one on the portal.

Step 2- Select the Tax Return

On the main page of the E-tax portal, select "Indkomst" (Income) and then "Forskudsopgørelse og årsopgørelse" (Advance assessment and annual statement). Then, select the year for which you want to file the tax return.

Step 3- Check your Pre-Filled Information

The E-tax portal will pre-fill your information from previous years, such as your name, address, and personal information. Check to make sure that this information is correct.

Step 4- Report your Crypto Income 

On the "Indkomst" (Income) page, you will see a section for "Andre indtægter og fradrag" (Other income and deductions). Here, you can report your crypto income by selecting "Anden idioms" (Other income) and entering the amount of your crypto income.

You need to report income from multiple sources in different sections. Here’s a section-wise breakdown:

• Gains from Bitcoin & altcoins-Box 20.
• Losses from Bitcoin & altcoins-Box 58.
• Gains from stablecoins-Box 346
• Losses from stablecoins-Box 85
• Airdrops-Box 20
• Staking rewards (but only at the point you receive them in your portfolio)-Box 20
• Mining rewards-Box 20
• Other income as interest from crypto-Box 20.

Step 5- Report your Crypto Capital Gains

If you have made any capital gains from the sale of cryptocurrencies, you will need to report these on the "Kapitalindkomst" (Capital income) page. Select "Aktier mv." (Shares, etc.) and then "Aktieavance og anden kapitalindkomst" (Share gains and other capital income). Enter the amount of capital gains from the sale of cryptocurrencies.

Step 6- Check your Tax Calculation

The E-tax portal will calculate your tax liability after reporting your crypto income and capital gains. Check to make sure that the calculation is correct.

Step 7- Submit your Tax Return

If you agree with the tax calculation, submit your tax return by clicking "Godkend" (Approve). You will receive a receipt and confirmation of your submission.

Note that these steps are to be followed after you’ve completed all your tax calculations so that you can accurately co-relate all the tax calculations done by the E-tax software and identify any discrepancies to avoid overpaying. 

If you find tax calculations intimidating(like most investors do), you can use online tax software like  that can easily generate legally compliant tax reports in a matter of minutes by auto-fetching all your details from across your investment pool.

What Records Will the Skattestyrelsen Want?

The Danish Tax Agency has conducted audits of Danish taxpayers' cryptocurrency transactions in the past. Therefore, it is crucial to keep accurate records of your cryptocurrency transactions to calculate profits and losses for reporting in your annual tax return and case of an audit.

Therefore it’s advisable to keep the following records:

• Detailed records of buy/sell transactions
• E-mails with details of the trade sent by the exchanges
• Details of your service providers(exchanges, wallets, blockchains)
• Public keys of your wallets
• Details on your existing portfolio
• Bank statements to correlate with your buy/sell transactions
• Receipts to prove expenses
• Additional documentation of your purchases and sales is required to verify ownership.

How to File Crypto Taxes Using Kryptos?

Now that you’re aware of how your crypto transactions are taxed and what forms you need to fill out to complete your tax report, here’s a step-wise breakdown of how Kryptos can make this task easier for you:

1. Visit Kryptos.io and sign up using your email or Google/Apple Account
2. Choose your country, currency, time zone, and accounting method 
3. Import all your transactions from wallets and crypto exchanges
4. Choose your preferred report and click on the generate report option on the left side of your screen and let Kryptos do all the accounting.
5. Once your Tax report is ready, you can download it in PDF format.

If you still need clarification regarding the integrations or generating your tax reports, you refer to our video guide here.

How to Avoid Tax on Cryptocurrency in Denmark?

There’s no way to legally avoid paying crypto taxes in Denmark. However, there are some strategies you can use to reduce your tax bill. Here are some of the most commonly used ones.

1. HODL: If you are a long-term investor, you can hold your cryptocurrency for more than three years before selling it. In Denmark, capital gains from the sale of cryptocurrency held for more than three years are tax-exempt. So, if you hold your cryptocurrency for the long term, you can avoid paying taxes on capital gains.

2. Use Tax Deductions: In Denmark, you can deduct expenses related to your cryptocurrency transactions, such as transaction fees and exchange fees. Keeping track of these expenses can reduce your taxable income.

3. Take advantage of losses: If you sell cryptocurrency at a loss, you can use that loss to offset capital gains from other investments. This can reduce your tax liability.

You can refer to the section titled “Tax Credits/Incentives” for more details on this.

Frequently Asked Questions(FAQs)

1. Is Crypto legal in Denmark?

Yes, cryptocurrencies are legal in Denmark. The Danish Financial Supervisory Authority (FSA) has issued guidelines on how cryptocurrencies are regulated and treated under Danish law. Cryptocurrency exchanges and trading platforms are required to register with the FSA and comply with anti-money laundering (AML) and know-your-customer (KYC) regulations. Additionally, income and gains from cryptocurrency investments are subject to taxation.

2. How is crypto taxed in Denmark?

In Denmark, cryptocurrencies are treated as assets for tax purposes. The tax treatment of cryptocurrencies depends on the purpose for which they are acquired and whether they are held as an investment or used for business purposes.

If you acquire cryptocurrencies as an investment, any profits made from the sale or exchange of the cryptocurrencies are considered taxable income and subject to capital gains tax. The capital gains tax rate in Denmark varies depending on the size of the gain, the duration of the investment, and other factors.

While if you use cryptocurrencies for business purposes, such as in the creation and sale of digital products or services, the income generated from the sale of the cryptocurrencies is considered taxable income and subject to income tax. You may also be able to deduct expenses related to the creation and sale of digital products or services, such as software or platform fees, to reduce your taxable income.

3. When do you need to report your crypto taxes?

The Danish tax year spans from January 1st to December 31st annually. To file and submit your tax return, you have until May 1st each year (or July 1st if you have non-Danish income). For the 2022 financial year, the reporting deadline is May 1st, 2023, and the E-tax online portal for tax reporting opens in mid-March 2023.

4. What do assets with speculative purposes mean?

Any assets that you buy, hold or collect in an attempt to make a profit at some later date can be considered speculative assets. The Danish Tax Agency regards crypto assets as speculative investments, which means that any gains or losses are subject to taxation.

‍

All content on Kryptos serves general informational purposes only. It's not intended to replace any professional advice from licensed accountants, attorneys, or certified financial and tax professionals. The information is completed to the best of our knowledge and we at Kryptos do not claim either correctness or accuracy of the same. Before taking any tax position / stance, you should always consider seeking independent legal, financial, taxation or other advice from the professionals. Kryptos is not liable for any loss caused from the use of, or by placing reliance on, the information on this website. Kryptos disclaims any responsibility for the accuracy or adequacy of any positions taken by you in your tax returns. Thank you for being part of our community, and we're excited to continue guiding you on your crypto journey!

Do crypto taxes intimidate you as a new crypto investor? Don’t worry, you're not alone. Despite facing some of the highest taxes in the world, millions of Indian investors continue to invest in Crypto. But with the Income Tax Department's (ITD) increasing scrutiny of Bitcoin and other cryptocurrencies, it's essential to understand how India's crypto tax laws work. That's why we've put together the ultimate crypto tax guide for 2023 to help you navigate the world of crypto taxes and stay compliant with the ITD. 

From understanding the tax implications of buying and selling cryptocurrencies to filing your tax returns, our guide covers everything you need to know about crypto taxation in India. So, sit back, relax, and let us guide you through the ins and outs of crypto tax in India.

‍

Key Information

‍

‍

Latest Updates/Guidelines

15th June, 2023 - Updated to accommodate ICO, Gifts and Donation Taxes

15th June, 2023 - Updated to accommodate DAO taxes

15th June, 2023 - Updated to accommodate the new circular on TDS

‍

How are Cryptocurrencies Taxed in India?

‍

The Indian government did not have a definitive stance on classifying Crypto or imposing taxes on them before 2022. However, during the 2022 Budget session, Finance Minister Nirmala Sitaraman introduced Section 2(47A) into the Income Tax Act, which defines Virtual Digital Assets (VDAs) in detail and covers all types of crypto assets, including cryptocurrencies, NFTs, tokens, and others. You have to pay a 30% (plus applicable surcharge and 4% cess) tax rate on any profits incurred from crypto transactions.

According to the ITD, if you have disposed of Crypto (sold Crypto or traded it for another crypto) or earned Crypto (received Crypto through airdrop or staking rewards), you must pay crypto taxes in India. Unlike other asset classes, there is no tax benefit to holding Crypto for the long term. You must pay taxes on crypto income regardless of how long you hold it.

Moreover, you may now have to face an additional Tax at Source (TDS) under section 194S of Section 2(47A) on transferring crypto assets on or after July 1, 2022.

‍

Example:

Consider the following transactions:

02/01/22 - Ravi bought 3 BTC for ₹25,00,000 each

12/02/22 - Ravi bought 2 ETH for ₹1,50,000 each

15/05/22 - Ravi sells 3 BTC for ₹30,00,000 each

23/06/22 - Ravi sells 2 ETH for ₹2,00,000 each

Now as seen in the above ledger of transactions, two disposals were made. So let’s look at the gains incurred from each disposal individually.

‍

1st Disposal

3 BTC sold for ₹30,00,000 each

These BTC tokens were acquired for ₹25,00,000 each.

Cost Basis = ₹25,00,000

Disposal Amount = ₹30,00,000

Capital gain/loss = Disposal Amount - Cost Basis = ₹30,00,000 - ₹25,00,000 = ₹5,00,000(for 1 BTC token)

Total Gain from 3 BTC tokens = 3*5,00,000 = ₹15,00,000

‍

2nd Disposal

2 ETH sold for ₹2,00,000 each

These tokens were acquired for ₹1,50,000 each.

Cost Basis = ₹1,50,000

Disposal Amount = ₹2,00,000

Capital Gain/loss = Disposal Amount - Cost Basis = ₹2,00,000 - ₹1,50,000 = ₹50,000(for 1 ETH)

Total Gain for 2 ETH tokens = 2*50,000 = ₹1,00,000

Collective gain from both disposals = ₹15,00,000 + ₹1,00,000 = ₹16,00,000

Now these gains will be taxed at a flat 30% tax rate, not including the cess and surcharge.

‍

Can the ITD track crypto?

‍

If you are considering avoiding reporting some of your transactions on your tax return to the Income Tax Department (ITD), the answer is a resounding no. The ITD has complete access to your records and can easily cross-check your tax report with their database to identify discrepancies.

In India, the ITD keeps track of crypto-related transactions, including the number of crypto assets held in wallets and exchanges, by implementing Know-Your-Customer (KYC) policies. Local exchanges in India are also required to comply with this policy.

Additionally, various global initiatives require private companies to share their customers' data with tax authorities worldwide to combat criminal activities such as money laundering. Using blockchain analytics tools, tax authorities can trace the movement of crypto assets between exchanges and wallets, providing insight into Indian taxpayers' private crypto holdings.

‍

Capital Gain Tax

‍

The ITD did not mention any term like "capital gain tax" in their official notification. Instead, they have implemented a flat income tax rate for all retail investors, traders, or individuals who transfer crypto assets in a particular financial year without differentiating between short-term and long-term gains. If you engage in any of the following transactions, you may be subject to a flat tax rate.

• Selling Crypto for INR or another fiat currency.
• Exchanging Crypto for other cryptocurrencies, including stablecoins
• Using Crypto to purchase goods and services
• ‍

Crypto Tax Rate India

‍

You must pay a 30% (plus applicable surcharge and 4% cess) tax rate on any profits made from the above-mentioned transactions. The 30% crypto tax rate will be the same irrespective of the nature of income i.e., it does not matter if it is an investment or business income and is irrespective of the holding period.

‍

How to calculate crypto gains and losses?

‍

While you'll pay a flat 30% tax on your profits, determining your cost basis is the first step in figuring out how much you owe.

To calculate capital gains, you'll need to know the sales price (proceeds) and purchase price (cost basis) of the Crypto you sold or transferred. For instance, if you sell ETH for ₹ 2,00,000, your sales price or proceeds is ₹ 2,00,000.

The formula for calculating capital gains is straightforward: selling price minus purchase price equals capital gains. 

However, determining your purchase price can be more complicated if you bought the cryptocurrency multiple times. In this case, you'll need to determine which units were sold first. In India, you can use the First-in First-out (FIFO) accounting method as it is advised by ITD, which means that the earliest acquired units are sold first.

Example 1

Let's say you invested INR 80,000 in Crypto in FY2023 and sold the Crypto for INR 1,20,000, resulting in a profit of INR 40,000. Now as an investor, you’re subject to a flat 30% crypto tax, you must pay INR 12,000 (plus surcharge and cess) as a tax on the crypto income for that fiscal year.

Please note: If you buy or sell Crypto, you'll only be taxed on the income or profit you make during the transaction. So if you hold onto your Crypto and its value goes up, you will only have to pay taxes on those unrealized gains once you decide to sell it.

Example 2

Transaction 1: You bought Bitcoin for INR 3 Lakhs and sold it for INR 4 Lakhs.

Transaction 2: You bought Litecoin for INR 1.5 Lakhs and sold it for INR 1 Lakh.

After calculating your gains and losses from both transactions, your net income from the above transactions is INR 1 Lakhs, the profit earned from the Bitcoin transaction.

For FY 2022-23, the applicable tax rate for profit is 30%. So, you'll owe INR 30,000 (plus surcharge and cess) as a tax on your crypto profit.

Crypto Losses

Crypto losses aren't tax-deductible in India according to clause 115BBH of Section 2(47A which states that losses incurred from the transfer or sale of crypto assets cannot be used to offset any other income.

Let's say you incur a net loss of Rs 2 Lacs from selling Crypto during the year, your tax liability for crypto transfer will be zero for the current year. 

However, this loss of Rs 2 Lacs cannot be carried forward to the next financial year and used to offset future income. Essentially, the loss of Rs 2 Lacs will not benefit you in future tax periods when generating taxable income from the crypto business.

Lost or Stolen Crypto India

While the ITD has not offered clear guidance on lost or stolen crypto assets, we have analyzed past judgments on issues of losses or theft of other assets. Our analysis shows that you are not required to pay taxes on lost or stolen crypto assets.

However, due to the ITD's strict stance on offsetting crypto losses against gains, you cannot offset losses from lost or stolen crypto assets against any gains.

Crypto Cost Basis Method India

The examples we’ve used so far to explain capital gains and crypto income calculations are fairly simplistic and do not represent real-world transactions. Transactions in the real world involve multiple assets of the same kind acquired on different dates and prices, making the overall process more complicated.

This highlights the need for a well-defined method to calculate crypto gains and losses, which are called accounting methods. Each country specifies a convenient accounting method to maintain homogeneity across all capital gains calculations.

The ITD in India recognizes the FIFO (First-In-First-Out) accounting method for cost-basis calculations. The FIFO accounting method states that the first asset you buy is the first asset you sell.

This can be better understood with an example:

Consider the following set of transactions-

10/01/22 - Sahil buys 1 BTC for ₹20,00,000

13/03/22 - Sahil buys 1 BTC for ₹22,00,000

17/05/22 - Sahil buys 1 BTC for ₹25,00,000

23/06/22 - Sahil sells 1 BTC for ₹30,00,000

If we consider the FIFO accounting method to calculate the cost basis for this disposal,

The disposed of BTC was acquired on 10/01/22 for ₹20,00,000

Cost Basis = ₹20,00,000

Disposal Amount = ₹30,00,000

Capital Gain/loss = Disposal Amount - Cost Basis = ₹30,00,000 - ₹20,00,000 = ₹10,00,000

Crypto Tax Breaks India

Who wouldn't want to find ways to save some extra money? Well, we certainly do, and that's why we've got some practical strategies to help you avoid paying taxes on crypto investments in India.

1. Indirect exposure to Crypto

Gaining exposure to a particular digital currency through indirect means can be an effective way to save on crypto tax. Global investment platforms have recently launched portfolios that allow Indian crypto investors to obtain exposure to a digital currency without buying or investing in it.

Investing in a fund that tracks the price of a particular crypto, like the Grayscale Bitcoin Trust, can provide indirect exposure to Bitcoin without directly buying it. This can help save on taxes and provide diversification.

2. Using stablecoins for gains

Stablecoins pegged to a different currency, are less volatile than cryptocurrencies like Bitcoin or Ethereum. Using stablecoins can help secure investments in the long run and save on taxes in India.

3. Taking advantage of a low-income year 

The taxation rate on profits from crypto sales is calculated based on taxable income. Selling crypto assets in a low-income year can result in a lower income tax rate, and waiting for 12 months can further reduce the tax rate for crypto assets as per long-term capital gain rates.

Let's say you expect to earn less than usual this year due to a job loss or sabbatical. Selling crypto assets in a low-income year can result in a lower tax rate, and waiting for more than a year to sell can further reduce the tax rate for crypto assets.

4. Tax-loss harvesting 

Selling crypto assets at a loss intentionally to claim tax savings can be an effective strategy. This way, the 30% tax only applies to the gains incurred by the crypto assets.

Let's say you bought 1 BTC for INR 10,000, that is now worth INR 8,000. Instead of holding onto it, you can sell it to claim a tax loss of INR 2,000 and offset gains from other investments.

However, it’s still unclear whether tax-loss harvesting works in India with the latest rules and regulations passed by the ITD. We suggest seeking help from an experienced tax professional to avoid complications.

What is 1% TDS On Crypto Assets In India?

According to section 194S of the Income Tax Act 1961, a 1% TDS is levied on any consideration paid for transferring Virtual Digital Assets. Essentially, when you sell Crypto on a crypto exchange, the exchange must deduct and withhold 1% of the transaction value as TDS, which is then paid to the government. However, as per Income Tax regulations, TDS may not be applicable if your transactions (both buy and sell) are below ₹10,000. 

For instance, if you sell Bitcoin worth ₹20,000, the 1% TDS would be deducted from the sale amount, which amounts to approximately ₹200 in this example. The crypto exchange will directly deduct this amount from your balance. 

It's important to note that in the case of crypto-to-crypto trades, TDS will be applied to both the buyer and seller at a rate of 1%.

Income Tax India

In addition to taxes on profits, you may have to pay income tax if you engage in the following activities:

• Receiving Crypto as a gift
• Mining coins
• Receiving payment in Crypto
• Earning staking rewards
• Receiving airdrops

Income Tax Rate India

In India, taxpayers can choose between the old tax regime and the new regime, which has lower tax rates. However, some exemptions and deductions available in the old regime are not applicable in the new regime. 

Assuming you choose the new tax regime, you will be taxed on your total income at rates ranging from 0% to 30%. India has a progressive tax rate system, meaning different tax rates apply to different tax slabs. You need to calculate the applicable tax rate only for the amount that falls into each tax slab, rather than applying the same rate to your entire income.

For the Assessment Year 2022-23, the personal income tax rates for the new tax regime are as follows:

‍

 The tax rates from the previous tax regime are as follows:

‍

‍

How to Calculate Crypto Income

Calculating your crypto income is a pretty straightforward process; all you need to do is add all your gains together, giving you your taxable income base.

Tax-Free Crypto Transactions

Wondering if there are non-taxable activities in India? Yes, there are a few instances where you don’t have to pay any taxes in India. Let’s have a look at these events. 

1. Holding onto your Crypto for an extended time (HODLing).
2. Transferring Crypto between your wallets.
3. Receiving Crypto as a gift from friends and relatives, with a maximum limit of ₹50,000.
4. Receiving Crypto as a gift of any amount from close family members.

Taxed Crypto Transactions

The following activities are taxable events in India. You have to pay taxes if you get involved in any of these activities.

• Selling Crypto for INR or any other fiat currency
• Using Crypto as payment
• Mining or staking crypto
• Receiving airdropped tokens
• Getting paid in Crypto
• Selling Crypto for INR or another fiat currency.
• Exchanging Crypto for another crypto, including stablecoins

Tax on Crypto Mining India

The ITD still needs to specify how they will tax rewards received from crypto mining. Neither have there been any prior statements or guidance on this matter. This creates uncertainty on how the Indian government or ITD intends to tax crypto mining rewards.

Until official guidance is provided, it is reasonable to anticipate that mining rewards in India will be taxed as regular income upon receipt. This implies being subject to progressive income tax rates instead of a flat 30% rate. Moreover, if you later sell, swap, or use the mined coins and generate a profit, you may be liable for a 30% tax on that profit.

Tax on Staking Crypto India 

The ITD has not provided specific guidelines on taxing staking rewards in India. However, assuming that gains from staking in a Proof-of-Stake (POS) consensus mechanism will be treated as income and the received assets taxed upon receipt is reasonable. 

These assets will be taxed based on their fair market value (FMV) at the time of receipt. Additionally, a 30% tax may apply when you choose to dispose of these tokens in the future.

Crypto margin trading, futures, and CFDs

The ITD has not provided any definitive instructions on the taxation of crypto margin trading, futures, and CFDs. We will revise and supplement this guide as soon as the ITD releases an official guideline.

NFT taxes India

Let's delve into the tax implications of NFTs under the new tax laws. NFTs, categorized as Virtual Digital Assets, are subject to taxation in India. If you profit from the sale of an NFT, you will be liable for taxes, surcharges, and cess. Minting NFTs is not currently specified as a taxable event by the ITD. 

However, if you sell or exchange an NFT for fiat currency or cryptocurrency, a flat 30% tax may apply based on taxation models similar to India.

Crypto Gifts and Donation Taxes

Gifting Crypto in India is a taxable event. However, there are a few exceptions:

1. Receiving gifts worth less than ₹50,000
2. Gifts from immediate family members are tax-free in India
3. Tokens received as a wedding gift or as inheritance or as part of a will are tax-free
4. Crypto Donations above ₹50,000 in a financial year are subject to income tax

To qualify for a tax deduction on donations to charitable institutions in India, it is necessary to donate through official banking channels or in cash up to RS2,000. Since cryptocurrencies are not recognized as legal tender in India, any donations made in Crypto will not be eligible for tax deductions. However, your generous contribution in the form of cryptocurrency may be considered as the disposal of an asset, potentially subjecting any perceived profits to a 30% tax.

DeFi crypto taxes India

The ITD has yet to issue any detailed guidance on DeFi transactions. Therefore, we must rely on the existing provisions of the Income Tax Act for direction. You may be taxed at your Tax Rate for the following DeFi transactions:

• Earning new liquidity mining tokens, governance, or reward tokens
• Referral rewards
• Play to earn income
• Browse to earn platforms such as Permission.io or Brave

Even though you have paid tax upon receipt, it is essential to remember that you may still be liable for a 30% tax on any profits made if you sell, swap, or spend those tokens later.

ICO Taxes

The ITD is yet to release any guidance on how income from ICOs is taxed. ICOs are special events that allow investors to own project native tokens before the project's release. They are similar to IPOs; you can trade mainstream tokens like BTC and ETH to receive project-native tokens in exchange. Since all income is taxed under the umbrella tax rate of 30%, income from ICOs will most likely be taxed under the same rate.

However, we suggest seeking guidance from an experienced tax professional regarding the taxation of such tokens to avoid legal complications in the future.

DAO Taxes

The taxation of income from DAOs in India currently needs more clear guidance. We are actively monitoring for any new guidelines on this matter. We will update this information as soon as relevant details emerge to provide you with the latest insights.

How are airdrops and forks taxed in India?

Regarding hard forks, receiving new tokens resulting from a fork will be subjected to Income Tax at an individual rate. The tax rate will be based on the fair market value of the tokens in INR at the time of receipt. Additionally, if you later decide to sell, swap, or spend your tokens, you'll have to pay a 30% tax on any profit made from the transaction.

On the other hand, airdrops are considered a gift, and you may be able to claim tax exemption if the total value of airdrops and gifts is up to INR 50,000 in a year. However, if the value exceeds INR 50,000, you'll have to pay Income Tax at your rate based on the fair market value of the token received at the time of receipt.

When to report crypto taxes in India?

There are two significant periods in India when filing your crypto taxes. The first is the financial year (FY), which aligns with the fiscal year that runs from April 1 to March 31 of the following year. The second is the assessment year (AY), the period during which you're required to report and pay your taxes for the previous financial year.

For example, the most recent financial year took place between April 1, 2021, and March 31, 2022, commonly referred to as FY 2021-22. Similarly, the current assessment year for the previous financial year is often known as AY 2022-23.

If you're reporting your crypto taxes as part of the AY 2022-23, the tax deadline is July 31st, 2023. However, if you're under a tax audit for the previous FY, the deadline is pushed back to October 31st, 2023. It's crucial to keep track of these deadlines and file your taxes on time to avoid penalties and interest charges.

How to file crypto taxes in India?

Filing crypto taxes in India can be a complex process, especially if you are unfamiliar with tax laws and regulations. 

In India, you have two options to file crypto tax - ITR-2 for reporting capital gain tax and ITR-3 for reporting business income tax. So we’re providing you with a detailed process to report crypto taxes on both options.

Step 1: Gather all the necessary documents related to your crypto transactions, such as the purchase and sale receipts, crypto wallet details, and other transaction records. Also, calculate all your crypto gains and incomes.

Step 2: In ITR-2, under the ‘Capital Gains’ section, enter the details of your crypto transactions, including the purchase and sale date, the type of Crypto, the quantity, the purchase price, and the sale price. And finally, enter capital gains in the appropriate fields.

Step 3: If you are reporting your crypto income as business income, use ITR-3, and enter the details of your business income in the ‘Profit and Loss’ section. Ensure to include all the expenses related to your crypto transactions, such as exchange fees, transaction fees, and other expenses.

Step 4: Once you have entered all the necessary information, calculate your tax liability and pay any taxes due. You can pay your taxes online through the Income Tax Department’s website or by visiting your bank branch.

Step 5: Finally, file your income tax return online through the Income Tax Department’s website. Save a copy of your tax return and all the supporting documents for future reference.

It is always recommended to seek professional help from a tax consultant or a CA or use an online crypto tax portal like Kryptos if you are unsure about any steps in filing your crypto taxes.

How to File Crypto Taxes Using Kryptos?

Now that you’re aware of how your crypto transactions are taxed and what forms you need to fill out to complete your tax report, here’s a step-wise breakdown of how Kryptos can make this task easier for you:

1. Visit Kryptos and sign up using your email or Google/Apple Account.
2. Choose your country, currency, time zone, and accounting method. 
3. Import all your transactions from wallets and crypto exchanges.
4. Choose your preferred report, click the generate report option on the left side of your screen, and let Kryptos do all the accounting.
5. Once your Tax report is ready, you can download it in PDF format.

If you need clarification regarding the integrations or generating your tax reports, you refer to our video guide here.

What crypto records will the ITD want?

The ITD, like many tax authorities worldwide, requires you to maintain detailed records from past years. You are expected to keep the following records in India:

• Date and time of crypto transactions
• Type of transaction (trade, staking, airdrop, etc.)
• The fair market value of your assets at the time of disposal
• Specific circumstances of the transaction and the parties involved in it.

How to Avoid Crypto Taxes in India 

There is no legal way to avoid crypto taxes entirely, but there are strategies you can employ to lower your tax bill:

1. Indirect exposure to Crypto

One effective strategy to save on crypto taxes in India is indirectly gaining exposure to digital currencies. This can be achieved through global investment platforms that offer portfolios tracking the price of specific cryptocurrencies. 

2. Using stablecoins for gains

Stablecoins, which are cryptocurrencies pegged to the value of a different currency, offer a less volatile alternative to cryptocurrencies like Bitcoin or Ethereum. By using stablecoins for investments, individuals can mitigate risks associated with price fluctuations and achieve more stability in the long run. Additionally, stablecoins can help save on taxes in India as they are often treated differently from other cryptocurrencies regarding tax regulations.

3. Taking advantage of a low-income year 

The tax rate on crypto profits in India is calculated based on an individual's taxable income. Therefore, selling crypto assets in a year with a lower income can result in a lower tax rate. Furthermore, holding the assets for more than 12 months can qualify for long-term capital gain rates, which offer even more favourable tax treatment.

4. Tax-loss harvesting

Tax-loss harvesting involves intentionally selling crypto assets at a loss to offset gains from other investments and claim tax savings. Individuals can deduct losses from their taxable income by realizing losses on certain crypto assets, effectively reducing their overall tax burden. 

FAQs

1. Is Crypto legal in India?

Yes, Crypto is legal in India and is considered a "Virtual Digital Asset (VAD)" rather than a currency by the IITD. As such, Crypto is subject to taxation following specific guidelines issued by ITD, which include different tax rules and regulations.

‍

2. How to Calculate and File Your Crypto Taxes in India Using Kryptos?

Filing your crypto taxes alone can be difficult, and it's important to ensure you don't miss reporting any transactions that could lead to legal trouble. Kryptos offers a smart software-based solution for crypto taxation. It can quickly generate a legally compliant tax report by auto-fetching your transactions. This means you can relax on your couch while Kryptos takes care of everything.

‍

3. How is receiving Crypto as a gift tax in India?

To determine whether you need to pay tax on gifted Crypto, two primary factors come into play: the value of the gift and your relationship with the person who gave it to you. 

Any gifts received in the same tax year valued below ₹ 50,000 are tax-free in India. However, gifts valued above this limit are taxed based on your ordinary income tax rates, up to 30%. But, it's unclear whether crypto gifts are taxed as ordinary income or according to the 30% flat income tax rate.

A gift from a direct family member, like your parents or grandparents, is considered tax-free, regardless of the value. Although there is no specific mention of crypto gifts by the ITD guidelines, it's reasonable to assume that the tax-free gift law applies to Crypto as well, as it stands today.

‍

4. How is Staking Taxed in India?

The ITD has not provided any guidelines on the tax consequences of staking rewards. However, suppose you are engaging in staking as a participant in a PoS consensus mechanism. In that case, you will probably be required to pay Income Tax at your tax rate on the fair market value of the received tokens in INR on the day of receipt. Furthermore, you'll be accountable for a 30% tax on any earnings realized when you eventually sell, swap, or use your staking rewards.

‍

All content on Kryptos serves general informational purposes only. It's not intended to replace any professional advice from licensed accountants, attorneys, or certified financial and tax professionals. The information is completed to the best of our knowledge and we at Kryptos do not claim either correctness or accuracy of the same. Before taking any tax position / stance, you should always consider seeking independent legal, financial, taxation or other advice from the professionals. Kryptos is not liable for any loss caused from the use of, or by placing reliance on, the information on this website. Kryptos disclaims any responsibility for the accuracy or adequacy of any positions taken by you in your tax returns. Thank you for being part of our community, and we're excited to continue guiding you on your crypto journey!

Whether you invest in tokens, stake them, mine them, or use them as a currency, the DGFiP (Direction Générale des Finances Publiques) would require some answers from you along with the taxes. France took a positive stance on crypto assets to transform the country into a European crypto hub, but owing to the inherent volatility of the unregulated market, the tax authorities had to come up with an intelligent tax structure to avoid its misuse.

If you are a French resident, you will have to pay taxes on your crypto investments and while the subject of crypto taxes is an intimidating one, we have curated an east-to-read and easier-to-digest crypto tax guide for you, so that when you’re done reading this guide, you can easily file crypto taxes yourself.

‍

Key Data Points

‍

‍

Latest Updates

• Le Centre de documentation Économie Finances : un service ouvert à tous
• Bénéfices non commerciaux (BNC) : régimes fiscaux et déclarations

‍

Can the DGFiP Track Crypto?

People often mistake the decentralised nature of blockchains and dependent cryptocurrencies for anonymity, which is not accurate. Your crypto transactions can be tracked using decentralised tools and your KYC details that you might’ve shared with your crypto exchange when you started using it.

France being a member EU state comes under the jurisdiction of regulatory guidelines and directives like the European Union's Sixth Anti-Money Laundering Directive (AMLD 6), which calls for stricter KYC regulations for companies offering crypto-related financial services in the region.

A new EU directive called Dac8 is expected to come into force later this year. It would give DGFiP the power to verify crypto ownership and access the accounts of crypto businesses to examine their digital assets.

So we suggest reporting all your transactions on your tax return and paying your crypto taxes on time because tax evasion can result in a penalty of 80% of the taxes owed, along with a maximum fine of €500,000 and a prison sentence of up to 5 years in France.

How is Crypto Taxed in France?

The legal definition of Bitcoin and other crypto assets came into the picture as late as May 9, 2019, under PACTE (Action Plan for Business Growth and Transformation law). The definition constitutes:

“Any digital representation of a security which is not issued or guaranteed by a central bank or by a public authority, which is not necessarily attached to a currency having legal tender and which does not have the legal status of a currency, but which is accepted by natural or legal persons as a medium of exchange and which can be transferred, stored or exchanged electronically.”

Crypto is taxed as an immovable property or asset in France and its disposal constitutes a capital gains event. The gains are subjected to capital gains tax, mining rewards that are subjected to BMC in France.

According to Art. 150 VH of the French General Tax Code, the taxation of crypto capital gains depends on whether the cryptocurrency was acquired from investments orother activities such as mining.

The amount of taxes you pay depends on how you’re viewed from a tax perspective. Investors are usually considered occasional traders and are required to pay the PFU (Prélèvement Forfaitaire Unique) at a flat tax rate of 30% which constitutes a 12.8% Income Tax plus a 17.2% social security contribution.

However, you can opt to waive the 12.8% income tax and choose a progressive tax under the new guidance.

Any income made by professional traders was considered commercial income (BIC (Bénéfices Industriels et Commerciaux) under the previous guidelines, however, things have changed owing to the new guidelines. Income made by professional traders is now viewed as a non-commercial income (Bénéfices non-Commerciaux) and is subjected to non-commercial profits tax.

Crypto Capital Gains

Since the taxation of your gains depends heavily on how you’re viewed by the DGFiP, we will look at how the tax authority differentiates between the two and the tax implications for both.

Professional Traders vs Occasional Traders

The classification used to be on whether you engage in transactions frequently or not. If you were engaged in frequent transactions you were considered a professional trader attracting a progressive commercial profit tax varying between 0-45% and if you weren’t so active and engaged in just frequent transactions, you were considered an occasional trader and attracted a flat PFU tax of 30%.

However, under the new tax reform, the frequency or volume of your transactions has nothing to do with how you’re viewed from a tax perspective. If you buy and sell your crypto assets under your management, then you’ll automatically be considered an occasional trader regardless of the frequency or volume of your transactions. 

A person executing sophisticated transactions using specialised tools in a professional setting is more likely to be categorised as a professional trader. Their gains will be taxed as non-commercial profits, the same as mining rewards.

Capital Gains Tax Rate

Since most investors will be taxed as occasional traders under the new guidelines. Most of your gains will be taxed at a flat 30% rate called PFU taxes. Here’s a breakdown of PFU rated for occasional traders:

‍

‍

As previously mentioned, you can choose to waive off the income tax (12.8%) of your gains under the new guidelines and choose to be taxed under a progressive income tax framework instead. While it may not be a beneficial opt-in for most investors, it does stand to benefit some of the low-income investors who fall in the lower tax brackets.

Example

Let’s take the example of Jade who has been investing in crypto for the past 2 years. Given below is a list of all transactions from the past two years:

2022/06/04 - Bought 1 BTC for €5,000

2022/07/23- Exchanged 1 BTC for 7 ETH Tokens

2022/11/29- Exchanged 5 BTC for 20 LTC tokens

2023/ 02/14- Sold 1 BTC for €20,000

2023/04/11- Sold 5 Eth for €5,000

Let’s convert these transactions into a tabular format for a better understanding of these transactions:

‍

‍

The DGFiP mandates the use of the PCVT method for cost-basis calculations that relies on the formula given below:

Cost Basis (EUR)= Sale price – (total acquisition costs x [sale price/total portfolio value])

We will revisit this formula soon in the later sections. For now, let’s make the calculations and complete the table.

Right before Jade Sold 1 BTC for €20,000, Jade had 2 BTC, 7 ETH, and 20 LTC, let’s assume that their value at the time of sale was €50,000. The cost of acquisition can be fetched directly from the table and it’s €5,000, and the price of disposal is €20,000.

When you put these numbers in the formula, you end up with the following:

Cost Basis(EUR) = 5,000 * (20,000/50,000) = 2,000

Capital Gain(EUR) = 20,000 - 2,000 =  18,000

Similarly, we can calculate the cost basis and capital gain for the second sell transaction:

Cost Basis(EUR) = 3,000* (5,000/25,000) = 600

 Capital Gain(EUR) = 5,000-600 = 4,400

So the modified table now looks like this:

‍

‍

Now these gains will be subjected to either the BNC or BIC tax structure depending on whether you are viewed as an occasional trader or a professional one. Although most investors would fall into the category of occasional traders and hence will be taxed under the BIC regime.

Capital Losses

Crypto losses are a fairly simple proposition for investors in France. You can offset your capital losses to lower your tax bill. However, the DGFiP is quite strict when it comes to offsetting your losses against your gains as it only allows capital losses made in the same financial year as the gains to be used as a deductible, while the rules are different for other securities, whereas you’re allowed to carry forward your losses to the subsequent financial year.

How to Calculate Crypto Gains and Losses?

Calculating your gains and losses is the penultimate step to filing your crypto taxes. It is a fairly simple process, all you need to do is calculate your cost basis first. Your cost basis is simply the amount you paid to acquire a certain asset.

Let’s say you bought 5 Eth tokens for €2,000 each and you had to pay an additional €50 as gas fees to the exchange in the process. Your cost basis per token would then be €2,010 (Price of Each Token + Amortized Gas Fees).

Once you have your cost basis, calculating your gains or losses is a breeze. Just subtract your cost base from the price of disposal and the difference is your gains or loss.

If it’s gain, it will be subjected to a flat 30% PFU tax, while a loss can be used to offset your gains and reduce your tax bill.

Crypto Tax Breaks France

Although avoiding crypto taxes entirely is not an option in France, you can legally reduce your tax liabilities.

1. HODL Your Crypto 

Holding your crypto isn’t a taxable event in France, you can hold your assets from a long-term perspective and pay no taxes on them while they appreciate in value. Although you will have to pay taxes upon conversion to fiat currency.

2. Convert Your Assets to Stable Coins

Since your crypto transactions are only taxable when you convert them to fiat currency in France, you can simply swap your assets for stablecoins and not pay any tax on them. Stablecoins are as stable as fiat currency and eliminate volatility from your portfolio. It’s the perfect way to realise a capital gain and not pay tax on it.

3. Crypto Loss Harvesting

Although losses aren’t convenient for an investor, they’re not always bad for you. You can use your losses as an offset against gains and reduce your tax liability. However, you can only use losses from the same year as an offset against the gains unlike those in the securities market.

4. Trading Fees

Almost every exchange charges you a trading fee for buying/selling or trading crypto from their exchange, and since trading fees are a deductible expense, you can reduce the trading fee from your acquisition cost and lower your taxable gains.

Moreover, you can also use trading fees from interim crypto swaps to significantly reduce your investment acquisition cost. 

This is good news for you if you have multiple transactions within a financial year and it can have a huge impact on your tax bill.

Crypto Cost Basis Method France

We used a rather simplistic example to explain to you how you can calculate your crypto gains or losses. In reality, crypto gain calculations are more complicated, because people own multiple assets of the same kind, acquired through different transactions.

Consider this, for instance, you buy 100 Sol tokens across three transactions, the split being 30 in one transaction, 30 in the second one, and 40 in the last at €10, €15, and €20 a token respectively. And then you decided to sell 50 Sol tokens for €25 each 6 months later.

How will you calculate the cost basis for this transaction?

In France, you need to use the PCVT (plus values de cessions d'actifs numériques) for all your cost basis calculations as proposed by the DGFiP. The PCVT method relies on a predetermined formula for calculating your cost base.

Capital Gain/Loss (EUR)= Sale price – (total acquisition costs x [sale price/total portfolio value])

Sale Price(EUR): The amount you receive upon disposal

Total Acquisition Cost(EUR): The price you paid to acquire the asset including extra fees

Total Portfolio Value(EUR): The total value of your portfolio inclusive of all assets

Let's say, you bought a BTC for €15,000. So your Total Acquisition Cost is €15,000.

And you sell it for €20,000. That’s your Sale price.

Your total portfolio value including the BTC token mentioned earlier is €40,000. That’s your Total Portfolio value.

Now all you need to do is insert these values into the formula and you’ll have your gain/loss for this transaction.

When you do that, you’ll get this:

Capital Gain/Loss(EUR) = {20,000 - (15,000 * (20,000 / 40,000)}

You can use a calculator for this, or you could just divide 20,000 by 40,000 which will give you a factor of 0.5, which when multiplied by 15,000 reduces it to 7,500. Now all that’s left is to subtract it from 20,000 which essentially leaves you with a capital gain of 12,500. 

‍

Crypto Income Tax France

If you’re an occasional trader and opt-in for the progressive tax regime under the PFU tax structure, you’ll be taxed according to the progressive income tax rates. The same rates apply if you’re considered a professional trader by DGFiP or if you’re seen to be making an income from crypto mining.

‍

Crypto Income Tax Rates 

The following rates shall apply to your crypto income:

‍

‍

Note that for professional traders and miners being taxed under the BNC tax regime, there’s something called the micro-BNC tax regime for traders and miners who’re making less than €72,600 in 2022.

The micro-BNC scheme essentially allows you to have a 34% tax-free allowance on your annual turnover. So you pay taxes on only 66% of your annual turnover contingent that you make less than €72,600. You can find out more about it here.

How to Calculate Crypto Income

Calculating your crypto income is a fairly simple task, if you’re running mining activities in a business setting, the turnover of your business is considered your income. Similarly, any income incurred in a professional setting is considered turnover and is taxed under the BNC regime as discussed earlier. 

Tax-Free Crypto Transactions

Not all crypto transactions are taxed. Here’s a list of tax-free transactions in France:

• Buying crypto with EUR
• Swapping one crypto asset for another
• Transferring crypto between wallets
• HODLing your crypto assets

Taxed Crypto Transactions

These transactions will attract tax liabilities in France:

• Converting crypto to fiat
• Receiving mining rewards 

There are some common transactions like spending, staking, and DeFi transactions like liquidity mining. The only reason why you can’t find details about these transactions in this guide is that the DGFiP hasn’t released any guidelines on their taxation yet.

When to Report Crypto Taxes in France?

The tax year in France runs from January 1st to December 31st and your tax deadline depends on what department (region) you reside in. Here are some key dates for all the regions in France:

‍

‍

How to Report Crypto Taxes in France

There are two ways you can report your crypto taxes to DGFiP:

1. Online using your FranceConnect Account
2. Offline using paper forms

However, the tax authorities have mandated the use of the online portal for all, unless there’s some special circumstance and you can’t access the online portal. You can use the physical forms in that case.

When it comes to filing your crypto taxes you need to complete multiple forms depending on the nature of your transactions:

1. Formulaire 2042: This is the primary tax document mandatory for anyone filing their tax return with DGFiP. You can either file this individually or jointly with a spouse.

2. Formulaire 2086: This is a peripheral form attached to Formulaire 2042. Any gains/losses you’ve incurred while converting your crypto to fiat should be mentioned in this form.

3. Formulaire 2042C: You’ll have to list all transactions that are considered to be BNC income (i.e. income from mining, professional trading)

4. Formulaire 3916-bis: For transactions in crypto accounts set up outside France

Note that Form 2086 only allows 20 disposals, so if you’ve made more than 20 disposals in a financial year, do seek help from an experienced tax accountant.

How to File Crypto Taxes Using Kryptos?

Now that you’re aware of how your crypto transactions are taxed and what forms you need to fill out to complete your tax report, here’s a step-wise breakdown of how Kryptos can make this task easier for you:

1. Visit Kryptos and sign up using your email or Google/Apple Account
2. Choose your country, currency, time zone, and accounting method 
3. Import all your transactions from wallets and crypto exchanges
4. Choose your preferred report and click on the generate report option on the left side of your screen and let Kryptos do all the accounting.
5. Once your Tax report is ready, you can download it in PDF format.

If you still need clarification regarding the integrations or generating your tax reports, you refer to our video guide here.

How to avoid crypto taxes in France?

You’re legally required to pay your crypto taxes in France, and not doing so can lead to a lot of trouble. However, you can reduce your tax liabilities by using the following strategies:

1. Track your losses and use tax loss harvesting to reduce your tax bill
2. Convert your assets into stablecoins instead of fiat
3. Take advantage of lower tax bands 

We’ve discussed the above-mentioned strategies in detail in the section titled “Crypto Tax Breaks”.

Tax on Mining Crypto France

Regardless of whether you mine tokens as a hobby or as a business, all mining rewards are considered non-commercial profits and are taxed under the BNC tax regime.

Tax on Staking Crypto

Crypto staking is still a grey area when it comes to crypto taxation in France. The DGFiP is yet to release any guidelines on how such transactions are taxed. There’s a fair chance that staking rewards will be considered non-commercial income and will be taxed in the same way as mining rewards.

Yet many European offices argue why the acquisition cost of staking rewards isn’t €0 or equal to the fair market value of tokens upon receipt. We recommend seeking advice from an experienced tax accountant for transactions concerning crypto staking.

‍

Crypto Gifts and Donations Taxes

Most European countries offer tax exemptions on Crypto Gifts and Donations, however, there are no clear guidelines regarding their taxation in France. More details will be added here as soon as the DGFiP releases new guidelines.

Crypto Margin Trading, Futures and CFDs

The DGFiP is yet to release any guidelines on the taxation of gains derived from margin/future trades and derivatives like CFDs. However, we will be looking out for any new guidelines regarding the same and will add relevant details here when it’s available.

Crypto ICO Taxes

ICOs represent ownership in newly incubated crypto projects and the nature of tokens received from ICOs is similar to those received as staking/mining rewards, and hence there’s a high chance that these transactions will follow a similar tax route.

NFT Taxes France

The DGFiP is yet to release any guidelines on the taxation of NFTs in France. We add all relevant details as soon as we get access to them.

DAO Taxes

Income from DAOs can be from various avenues like bounties, contribution rewards paid to contributors, and redistributed profits. The DGFiP is yet to release any guidelines on DAO taxation, we will surely be on the lookout for new guidelines and will update them here as soon as we get access to them.

DeFi Crypto Taxes France

The current guidelines from the DGFiP consider disposal to be the act of exchanging your cryptocurrency for traditional currency. Consequently, certain DeFi transactions could be interpreted as not subject to taxation, such as trading capital for liquidity pool tokens.

However, it’s impossible to be sure regarding their taxation without explicit guidance. We suggest talking to an experienced tax accountant if you’re deep into the DeFi territory.

What Crypto Records Will the DGFiP Want?

‍

The DGFiP expects you to keep detailed records of your crypto transactions from the past 5 years just like all other European tax offices. Here’s a list of documents you might need when filing your crypto taxes:

• A list of all crypto transactions with their dates
• The purpose of the transaction and the parties involved
• The market value of the asset (EUR) at the time of the transaction

You can opt for a smarter way of record-keeping instead of maintaining these records in the form of a manual ledger. You can simply import all your transactions to Kryptos and let Kryptos maintain the ledger for you.

How are Airdrops and Forks Taxed in France

The DGFiP is yet to release guidelines on the taxation of income from airdrops and forks. We will be adding it here as soon as new guidelines hit the public view.

FAQs

1. Is Crypto Legal in France?

Although it is legal to own and trade crypto in France. The government doesn’t consider crypto to be legal tender and instead classifies it as an immovable property or asset. In 2014, France introduced a legal framework for digital currencies, making it one of the first countries to do so. Cryptocurrency exchanges and service providers are required to comply with anti-money laundering (AML) and know-your-customer (KYC) regulations. Moreover, France has taken steps to promote blockchain technology and innovation through various initiatives and projects.

‍

2. What happens if you don’t pay taxes on Crypto?

In France, tax evasion can result in a penalty of 80% of the taxes owed, along with a maximum fine of €500,000 and a prison sentence of up to 5 years.

‍

3. How is Crypto Taxed in France?

In France, cryptocurrency is taxed as an immovable property or asset. When you sell or dispose of crypto assets, it triggers a capital gains event. Capital gains tax is applicable to any profits resulting from the sale, except for mining rewards, which are subject to a separate tax called BMC.

The taxation of crypto capital gains is determined based on how the cryptocurrency was acquired. If it was obtained through investments or other activities like mining, different tax rules apply.

For investors considered occasional traders, are required to pay the PFU (Prélèvement Forfaitaire Unique) at a flat tax rate of 30%. This includes a 12.8% income tax and a 17.2% social security contribution. However, under the new guidance, there is an option to choose a progressive tax rate instead of the 12.8% income tax.

Professional traders' income was previously classified as commercial income (BIC) but now falls under the category of non-commercial income (Bénéfices non-Commerciaux) as per the new guidelines. Such income is subject to non-commercial profits tax. The specific tax amount depends on your individual tax situation.

‍

4. How can Kryptos help you in filing your crypto taxes?

We agree that filing your crypto taxes is an unreasonably complicated task, even for someone with a fair amount of prior knowledge. However, there’s an easy way to file your crypto taxes using a crypto tax software called Kryptos.

All you need to do is log in on the platform, add all your trading accounts, wallets, and DeFi accounts and sip coffee while Kryptos does all the heavy lifting. The platform can auto-fetch all your transactions from the tax year and generate a legally compliant tax report within minutes while suggesting ways to lower your tax bill. It works like magic. All you need to do is try it once.

‍

5. How to Avoid Crypto Taxes in France?

Although avoiding taxes entirely isn’t an option in France, you can use the below-mentioned strategies to reduce your crypto taxes legally:

1. Keeping track of your losses and using tax loss harvesting 
2. Converting your assets into stablecoins instead of fiat currency 
3. Using the lower tax brackets to your advantage
4. HODLing crypto for the long term

‍

All content on Kryptos serves general informational purposes only. It's not intended to replace any professional advice from licensed accountants, attorneys, or certified financial and tax professionals. The information is completed to the best of our knowledge and we at Kryptos do not claim either correctness or accuracy of the same. Before taking any tax position / stance, you should always consider seeking independent legal, financial, taxation or other advice from the professionals. Kryptos is not liable for any loss caused from the use of, or by placing reliance on, the information on this website. Kryptos disclaims any responsibility for the accuracy or adequacy of any positions taken by you in your tax returns. Thank you for being part of our community, and we're excited to continue guiding you on your crypto journey!

Are you still trying to figure out how much you owe in crypto taxes in Ireland? Then this guide is for you. Because our guide answers important questions like how is crypto taxed in Ireland, how to file your crypto taxes, what documents you will need, and what is the tax deadline. Moreover, it covers tax-saving strategies and exemptions that you can use to reduce your tax bill and it also tells you how Kryptos can make tax filing easier for you.

Note that this guide will be updated regularly to accommodate any new rules or guidelines around crypto taxation. Therefore, we suggest you keep revisiting it from time to time to stay updated. 

‍

Key Data Points

‍

‍

Latest Updates/Guidelines

April 2022- Revenue eBrief No. 095/22

How is Crypto Taxed in Ireland?

The Revenue considers all cryptocurrencies, tokens, and digital assets to be capital assets just like real estate, equities, or shares. And since all crypto assets are categorized under one term, this means that all digital assets are treated the same for tax purposes, regardless of whether they’re native to a blockchain, or a DeFi protocol. 

Any transaction that is seen to be an act of disposal by the Revenue is subjected to capital gains tax. Here’s what the Revenue had to say about the disposal of crypto assets in their latest e-brief:

“The sale, transfer, or redemption of crypto-assets is most likely to be a disposal for CGT purposes unless, based on the facts and circumstances, there is a trade of dealing in crypto-assets being carried on.”

The following transactions are considered as disposal of crypto assets:

• Selling cryptocurrency
• Using cryptocurrency to make a purchase
• Trading cryptocurrency for other cryptocurrencies
• Gifting cryptocurrency

A flat 33% CGT is levied on all transactions with a capital gain. Calculating your gains is a pretty straightforward task, it is simply the difference between the sale piece and acquisition price inclusive of any exchange or network fees. 

‍

‍

Crypto transactions are also subjected to income tax if you appear to be making an income. Here’s what the Revenue had to say about income-bearing transactions:

“Where a non-incorporated business makes a trading profit or loss on crypto-asset transactions this must be reflected in their accounts and will be taxable by normal IT rules.”

A corporate tax is levied on corporations deriving an income from crypto transactions, but since we’re covering individual taxes here, it goes beyond the scope of this guide.

The following transactions are considered income-bearing transactions:

• Trading crypto as a business
• Earning crypto in exchange for labour
• Airdrops
• Mining cryptocurrency
• Staking cryptocurrency

Can the Revenue Track Crypto?

The simple answer to this is yes. The Revenue can track your crypto transactions. Under the Anti Money Laundering Directives of the EU, all businesses offering crypto-related financial services in the region are required to maintain KYC details of their customers and share them with all member EU states in an attempt to stop money laundering using crypto assets.

Moreover, all crypto exchanges operating in Ireland are expected to be registered as VASPs (Virtual Asset Service Providers) with the Irish Central Bank. This compels exchanges to collect customer data and report it to authorities on request.

Transactions involving blockchain-based applications and tokens are registered on public ledgers and can be tracked easily using tools. Revenue can simply correlate these transactions with the details shared by your exchange to unearth any discrepancies. 

‍

Crypto Capital Gains Tax

Since crypto is categorized as a capital asset by Revenue and you’ll have to pay a capital gains tax whenever you’re seen to be making a gain from the disposal of such assets. Anytime an asset exchanges hands, it is counted as a disposal for tax purposes. 

The following transactions will be considered as a disposal of assets:

• Selling crypto for fiat
• Swapping one crypto for another
• Buying a product or service using crypto
• Gifting crypto (except to your spouse or civil partner)
• Receiving compensation or insurance returns on crypto assets

Capital Gains Tax Rate 

Ireland doesn’t have a progressive CGT tax and instead levies a flat 33% tax on all transactions resulting in a capital gain above the personal exemption limit. Ireland offers a €1,270 personal exemption limit to both residents and non-residents such that the first €1,270 of their gains in a financial year are non-taxable.

How to Calculate Your Crypto Gains and Losses?

Calculating your crypto gains/losses is a pretty straightforward task. All you need to do is subtract your cost basis from the disposal amount. 

But what is the cost basis?

The Cost basis is simply the price (EUR) you paid to acquire the asset inclusive of any additional fees paid to the exchange or network. If you’ve acquired the asset via other sources such as an airdrop, the cost basis will be simply equal to the fair market value of your assets at the time of receipt.

Once you have your cost basis, just subtract it from the disposal amount. If it’s positive, it’s a gain, otherwise, it’s a loss.

Example:

Consider the following transactions:

05/01/2023 - Sarah Bough 2 BTC at €15,000 each

12/03/2022 - Sarah Sold 1 BTC for €20,000

15/05/2022 - Sarah bought a watch worth €22,000 with 1 BTC

So the gain from the first disposal i.e. selling the 1st Bitcoin would be €5,000 (€20,000 - €15,000).

And the gain from the second disposal i.e. buying the watch would be €7,000 since the watch is worth €22,000 therefore the disposal amount comes out to be the same as the price of the watch.

Therefore, the total gain = €5,000 + €7,000 = €12,000

But since the Irish authorities offer an exemption of €1,270 on your gains, you can reduce it from your total gains to finally get your taxable base.

Taxable base =  €12,000 - €1,270 = €10,730

So your total tax liability comes out to be €3,540.9 (33% of €10,730).

Crypto Losses

Losses are inevitable as an investor, and although they might not seem like the best thing, you can use them to lower your tax bill. In Ireland, if you’ve made a capital loss i.e. your disposal amount is lower than your cost basis, you can use it as an offset against gains. These losses are categorized as allowable losses and you can even carry them forward to subsequent tax years if you don’t have enough gains in a tax year.

You can even choose to transfer these losses to your spouse or civil partner to be used as an offset against their personal capital gains. 

However, Short-term assets, acquired and sold within four weeks, have a distinct rule. Normally, losses from these assets cannot be used to offset gains, except when the gains are derived from a similar short-term asset acquired and sold within the same four-week period.

Lost or Stolen Crypto

Crypto thefts and frauds are more common than ever and investors keep losing a lot of money to such fraudulent events. If you’re one such investor, you might be wondering whether tax authorities in Ireland allow for these losses to be claimed as capital losses.

The Revenue is yet to release any guidance on the tax treatment of lost or stolen crypto. However, they do have guidance that covers the tax treatment of lost or destroyed assets, or those of negligible value which states that for lost assets or assets that have lost their value and the holder has no other way of disposing them of, there might be a capital loss consideration equal to the market value of the asset.

All claims for lost or stolen crypto are settled on a case-per-case basis by a revenue inspector, therefore it would be best if you consult an experienced tax accountant for such claims.

‍

Crypto Tax Breaks

Although there is no legal way to avoid crypto taxes entirely, you can use some of the tax-saving strategies mentioned below to lower your tax bill.

1. HODL Your Crypto: Your assets attract tax when you dispose of them, there’s no tax for holding crypto. 

2. Offset Your Losses: The Revenue allows you to offset your capital losses against gains and carry them forward to subsequent tax years as well. Use your losses and lower your tax bill.

3. Borrow Against Crypto: Instead of disposing of crypto to realise your gains, you can use it as collateral to borrow money, this way you can liquidate your gains without triggering a taxable event. 

‍

Crypto Cost Basis Method Ireland

The examples we have used so far are primitive and barely represent real-world transactions in terms of complexity. Any investor would agree that calculating the cost basis is far more complicated when multiple assets of the same kind are involved. That’s why you need a cost-basis method to help simplify your cost-basis transactions.

The Revenue is yet to offer any guidance on the specific cost basis method to be used by investors when calculating the cost basis for crypto transactions. However, there is some existing guidance on CGT for shares and securities and since crypto falls in the same category as shares, it’s safe to assume that the same guidance applies to digital assets too.

For the same class of cryptocurrencies acquired on different dates, the FIFO (First-In-First-Out) accounting method is recommended which simply suggests that the first asset you bought will be the first asset you sell. 

Consider the following transactions for instance:

Jan 2023 - Bought 1 BTC for €15,000

Feb 2023 - Bought 2 BTC for an average price of €17,000

Mar 2023 - Sold 1 BTC for €20,000

So according to the FIFO accounting method, the first BTC you bought will be the first Bitcoin you sell. So the 1 BTC sold in March 2023 is the same one that was bought in January 2023.

So your cost basis for CGT calculations will be €15,000.

Note that there is one exception to this guideline which states that any asset bought and disposed of within 4 weeks is simply the most recently acquired one. This prevents investors from manufacturing artificial losses. 

Losses made from assets acquired and disposed of within four weeks can only be used as an offset against those assets of the same kind that have been acquired and disposed of within the same four-week period.

Crypto Income Tax

As previously mentioned, some transactions are viewed as income-bearing transactions by the Revenue and attract income tax. Although there’s no clear guidance on what kind of transactions are considered to be income-bearing transactions by the Revenue, here are some transactions that will most probably be viewed as the same:

• Receiving crypto as compensation
• Mining and staking rewards
• Tokens received from airdrops
• Awards received from interact-to-earn DeFi platforms
• Creating and selling NFTs as an artist 

Income Tax Rates Ireland

Ireland has two income tax slabs based on how much your earn and your individual circumstances as an investor. 

‍

‍

Note that there are multiple credits, and allowances offered by the Revenue to lower your tax bill. You can visit Revenue. ie to know more.

How to Calculate Crypto Income

Calculating your crypto income is a pretty straightforward process. All you need to do is identify the fair market value of your assets at the time of receipt and add them to get your total income. You’ll pay 20 or 40% tax on your total income based on which tax slab you fall in.

Consider the following series of transactions:

01/01/2022 - Sheila received 5 ETH tokens in an airdrop (worth €1,200 each) 

03/04/2022 - Sheila received 6.25 BTC as a mining reward (worth €15,000 each)

05/05/2022 - Sheila received 3 ETH tokens as a staking reward (worth €1,500)

Now the total income on receipt would be = €(1,200*5 + 15,000* 6.25 + 1,500*3)

= €(6,000 + 93,750 + 4,500)

= €1,04,250

Assuming that you’re an individual with no dependent children, you would fall into the 40% tax bracket.

So your total tax liability would come out to be €41,700.

‍

Tax-Free Crypto Transactions

Here are some tax-free transactions in Ireland:

• Buying crypto with fiat
• Holding cryptocurrency
• Moving cryptocurrency between wallets you own
• Taking out a cryptocurrency loan

Taxed Crypto Transactions

Here are some of the taxed crypto transactions:

• Selling crypto
• Staking and mining crypto
• Receiving airdrops
• Swapping one token for another
• Engaging with interact-to-earn DeFi platforms
• Buying a product or service using crypto 
• Gifting crypto

Tax on Mining Crypto Ireland

Mining rewards are subjected to income tax in Ireland upon receipt if you’re an individual investor and may be further subjected to CGT when you dispose of them by selling, swapping, or gifting them. If you’re involved in mining activities as a business, your income will be subjected to corporation tax instead.

There are some allowable expenses linked to mining like electricity bills, equipment costs, and operational expenses that you can use to write off your tax bills.

Tax on Staking Crypto

There is no specific tax guidance in Ireland regarding staking as of now. However, staking rewards are expected to be treated the same way as mining rewards from a tax perspective. Consequently, staking rewards will be taxed as income when received, and if the crypto is sold later, the proceeds will be subject to capital gains tax, with the cost base equal to its original value upon receipt.

How are Airdrops and Forks Taxed in Ireland

Airdrops, regardless of whether you receive them for participation in project promotion or for completing a task, will most likely be subjected to income tax on receipt, the cost basis of tokens received from airdrops would be equal to the fair market value of the tokens upon receipt.

There is no specific guidance on how forks are treated for tax purposes. However, it can be extrapolated from the existing guidelines that their tax treatment will be no different than airdrops. Soft forks aren’t a taxable event because no new tokens are generated in the process. Hard forks on the other hand may attract income tax as new tokens are created and redistributed among blockchain participants.

Capital Acquisition Tax Crypto

Revenue released a new set of guidelines covering the capital acquisition tax on crypto gifts and inheritance. The guidance states that a CAT might apply to crypto assets received as gifts or inheritances.

The general CAT guidelines state that the CAT will apply to the market value of the assets on receipt. However, there are certain lifetime exemption limits offered by the Revenue, and if you’re below a certain threshold then these assets are non-taxable.

There are multiple CAT groups with different exemption limits. Group A is gifts from parents, Group B is from immediate family members, and Group C is from anyone not covered in Group A or Group B.

‍

‍

If the total value of gifts from any group exceeds the lifetime exemption amount, any assets received as gifts and donations will be subjected to a flat 33% CAT. Note that assets received from your spouse or civil partner are not subjected to CAT.

Also, gifts valued below €3,000 from a single person in a fiscal year are exempt from (CAT). 

Crypto Margin Trades, Futures, and CFDs

There is no guidance on how income from margin trades, crypto futures, and CFDs is taxed so we recommend seeking guidance from an experienced tax accountant for income from such sources.

However, you must know how margin and future trades differ to better understand their tax implications. In margin trades, you borrow funds (leverage) to take capital-intensive positions, and future trades are speculative trades where you predict the price movements of a certain asset over a fixed-time contract.

The best way to steer clear of any future tax complications would be to treat any profits from such trades as a capital gain and pay CGT on them.

Crypto ICO Taxes

There is no specific guidance on how ICOs are treated for tax purposes. Although it would be safe to assume that any income from ICOs would be subjected to income tax just like mining and staking rewards in light of the existing guidelines. However, we are constantly on the lookout for new guidelines and new details will be added here as soon as we get access to them.

NFT Taxes Ireland

Although the scope and utility of NFTs differ from that of crypto assets, they’re treated the same for tax purposes. So if you dispose of an NFT by selling, swapping, or gifting them, any gains would be subjected to CGT. While, if you’re an artist creating your NFTs and selling them at a marketplace, that may be viewed as an additional income and would therefore attract income tax liabilities.

Artists do enjoy an Income Tax Exemption on NFTs however whether this guidance applies here or not is yet to be declared. We suggest contacting an experienced tax advisor for more details on the same.

DAO Taxes 

There is no specific guidance on how income from DAOs is taxed in Ireland. We are constantly on the lookout for any new guidance on this and relevant details will be added here as soon as we get access to them.

DeFi Taxes 

The Revenue is yet to declare any guidance on how DeFi transactions are viewed from a tax perspective. However, that does not mean all DeFi transactions are exempt from taxes. You have to consider the existing guidelines to extrapolate the tax treatment of your DeFi transactions.

The best approach would be to contact an experienced tax advisor to seek guidance on the taxation of such transactions.

Here’s what we could infer from the existing Revenue guidelines about the taxation of some DeFi transactions.

DeFi protocols use liquidity pools, such as dex, lending, or staking protocols. The tax treatment depends on how the pool operates. For instance, trading on a dex like Uniswap involves calculating capital gains or losses when disposing of a crypto asset. Adding capital to liquidity pools to earn rewards can be more complex. Often, adding capital results in receiving a liquidity pool token, which is considered a crypto-to-crypto trade and requires recognizing a capital gain or loss.

The way rewards are paid out also affects taxation. If rewards are earned through a token that increases in value, no gain is realized until the capital is withdrawn. This is similar to a disposal and requires calculating capital gains or losses. However, not all rewards are distributed this way. Some DeFi protocols provide new tokens as rewards, sometimes using both liquidity pool tokens and new tokens. Earning new tokens can be treated as additional income, requiring identification of the fair market value in EUR on the day received and payment of income tax on that amount.

When to Report Crypto Taxes in Ireland

Here are the important tax deadlines in Ireland related to crypto taxes:

• The financial year in Ireland is from January 1st to December 31st.

• Capital Gains Tax (CGT) has two distinct periods:

• The first period is from January 1st to November 30th. If you earned a profit from selling crypto assets, you must pay the applicable tax by December 15th of the same year.

• The second period is from December 1st to December 31st. If you earned a profit from selling crypto assets during this period, the tax must be paid before January 31st of the following year.

• The deadline for submitting the tax return, which includes reporting all your crypto gains and income for the financial year, is October 31st of the subsequent year.
• Currently, you are reporting on the 2022 financial year. The CGT tax payments for the 2022 financial year are due on November 30th, 2022, and January 31st, 2023. However, you must declare your gains or losses to Revenue by October 31st, 2023.

How to File Crypto Taxes in Ireland

You can file your crypto taxes in Ireland using the Revenue Online Services or MyAccount portal. You can register on these portals online if you haven’t already used them on Revenue. ie.  

You can also file your taxes using paper forms based on whether you’re self-employed or a PAYE worker.

If you’re a PAYE worker, you should use Form CG1 meant for self-assessment and filing capital gains tax returns.

If you’re self-employed or a chargeable person, you should use Form 11 meant for self-assessment and filing income tax returns.

A chargeable person is an individual who meets either of the following criteria in a year:

• They have net assessable non-PAYE income equal to or exceeding €5,000.
• They have total gross income from non-PAYE sources equal to or exceeding €30,000.

What Record Will the Revenue Want

The Revenue has clear guidelines on record keeping, unlike most tax authorities across the globe. Here are the documents you should maintain according to the guidelines:

• Dates of all transactions
• Details of the kind of assets held
• The fair market value of the asset at the time of the transaction
• Details of all parties involved in the transaction and the specific reason for the transaction

It is crucial to maintain proper records as the tax authorities emphasize the requirement to provide records to Revenue upon request. Additionally, you must retain your records in compliance with legislation, keeping them for six years.

‍

How Can Kryptos Help in Filing Crypto Taxes

Now that you’re aware of how your crypto transactions are taxed and what forms you need to fill out to complete your tax report, here’s a step-wise breakdown of how Kryptos can make this task easier for you:

1. Visit Kryptos and sign up using your email or Google/Apple Account
2. Choose your country, currency, time zone, and accounting method 
3. Import all your transactions from wallets and crypto exchanges
4. Choose your preferred report and click on the generate report option on the left side of your screen and let Kryptos do all the accounting.
5. Once your Tax report is ready, you can download it in PDF format.

If you still need clarification regarding the integrations or generating your tax reports, you refer to our video guide here.

How to Avoid Crypto Taxes In Ireland

There’s no legal way to avoid crypto taxes entirely and doing so might attract legal trouble. However here are some strategies you can employ to lower your tax bill.

1. Use Personal tax credits, allowances and reliefs 
2. Utilise the personal exemption amount
3. Track your allowable expenses and deduct them to lower your tax bill
4. Use tax loss harvesting to lower your tax bill by offsetting unrealised losses against gains

FAQs

1. Is Crypto Legal in Ireland?

Yes, cryptocurrency is legal in Ireland. The Central Bank of Ireland (CBI) has issued several warnings about the risks associated with cryptocurrency investment, but there is no blanket ban on the use or ownership of cryptocurrencies.

In 2020, the CBI published a statement on its website clarifying that cryptocurrency is not legal tender in Ireland and is not regulated by the CBI. The statement also warned that cryptocurrency investment is high-risk and investors should be aware of the potential for fraud and loss.

Despite the CBI's warnings, several cryptocurrency companies are operating in Ireland. These companies are not regulated by the CBI, but they are subject to the same laws and regulations as any other business in Ireland. For example, they must comply with anti-money laundering (AML) and counter-terrorism financing (CTF) regulations.

2. What happens if you don’t pay taxes on Crypto?

Failure to pay taxes on cryptocurrency in Ireland can result in penalties, fines, and potential imprisonment. The Irish Revenue may impose fines based on the specific circumstances, with a maximum fine equivalent to 100% of the tax evaded, effectively doubling the original tax liability. Additionally, overdue taxes are subject to a daily interest of 0.0219%.

If convicted of tax evasion, individuals can face imprisonment for a maximum of 12 months. In more severe cases, if indicted or found guilty, the penalty can extend up to five years of imprisonment.

3. How is Crypto Taxed in Ireland?

In Ireland, cryptocurrencies are considered capital assets, similar to real estate or equities. All digital assets, including cryptocurrencies, tokens, and digital assets on blockchains or DeFi protocols, are treated equally for tax purposes.

The following transactions are considered as disposing of crypto assets:

1. Selling cryptocurrency
2. Using cryptocurrency to make a purchase
3. Trading cryptocurrency for other cryptocurrencies
4. Gifting cryptocurrency

A flat 33% Capital Gains Tax (CGT) is applied to all transactions that result in a capital gain. Calculating the gain is straightforward, as it is the difference between the sale price and the acquisition price, including any fees incurred during the exchange or network transfer.

For corporations earning income from crypto transactions, corporate tax applies, but that is beyond the scope of this guide, which focuses on individual taxes.

The following transactions are considered income-bearing transactions:

1. Trading cryptocurrency as a business
2. Earning cryptocurrency in exchange for labour
3. Airdrops
4. Mining cryptocurrency
5. Staking cryptocurrency

4. How can Kryptos help you in filing your crypto taxes?

We agree that filing your crypto taxes is an unreasonably complicated task, even for someone with a fair amount of prior knowledge. However, there’s an easy way to file your crypto taxes using a crypto tax software called Kryptos.

All you need to do is log in on the platform, add all your trading accounts, wallets, and DeFi accounts and sip coffee while Kryptos does all the heavy lifting. The platform can auto-fetch all your transactions from the tax year and generate a legally compliant tax report within minutes while suggesting ways to lower your tax bill. It works like magic. All you need to do is try it once.

‍

All content on Kryptos serves general informational purposes only. It's not intended to replace any professional advice from licensed accountants, attorneys, or certified financial and tax professionals. The information is completed to the best of our knowledge and we at Kryptos do not claim either correctness or accuracy of the same. Before taking any tax position / stance, you should always consider seeking independent legal, financial, taxation or other advice from the professionals. Kryptos is not liable for any loss caused from the use of, or by placing reliance on, the information on this website. Kryptos disclaims any responsibility for the accuracy or adequacy of any positions taken by you in your tax returns. Thank you for being part of our community, and we're excited to continue guiding you on your crypto journey!

Are you a Belgian crypto investor wanting to learn more about crypto taxes? Well, you’re not alone. Crypto taxes are complicated, and the fact that tax authorities keep rolling up new guidelines makes it even tougher to navigate the space. 

That’s why we created a comprehensive tax guide so that you don’t have to wander the web everytime you make a crypto transaction. In this guide, we dive deep into the world of crypto taxes covering topics like capital gains tax, income tax, crypto gifts and donations tax, tax deadlines, crypto mining tax, crypto staking tax, DeFi taxes, NFT taxes and more.

Once you’re done reading this guide, you will have enough information to file your crypto taxes yourself. 

So, Let’s dive in….

Latest Updates/Guidelines

• Ruling on Airdrop Taxation
• Skatteverket v David Hedqvist Case C-264/14- Legal Precedent for VAT on Crypto

How is Crypto Taxed in Belgium

In Belgium, the primary tax on profits is Capital Gain Tax (CGT), which applies to gains from selling crypto assets. To calculate capital gains, subtract the acquisition cost and any additional charges from the disposal amount. The profits from the sale are then subject to CGT.

The following transactions will attract a CGT in Belgium:

• Selling crypto for fiat
• Swapping one crypto for another
• Gifting crypto 
• Donating crypto

The SPF – Service Public Fédéral Finances or the Belgian General Administration of Taxes also taxes crypto gains as income. Still, income taxes are a bit more complicated than CGT in Belgium. 

Investors are taxed differently based on specific circumstances and the nature of transactions. There are three different scenarios when it comes to the taxation of individual investors.

1. Prudent Investors with Non-Speculative Intent

If crypto transactions are considered as the standard management of private assets and the investor does not have a speculative intent, then these transactions are regarded as non-speculative and exempt from taxation. However, what constitutes "normal management" may vary for each investor based on the nature of their transactions.

Investors are typically classified as long-term investors without speculative intent if only a portion of their funds is allocated to crypto assets and a long-term strategy is implemented to oversee those investments.

2. Short-Term Investors with Speculative Intent

Crypto traders, known for engaging in frequent trades with higher risk levels, are often perceived as individuals who make a living by speculating on asset prices and capitalizing on price movements through scalping. Since their focus is purely speculative and lacks a long-term perspective, they are regarded as speculative investors. 

If a trader is not operating within a professional environment, their transactions are deemed speculative and subject to a flat tax rate of 33%, along with any applicable municipal surcharge. It's important to note that losses incurred can be deducted from taxable income, thereby reducing the overall tax liability.

3. Professional Trader 

Professional traders, who frequently engage in high-risk trades and heavily speculate with a short-term perspective, face taxation on their income at a progressive rate ranging from 25% to 50%, depending on their tax bracket. It's important to note that this progressive tax rate does not include any municipal surcharges applicable to your gains.

In certain cases, income generated from crypto assets, such as mining, receiving assets through ICOs or airdrops, and other transactions, may be classified as professional income and taxed under income tax laws. The tax brackets for such cases align with those of professional traders, ranging from 25% to 50% based on the individual taxpayer's income.

There seems to be some confusion about how progressive tax rates work. So here’s an example to better understand that.

Let’s say a country has 3 tax brackets:

€0 - 10,000 taxed at 10%

€10,001 - 20,000 taxed at 20%

€20,001 and above taxed at 30%

And let’s assume you make a gain of €30,000.

Now the first €10,000 will be taxed at 10%

The next €10,000 will be taxed at 20%

And the remaining sum will be taxed at 30% since it falls into the third tax bracket.

How to decide what category you fall in?

Since there are three categories of investors in Belgium, one must decide which category they fall in before filing their crypto taxes.

But who decides this category?

The SPF does of course!

There’s an official list of questions that one needs to answer to identify which category they fall in, what kind of taxes will be levied on their transactions, and how much taxes they owe to the tax authorities.

Here’s the list:

1. How did you come into possession of cryptocurrencies (e.g. by inheritance by inheritance, donation, personal savings, replacement of movable or immovable assets …)?

2. How many years have you been investing in cryptocurrencies?

3. For what amount (total) have you already invested in cryptocurrencies?

4. How often do you buy and sell? In other words, how many times a year do you make these types of transactions (once, daily, weekly, monthly, or a few times a year)? Please provide the details of all the operations carried out so far (purchases, sales, conversions of a cryptocurrency into another cryptocurrency, …) indicating the dates and amounts of the transactions.

5. How long have the cryptocurrencies you wish to transfer/cease been in your possession?

6. What is your investment strategy in cryptocurrencies? 

a) “buy & hold”: hold the virtual currencies for a long time

b)“trending”: trade/sell based on technical analysis of market prices or trends

c)“active trading/day trading/scalping”: the realization of small gains on very short open positions

d)“arbitrage”: buying and selling on different exchanges to profit from price differences on these exchanges.

7. Do you mine via your mining rig or a mining pool? If yes, please provide further explanation.

8. Do you buy or sell cryptocurrencies through an automated process or automated software? Did you design this process/software yourself? Please provide details.

9. What is your current professional activity? What education have you completed? Have you gained any knowledge of cryptocurrencies in the course of your professional activity?

10. Have you invested in a cryptocurrency investment fund? Please provide any relevant details.

11. Are you active in the cryptocurrency community on forums or via blogs? Do you give lectures on the subject? Please provide any relevant details.

12. What percentage of your assets (movable) have you invested in cryptocurrencies? Do you also invest in other movable assets (e.g. stocks, bonds, paintings, gold, …)? If so, please specify in which other movable assets you have invested as well as the proportion of your investment in cryptocurrencies compared to other investments.

13. Do you use any special equipment to protect your cryptocurrencies (for example hardware wallet)? If yes, please provide details.

14. Do you also invest in cryptocurrencies for others? If yes, please specify for whom and for what amount.

15. Have you used borrowing to finance your cryptocurrency purchases? If yes, for what amount and from whom did you borrow?

16. What is the (market) value of your cryptocurrency portfolio at present (including date)?

17. Do you use the advice of professionals in the financial and/or IT sector in your investments in cryptocurrencies?

Can the SPF Track Crypto?

Recent actions taken by the Belgian Special Tax Inspectorate (STI), as reported by Cointelegraph, indicate that the authorities have means to track crypto investor activity. The STI is specifically targeting Belgian residents with holdings in foreign tax exchanges, leveraging double tax agreements with countries like the U.S. to obtain information about Belgian taxpayers with assets in major exchanges such as Coinbase.

Instances have been reported where Belgian residents have received letters from the SPF requesting a comprehensive account of their crypto holdings dating back several years.

Moreover, starting from January 2026, an EU-wide directive known as DAC-8 will require all crypto exchanges and service providers to share investor details with EU member states, promoting better compliance and reporting.

To ensure compliance and avoid legal complications, it is advisable to maintain detailed transaction records and accurately report gains and losses to the SPF.

Capital Gains Tax

As mentioned earlier, Capital Gains Tax (CGT) is the prevalent tax applied to cryptocurrencies in Belgium. CGT is imposed on any profits realized from selling cryptocurrencies for fiat or exchanging one cryptocurrency for another.

Unlike many other countries, Belgium does not have a distinct tax framework that distinguishes between long-term and short-term capital gains. Instead, it levies a uniform flat rate of 33% on all capital gains.

The formula to calculate CGT on your gains is pretty straightforward:

‍

‍

This can be better understood via an example:

• Liam bought 1 BTC for €17,000
• Liam sold that BTC for €21,000 3 months later
• He paid €137 in transaction fees for the disposal

Let’s calculate the capital gain on this transaction:

Disposal Amount = €21,000

Acquisition price = €17,000

Fees paid = €137

CGT = ((21,000 - 137) - 17,000) * 0.33 = (20,863 - 17,000) *0.33 = 3,863 *0.33 = €1274.79

Capital Gains Tax Rate

In Belgium, there is no specific capital gains tax law that distinguishes between long-term and short-term gains for cryptocurrencies. Instead, tax authorities apply a flat tax rate of 33% to all gains derived from crypto transactions.

How to Calculate Crypto Gains and Losses

Calculating your crypto gains and losses is simple. Just deduct the acquisition amount from the disposal amount and you will have your gain or loss. If the difference is positive, it’s a gain, otherwise, it’s a loss.

Capital gain/loss = Disposal amount - Acquisition amount 

Consider the following transactions:

• Ava bought 1 BTC for €15,000
• Ava sold that BTC for €17,000

Capital Gain/loss = €17,000 - €15,000 = €2,000 (It’s gain)

• Ava bought 1 ETH for €1,200
• Ava sold 1 ETH for €800

Capital Gain/loss = €800 - €1,200 = - €400 (It’s a loss)

Crypto Losses

Crypto losses are not taxable in Belgium. However, you can use your losses to lower your tax bill by deducting your losses. This is a common way to lower your tax liabilities and pay fewer taxes. 

Therefore, it is prudent to record all your losses along with your gains and report them to SPF.

Lost or Stolen Crypto

The SPF has not issued any guidance on how lost or stolen cryptocurrencies are treated from a tax standpoint. The determination of the status of such assets is likely to be made on a case-by-case basis. Therefore, it is advisable to reach out to the SPF directly for specific information and guidance regarding this matter.

Crypto Tax Breaks Belgium

The Belgian tax authorities do offer a few ways to reduce your tax bill.

1. Tax-Loss Harvesting

You can offset your losses against gains and lower your taxable surplus capital. This method is called tax-loss harvesting and is one of the most popular methods used by crypto investors to lower their tax bills.

2. HODL Your Assets

Gains are taxable only upon the sale of the assets. When you possess an asset that has increased in value since its acquisition, it represents an unrealized gain until the asset is disposed of. Once you sell the asset, the gains become realized, and you are required to pay taxes on those gains. Holding assets for the long term is an effective approach to potentially minimize tax liabilities.

3. Have a Long-Term Investment Strategy

In Belgium, non-speculative investors who adopt a long-term investment strategy are exempt from taxation on crypto transactions. If you allocate a portion of your capital to cryptocurrencies and your investment approach does not heavily rely on speculating on short-term price movements of crypto assets, any gains you earn from crypto transactions will not be subject to taxation.

Crypto Cost Basis Method Belgium

The SPF is yet to release specific guidance on which inventory method to use for cost-basis calculations and investors are free to pick any inventory method. There are numerous inventory methods used by investors globally, we will discuss some of the mainstream methods here.

‍

‍

1. FIFO Accounting Method

The FIFO or First-In-First-Out accounting method is one of the most popular ones used by investors. It states that the first asset you buy is the first one you sell. It means that the cost basis of the oldest asset is used to calculate gains, losses, or income when disposal is made.

2. LIFO Accounting Method

The LIFO or Last-In-First-Out accounting method is the opposite of the FIFO and states that the last asset you purchase is the first one you sell. This means that the cost basis of the newest asset is used for calculating the gains, losses, or income generated through subsequent disposals.

3. HIFO Accounting Method

The HIFO or Highest-In-First-Out accounting method is slightly different in its approach compared to LIFO or FIFO. It states that the asset with the highest acquisition price is the first one to be sold. This means that when you dispose of an asset, you consider the cost highest acquisition price as the cost basis.

4. ACB Accounting Method

The Average Cost Base method simply considers the average acquisition price of an asset across all acquisitions as the individual cost basis. Note that when you use the ACB accounting method, the cost basis of all transactions remains the same regardless of when it was acquired.

Consider the following example:

13/01/22 - Louis bought 1 BTC for €12,000

15/02/22 - Louis bought 1 BTC for €18,000

14/03/22 - Louis bought 1 BTC for €16,500

18/06/22 - Louis sold 1 BTC for €22,000

Now we will calculate the capital gain using all the accounting methods discussed above.

1. FIFO

Since we’re using the FIFO accounting method, the cost basis for the disposal will be equal to the acquisition price of the first BTC.

Cost Basis = €12,000 (as seen on 13/01/22)

Disposal Amount = €22,000

Capital Gain/loss = €22,000 - €12,000 = €10,000

2. LIFO

In LIFO, the cost basis will be equal to the acquisition price of the BTC purchased last. 

Cost Basis = €16,500

Disposal Amount = €22,000

Capital Gain/Loss = €22,000 - €16,500 = €5,500

3. HIFO

In HIFO, the asset with the highest acquisition is the first one to be sold. 

Cost Basis = €18,000

Disposal Amount  = €22,000

Capital Gain/Loss = €22,000 - €18,000 = €4,000

4. ACB 

The Average Cost Basis method considers the average acquisition price of the asset to be the cost basis.

Cost Basis = (€12,000 + €16,500 + €22,000)/3 = €15,500

Disposal Amount = €22,000

Capital Gain/Loss = €22,000 - €15,500 = €6,500

Crypto Income Tax

In certain cases, income generated from crypto assets can be classified as professional income and is subject to taxation under income tax laws in Belgium. Activities such as mining, staking, and receiving tokens from airdrops may attract income tax liabilities.

It's important to note that income tax in Belgium differs from capital gains tax. While a flat tax rate applies when it comes to capital gains tax, income tax rates are progressive and vary based on the individual's income level.

‍

Crypto Income Tax Rates

As previously mentioned, income tax in Belgium is progressive and varies between 25 and 50% based on the income level. Below is the breakdown of tax brackets for crypto income tax in Belgium. 

How to Calculate Crypto Income

Calculating Crypto Income is easier than calculating capital gains or losses. You just need to record the fair market value of all assets you receive through income-bearing transactions and add them together. The sum you end up with is your taxable income base.

Tax-Free Crypto Transactions

Listed below are some of the tax-free transactions in Belgium:

• Buying crypto with fiat
• Transferring crypto between wallets
• Holding crypto assets (as an individual investor)

Taxed Crypto Transactions

Listed below are transactions that attract tax liabilities in Belgium:

• Selling crypto
• Swapping one crypto for another
• Trading in crypto assets
• Gifting crypto
• Donating crypto 
• Mining and stalking crypto assets

Tax in Mining Crypto

The SPF is yet to provide specific guidance on how income from crypto mining is taxed in Belgium. Since crypto mining involves securing a network by validating transactions, the mining rewards can be perceived either as self-produced assets or as compensation for services rendered to the network. The interpretation of tax authorities regarding this matter may impact the tax implications.

To gain clarity on the tax implications of income generated from mining activities, it is advisable to directly contact the SPF and seek their guidance on the subject.

Tax on Staking Crypto

Mining and staking are both processes for validating transactions on a network. Mining is typically used in Proof-of-Work networks like Bitcoin, while staking is the preferred method for validating transactions in Proof-of-Stake networks.

In mining, participants receive new tokens as rewards for validating transaction blocks. On the other hand, Proof-of-Stake networks do not distribute new tokens as mining rewards. Instead, stakers can earn network fees as their reward for staking tokens.

There have been instances where legal professionals have presented arguments in court, stating that staking rewards should be considered similar to interest income and treated as movable assets, thereby subject to a tax rate of 30%.

Nevertheless, there is no definitive guidance available on how staking rewards are specifically viewed for tax purposes. Therefore, we recommend reaching out to the SPF for an individual assessment and further clarification regarding the tax treatment of staking rewards.

How are Airdrops and Forks Taxed in Belgium

According to a ruling dated 03.05.2022, any gains incurred from crypto transactions inclusive of airdrops will be treated as miscellaneous income and taxed at a flat rate of 33%. Forks on the other hand are a bit more complicated since there is no clear guidance or ruling regarding the same.

We suggest seeking guidance from a professional tax consultant or contacting the SPF for a personal assessment to better understand the tax implications.

Crypto Gifts and Donation Taxes

The SPF is yet to release specific guidance on how crypto gifts and donations are treated from a tax perspective in Belgium. However, if we consider crypto donations to be similar to other forms of donations, it is reasonable to assume that crypto gifts and donations will be subject to gift taxes.

In Belgium, inheritance tax is imposed on heirs or legatees who receive assets from the estate of a deceased Belgian resident. Moreover, a specific type of inheritance tax applies when a non-resident passes away but holds tangible assets within the country. In this case, the tax is calculated based on the gross value of the assets, rather than the net value received by individuals. The amount of inheritance tax varies depending on the region in which the deceased had their physical residence.

Gifting in Belgium should be done through a notary deed to meet the requirements. Since all notary deeds need to be registered, Belgian gift taxes are applicable. However, manual and indirect gifts are exempt from these taxes.

The gift tax rates differ depending on the region where the gift is registered. In the Flemish, and Brussels capital regions, registered gifts of movables are subject to a reduced flat registration rate:

• 3% for gifts between spouses, children, grandchildren, parents, grandparents, and cohabitants

• 7% for gifts between individuals who do not fall into the above categories.

As per Article 7 of the Inheritance Taxation Codes (IHTC) in every region, gifts made within three years before the donor's death, which were not subjected to Belgian gift taxes, are considered part of the donor's estate and subject to inheritance taxes. These gifts need to be reported in the inheritance tax return at the time of the donor's death.

Recently, there has been a significant reform of the inheritance tax law at the federal level, with the new rules coming into effect on September 1, 2018. Consequently, many changes have been implemented in regional inheritance taxes, therefore it is advisable to seek specific advice in this regard.

Crypto Margin Trades, Futures, and CFDs

There is no specific guidance on how crypto margin trades, futures, and CFDs are taxed in Belgium. However, any income made from crypto margin trades, futures, and CFDs will be taxed as miscellaneous income. 

However, we do suggest seeking guidance from an experienced tax professional or directly contacting the SPF for a personal assessment to better understand the tax implications.

Crypto ICO Taxes 

ICOs are special events that allow investors to own native tokens from an unreleased project in exchange for mainstream tokens like Bitcoin and Ethereum. ICOs are similar to IPOs in the traditional securities market.

Although there is no clear guidance on how such transactions are viewed from a tax perspective, ICOs are usually treated as crypto-to-crypto trades in most tax jurisdictions and the SPF would likely treat them the same way.

Although a prudent approach would be to contact SPF directly and seek clarification on the same.

NFT Taxes

There is no specific guidance from SPF regarding the taxation of NFT-related transactions, we are constantly on the lookout for guidelines on the subject and will add all relevant details here as soon as the guidelines hit our radar.

DAO Taxes

DAOs are member-owned communities with a shared vision. All the decisions in a DAO are made by the members in the absence of central leadership. They are new-age institutions that aim to democratise decision-making and allow people to have a say in decisions that directly affect them. DAOs are often called the soul of Web3 and allow members to earn rewards in multiple ways. Contributors are rewarded for their contributions to the organization, similar to how centralized organizations pay salaries to their employees. They also pay out bounties for one-time projects and redistribute any profits generated through operations.

The subject of DAO taxation is another grey area in the Belgian tax regime and the SPF is yet to release any specific guidelines on the subject. Although any income from DAOs will likely be taxed as miscellaneous income, we suggest seeking help from an experienced tax professional to better understand the tax implications.

VAT Taxes

A legal precedent set by the European Court of Justice (ECJ) during Skatteverket v David Hedqvist Case C-264/14 clarifies that cryptocurrencies are contract-based payment avenues and that any transaction made with them constitutes a financial transaction. 

And since there is no specific guidance issued by the SPF on the matter, there’s likely no VAT on crypto transactions in Belgium. However, we do suggest seeking guidance from an experienced tax consultant for clarity.

DeFi Crypto Taxes 

DeFi transactions are much more complicated and their taxation is yet to be discussed by the SPF. Staking on DeFi protocols will likely be viewed as general staking activities and therefore taxed accordingly. 

For more complicated transactions like yield farming, and liquidity mining, you might have to consult an experienced tax professional to better understand the associated tax implications.

When to Report Crypto Taxes in Belgium

If you’re using paper forms to submit your tax return, you must submit your tax report by June 30, 2023. If you’re submitting your tax return using the MyMinFin online portal you have until July 15 2023 to submit your tax return. 

While if you have specific income or if you’re filing your crypto taxes through an accountant, you have an extended deadline of 18 October 2023.

How to File Crypto Taxes in Belgium

Crypto investors in Belgium are required to disclose taxable profits from their crypto investments by submitting an annual tax return to the tax authorities.

When reporting for the financial year 2022, you should include the net gain or loss from your transactions, as well as any income generated.

In certain cases, the tax authorities may request a detailed list of all transactions, including purchase and sale dates, proceeds, cryptocurrency costs, and any associated expenses.

In Belgium, you have the option to file your crypto tax return either online or through a paper form. Filing online is generally faster and more convenient, as your return comes pre-filled with information provided by your employer.

To file online, you will need either a Belgian electronic ID card or Itsme authentication.

What Crypto Record Will the SPF Want?

Like most tax authorities, the SPF mandates detailed record-keeping for investors when it comes to crypto transactions. As a Belgian investor, you should maintain the following records:

• Detailed list of transactions including date and time of individual transactions
• Type of crypto assets purchased and disposed of
• Acquisition price
• Disposal amount
• Cost basis
• Detailed records of mining activities
• Bank statements
• Annual statements 

How to File Crypto Taxes Using Kryptos?

Now that you’re aware of how your crypto transactions are taxed and what forms you need to fill out to complete your tax report, here’s a step-wise breakdown of how Kryptos can make this task easier for you:

1. Visit Kryptos and sign up using your email or Google/Apple Account
2. Choose your country, currency, time zone, and accounting method 
3. Import all your transactions from wallets and crypto exchanges
4. Choose your preferred report and click on generate report option on the left side of your screen and let Kryptos do all the accounting.
5. Once your Tax report is ready, you can download it in PDF format.

If you still need clarification regarding the integrations or generating your tax reports, you refer to our video guide here.

How to Avoid Crypto Taxes in Belgium

Although you cannot avoid paying crypto taxes entirely, there are some strategies you can employ to lower your tax bill significantly. Some of them are mentioned below:

1. Deduct your losses from your gains and lower your tax bill.

Losses are tax-deductible in Belgium and you can use them to offset your gains and lower your taxable income base.

2. HODL your assets

Your assets are only taxable when you dispose of them and make a gain. You can hold on to your assets and avoid paying taxes on your unrealised gains.

3. Have a long-term investment strategy

Investors who have a part of their capital invested in crypto assets and have a long-term investment strategy that is not dependent on speculation are exempt from any taxes in Belgium.

FAQs

‍

1. Is cryptocurrency legal in Belgium?

Yes, cryptocurrency is legal in Belgium. The Belgian government has not imposed any specific bans or restrictions on the use, possession, or trading of cryptocurrencies. However, it's worth noting that the legal status of cryptocurrencies can vary from country to country, and regulations regarding their use and taxation may apply. It's important to comply with any applicable laws and regulations when engaging in cryptocurrency activities in Belgium.

2. How is Crypto Taxed in Belgium?

In Belgium, cryptocurrency gains are subject to Capital Gain Tax (CGT). This applies to selling crypto for fiat, swapping one crypto for another, gifting crypto, and donating crypto.

Taxation varies based on the investor type:

• Prudent Investors with Non-Speculative Intent: If crypto transactions are part of standard asset management and lack speculative intent, they are not taxed.

• Short-Term Investors with Speculative Intent: Crypto traders engaged in frequent trades and speculation are considered speculative investors. They face a flat tax rate of 33% plus municipal surcharges, with tax-deductible losses.

• Professional Traders: Those involved in heavy speculation and frequent trades face progressive tax rates (25% to 50%), depending on their income bracket. Income from mining, ICOs, or airdrops may also be taxed as professional income.

3. Is Belgium Crypto-Friendly?

Belgium can be considered relatively crypto-friendly compared to some other countries. While there are regulations in place for cryptocurrency taxation, the Belgian government has not imposed specific bans or restrictions on the use or possession of cryptocurrencies. Crypto transactions are generally allowed, and there are no limitations on individuals or businesses accepting or using cryptocurrencies.

However, it's important to note that Belgium's regulatory framework for cryptocurrencies is primarily focused on taxation and financial oversight. The tax treatment of cryptocurrencies, as explained earlier, requires individuals to report their crypto activities and pay taxes accordingly. Compliance with these tax regulations is essential to avoid penalties or fines.

4. How Kryptos can simplify crypto taxes for you?

We’ve already discussed how to file your crypto taxes in the above sections of the guide offering a step-wise breakdown of the entire process. However, we agree that it is unreasonably complicated even for someone with a fair amount of prior knowledge. Although there’s an easy way to file your crypto taxes using a crypto tax software called Kryptos.

Where all you need to do is log in on the platform, add all your trading accounts, wallets, and DeFi accounts and sip coffee while Kryptos does all the heavy lifting for you. The platform can auto-fetch all your transaction from the tax year and generate a legally compliant tax report within a matter of minutes while also suggesting ways to lower your tax bill. It works like magic, all you need to do is try it once.

‍

All content on Kryptos serves general informational purposes only. It's not intended to replace any professional advice from licensed accountants, attorneys, or certified financial and tax professionals. The information is completed to the best of our knowledge and we at Kryptos do not claim either correctness or accuracy of the same. Before taking any tax position / stance, you should always consider seeking independent legal, financial, taxation or other advice from the professionals. Kryptos is not liable for any loss caused from the use of, or by placing reliance on, the information on this website. Kryptos disclaims any responsibility for the accuracy or adequacy of any positions taken by you in your tax returns. Thank you for being part of our community, and we're excited to continue guiding you on your crypto journey!

Not sure how much crypto taxes you owe to tax authorities in Romania? Don’t worry we are here to help you with the most comprehensive Romanian Crypto Tax Guide. We will discuss everything from income tax to capital gains tax on crypto transactions and taxable and non-taxable events. We will also discuss tax-saving strategies and how you can file your crypto taxes. In short, this guide has everything you need to educate yourself on crypto taxes and conveniently file them.

So let’s get started.

Key Data Points

‍

Latest Updates in Regulations/Guidelines

• April 26, 2023- DGAF conducts anti-fraud controls at the national level in economic areas with poor tax compliance

• April 25 2023- 300 Tax Inspections of large taxpayers

• 03/01/2023- Calendar of financial obligations for the year 2023 

How is Crypto Taxed in Romania?

The Agenția Națională de Administrare Fiscală (ANAF) is yet to release detailed guidance on how cryptocurrencies are taxed in Romania. However, the existing guidelines do mention that crypto is not considered legal tender in Romania, like most other countries and any income/gain incurred from crypto is taxable under the existing income tax rules.

Article 116(1) of Law 227/2015 deals with transactions related to crypto and categorises crypto income as income from alternative sources, and any gains incurred from the same are subjected to a PIT of 10%. Moreover, it states that calculating your gains, taxes, and any social contributions is your responsibility, not that of a business or an exchange.

Whether your transactions incur a capital gain or a profit depends on the nature of the transactions as seen by the ANAF.

Can the ANAF Track Crypto?

Yes, the ANAF can track your crypto transactions owing to the European Anti-Money Laundering Directives that compel crypto exchanges and other businesses operating in the space to record and share customer details with all member European states, and Romania is one of them. Therefore, it has access to your transactions and it can correlate them with your KYC details to identify any discrepancies.

Back in June 2022, the ANAF reported €49 million in collective unreported wealth after an audit performed on 63 investors with over €131 million in gains. The ANAF confirmed that investigators will look into suspicious transactions to identify under-reporting of profits to increase overall compliance with crypto reporting.

Crypto Capital Gains

Selling, swapping, or spending crypto assets is considered as a disposal by the Romanian tax authorities and the gains derived from such disposals are taxed under the existing income tax laws since there is no dedicated capital gains tax in Romania. Note that crypto losses aren't taxable and you can use them to offset your gains and lower your tax bill.

Gains/income from crypto are taxed under the existing income tax rules at 10% PIT for all individual investors.

Example

Suppose Dan bought 3 BTC at €15,000 each and then decided to sell 1 BTC for €20,000, swap another for 10 ETH tokens at an average price of €2,100, and finally decided to buy a premium watch worth €24,000 with the last token a few months later.

So the cost base for every BTC token is €15,000, and therefore disposal of the first BTC attracted a gain of €5,000 (Disposal Amount - Cost Base), the token swap resulted in a gain of €6,000, and finally spending the final BTC on the watch resulted in €9,000.

The collective gain comes out to be €20,000 and with a PIT of 10%, Dan’s tax liability comes out to be €2,000.

How to Calculate Crypto Gains and Losses

As previously mentioned, the ANAF clearly states that the impetus for calculating and reporting individual gains and losses lies with the investors. Therefore, you must be able to calculate your crypto gains and losses yourself.

Here’s how to do that.

The first step is to calculate your cost basis which is essentially the amount you paid to acquire a specific asset inclusive of exchange or network fees if you received it via an exchange. If you’ve acquired the asset from other sources like an Airdrop, the cost basis is simply the fair market value of the asset on receipt.

Once you have your cost basis, you can simply subtract it from the disposal price to calculate your gain or loss on a particular transaction.

Example:

Suppose you receive 5 ETH tokens from an airdrop priced at €1,700 each at the time of receipt. So the cost base for each token would automatically be €1,700. 

And let’s say you decide to dispose of 3 ETH tokens later in the year at an average price of €2,000 per token, the realised gain would be equal to €600 on this transaction (€2,000-1,700).

Crypto Losses 

Any capital losses incurred by investors due to crypto are tax deductible in Romania and you can even carry these losses forward for up to 7 years into the future.

Lost or Stolen Crypto

Many crypto investors have been victims of fraudulent activities in the crypto landscape, hacking incidents, rug pulls, and other deceptive schemes. Just like for other crypto transaction types, the ANAF is yet to provide clear guidance on how lost or stolen cryptocurrencies should be treated in terms of potential capital losses. We suggest contacting an experienced tax accountant if you feel like you can claim a deduction on your lost or stolen crypto.

Crypto Tax Breaks Romania

Since tax authorities in Romania are yet to release guidelines on multiple fronts, the demarcations of crypto taxations are not yet clear, which makes it difficult to identify crypto tax breaks in Romania. However, there are a couple of exemptions within the existing guidelines that you can use to save some taxes.

Gains of less than 200 lei from a single transaction are not taxable, given that your overall income is less than 600 lei/year. Note that if your total earnings from multiple sources is over 12 times the gross national minimum wage (30,600 lei in 2022), you will be required to make social security contributions. The maximum contribution is set at 10% of your taxable income, resulting in a capped amount of 3,060 lei.

Crypto Cost Basis Method Romania

The examples we used so far do not reflect the complexity of real-world crypto transactions. A crypto investor buys the same asset multiple times at different prices, so when it's finally time to dispose of the same assets, determining the cost basis can be a complex affair. That's exactly why investors use specialised accounting methods for cost-basis calculations.

Tax authorities prefer having a predefined method for cost-basis calculations to make sure there are no discrepancies in gain calculation and reporting.

The ANAF has not yet offered explicit guidelines regarding acceptable methods for determining the cost basis of cryptocurrency assets. However, in the case of corporations, methods such as FIFO (First-In, First-Out), LIFO (Last-In, First-Out), and ACB (Average Cost Basis) are permissible for income calculations. On the other hand, individual investors who hold shares are allowed to utilise the weighted average cost basis method.

The average cost basis method is pretty straightforward. If you own €30,000 worth of ETH tokens and the number of tokens in your possession is 15. Each ETH token inherits the average cost base of €2,000 (30,000/15). 

Crypto Income Tax Romania

According to the ANAF guidelines, when you receive crypto as compensation or reward for certain activities, then the transaction attracts income tax in Romania. The following transactions are categorised as income tax-bearing transactions:

1. Crypto mining
2. Crypto staking
3. Earning tokens through DeFi protocols
4. Earning tokens through other sources like interact-to-earn platforms

If your income is viewed as additional income by the ANAF, you will first be subjected to an income tax on receipt and a capital gains tax upon disposal.

Crypto Income Tax Rates

Romania doesn’t have a progressive tax structure, they instead have a blanket tax rate of 10% on every transaction called the Personal Income Tax (PIT).

How to Calculate Crypto Income

Calculating your crypto income is a fairly straightforward task. All you need to do is to add the fair market value (in RON) of all the tokens on receipt. And the total amount is what you’ll pay PIT on.

Example:

If you received 10 BTC tokens, 20 ETH tokens, and 15 Polygon tokens from three separate airdrops on three consecutive days. Now assuming the prices of the tokens to be the following on the day of receipt:

BTC- 10,000 RON

ETH- 1,500 RON

Polygon- 1 RON

The total income from the airdrops would be 1,30,015 RON (1,00,000 + 30,000 + 15). 

Tax-Free Crypto Transactions

Not all crypto transactions are taxed. Here’s a list of tax-free transactions in Romania:

• Purchasing crypto using fiat currency (lei or euros).
• Gifting crypto to another individual.
• Transferring crypto between your wallets.
• HODLing your crypto assets

Taxed Crypto Transactions

Here’s when you pay taxes in Romania:

• Selling crypto in exchange for fiat currency (lei or euros).
• Receiving mining and staking rewards
• Exchanging one type of crypto for another.
• Using crypto to make purchases of goods and services.

Tax on Mining Crypto Romania

While the ANAF has not provided explicit guidelines on the taxation of mining, it is anticipated that these rewards will be considered additional income. Therefore, upon receiving mining, you will likely be required to pay Income Tax based on the fair market value (in RON) of the rewards on the day of receipt.

Additionally, if you sell, swap, or spend the rewards obtained through mining, you will be subject to a 10% Personal Income Tax (PIT) on the resulting profits. It is important to account for these tax liabilities when engaging in such transactions involving mined coins or staking rewards.

Tax on Staking Crypto

Similar to mining, ANAF has not provided specific guidelines on the taxation of staking rewards. However, we can infer from the principles applied to crypto mining that staking rewards are likely to be subject to income taxes. It is important to treat these rewards as potential taxable income until the tax authorities offer further clarification.

How are Airdrops and Forks Taxed in Romania

The ANAF is yet to release guidelines on the taxation of income from airdrops and forks. We will be adding it here as soon as new guidelines hit our radar.

Crypto Gifts and Donations Taxes

Although the ANAF has not provided specific guidance on gifting crypto and the potential tax implications. However, considering the existing tax laws on gifting, it is highly probable that gifting crypto or receiving crypto as a gift is exempt from taxation in Romania. However, we do suggest consulting a tax expert on the matter.

Crypto Margin Trading, Futures, and CFDs

The ANAF is yet to release any guidelines on the taxation of gains derived from margin/future trades and derivatives like CFDs. However, we will be looking out for any new guidelines regarding the same and will add relevant details here when it’s available.

Crypto ICO Taxes

The ANAF has yet to provide specific guidelines for ICOs. However, given the nature of ICOs, which involve ownership in newly established crypto projects, and the similarities between tokens obtained from ICOs and those received as staking or mining rewards, it is highly probable that these transactions will be subject to similar tax treatment. 

NFT Taxes Romania

The ANAF is yet to release any guidelines on the taxation of NFTs in Romania. We’ll add all relevant details as soon as we get access to them.

DAO Taxes

Income generated from DAOs can stem from different sources, such as bounties, contribution rewards for contributors, and distributed profits. The ANAF has not yet issued any guidelines regarding the taxation of DAOs. We will closely monitor any new guidelines and promptly update the information here once they become available.

DeFi Crypto Taxes Romania

The ANAF has not yet issued any guidelines regarding the taxation of DeFi (Decentralised Finance) in Romania. Once we obtain access to the relevant information, we will promptly update this guide and add all the details on the taxation of DeFi activities.

When to Report Crypto Taxes in Romania?

The tax year in Romania starts on January 1st and ends on December 31st each year. Taxpayers who earn income from alternative sources, such as crypto, must file their annual tax return by May 25th of the following year.

How to Report Crypto Taxes in Romania

There are two ways to report crypto taxes to ANAF:

1. Offline using Personal Income Tax Return form
2. Online via ANAF Portal

In this tax guide, we will discuss offline mode because it’s the one most people prefer. So here’s how you can report your taxes manually using physical forms. 

1. Download the Personal Income Tax Return form from the ANAF website.
2. Complete the form, including all the information about your crypto transactions.
3. Attach any supporting documentation, such as purchase receipts, mining logs, or staking rewards statements.
4. Sign and date the form.
5. Mail the form to the ANAF address.

Here are some additional tips for filing crypto taxes with the ANAF:

• Keep good records of your crypto transactions. This will make it easier to complete the tax return form.
• Use a crypto tax calculator to help you calculate your capital gains and losses.
• Get help from a tax professional if you need it. A tax professional can help you understand the tax laws and ensure that you file your taxes correctly.

How to File Crypto Taxes Using Kryptos?

Now that you’re aware of how your crypto transactions are taxed and what forms you need to fill out to complete your tax report, here’s a step-wise breakdown of how Kryptos can make this task easier for you:

1. Visit Kryptos and sign up using your email or Google/Apple Account
2. Choose your country, currency, time zone, and accounting method 
3. Import all your transactions from wallets and crypto exchanges
4. Choose your preferred report and click on the generate report option on the left side of your screen and let Kryptos do all the accounting.
5. Once your Tax report is ready, you can download it in PDF format.

If you still have any doubts regarding the integrations or generating your tax reports, you refer to our video guide here.

What Crypto Records Will the ANAF Want?

Given the ANAF's increased scrutiny of crypto investors, it is crucial to maintain thorough records of your crypto transactions to be prepared for potential audits. It is recommended to maintain the following minimum records:

1. Dates of taxable transactions.
2. Specifics of the assets involved in each transaction (including the type of cryptocurrency).
3. The value of the assets (in RON) at the time of each transaction.
4. Details of the parties involved in the transaction (such as wallet addresses) and the purpose of the transaction.

You can opt for a smarter way of record-keeping instead of maintaining these records in the form of a manual ledger. You can simply import all your transactions to Kryptos and let Kryptos maintain the ledger for you.

How to avoid crypto taxes in Romania?

You’re legally required to pay your crypto taxes in Romania, and not doing so may attract legal trouble. However, you can reduce your tax liabilities using the following strategies:

• In Romania, gifting crypto to family members is likely to be tax-free since there is no specific guidance or Gift Tax for crypto. By using this strategy, you can transfer your crypto assets to your family without incurring any tax obligations.

• If the profit you earn from an individual transaction is less than 200 lei, you don’t need to report or pay taxes on that specific transaction. It's important to note, however, that this exemption applies solely if your overall income for the fiscal year is less than 600 lei.

• If your cumulative earnings from alternative sources, such as crypto investments, surpass 12 times the gross national minimum wage (amounting to 30,600 lei in 2022), you will be required to make social security contributions. The maximum contribution is set at 10% of your taxable income, resulting in a capped amount of 3,060 lei.

FAQs

‍

1. Is Crypto Legal in Romania?

Like most countries, Romanian tax authorities don’t consider crypto to be legal tender. However, this doesn’t mean that you cannot invest in crypto in Romania. You can buy, sell, swap, hold, and spend crypto in Romania as long as you comply with the local tax regulations and pay your taxes on time.

‍

2. How is Crypto Taxed in Romania?

The Agenția Națională de Administrare Fiscală (ANAF) in Romania has not yet provided detailed guidelines regarding the taxation of cryptocurrencies. However, it is established that cryptocurrencies are not considered legal tender in Romania, similar to other countries. Any income or gains derived from cryptocurrencies are subject to taxation based on the existing income tax rules.

According to Article 116(1) of Law 227/2015, crypto-related transactions are categorised as income from alternative sources. Any gains obtained from these transactions are subject to a capital gains or income tax rate of 10%. It is important to note that the responsibility for calculating gains, taxes, and social contributions lies with the individual, rather than a business or exchange.

‍

3. How can Kryptos help you in filing your crypto taxes?

We agree that filing your crypto taxes is an unreasonably complicated task, even for someone with a fair amount of prior knowledge. However, there’s an easy way to file your crypto taxes using a crypto tax software called Kryptos.

All you need to do is log in on the platform, add all your trading accounts, wallets, and DeFi accounts and sip coffee while Kryptos does all the heavy lifting. The platform can auto-fetch all your transactions from the tax year and generate a legally compliant tax report within minutes while suggesting ways to lower your tax bill. It works like magic. All you need to do is try it once.

‍

4. How to Avoid Crypto Taxes in Romania?

Failing to pay crypto taxes in Romania can have serious consequences. However, there are strategies to reduce your tax liabilities:

1. Gifting crypto to family members is likely tax-free since there is no specific guidance or Gift Tax for crypto. This allows you to transfer your crypto assets to your family without attracting tax obligations.

2. If the profit from an individual transaction is less than 200 lei, you are not required to report or pay taxes on that specific transaction. However, this exemption applies only if your overall income for the fiscal year is less than 600 lei.

3. If your cumulative earnings from alternative sources, including crypto investments, exceed 12 times the gross national minimum wage (30,600 lei in 2022), you must make social security contributions. The maximum contribution is 10% of your taxable income, with a cap of 3,060 lei.

‍

All content on Kryptos serves general informational purposes only. It's not intended to replace any professional advice from licensed accountants, attorneys, or certified financial and tax professionals. The information is completed to the best of our knowledge and we at Kryptos do not claim either correctness or accuracy of the same. Before taking any tax position / stance, you should always consider seeking independent legal, financial, taxation or other advice from the professionals. Kryptos is not liable for any loss caused from the use of, or by placing reliance on, the information on this website. Kryptos disclaims any responsibility for the accuracy or adequacy of any positions taken by you in your tax returns. Thank you for being part of our community, and we're excited to continue guiding you on your crypto journey!

Portugal has been a cradle for crypto investors ever since Bitcoin blew up and people started making astronomical gains on their investments. This compelled authorities in Portugal to moderate the space with taxes. Portugal has often been referred to as El Dorado for such investors.

Up until now.

In October 2022, the OECD published its final guidance on the Crypto-Asset Reporting Framework and Amendments to the Common Reporting Standard set forth to announce compliance with the international crypto transparency standards. The Portuguese State Budget for 2023 modified the definition of crypto assets to accommodate crypto taxation and eliminate the existing tax loopholes that prevented crypto taxation. 

If you’re curious about what has changed and how that will affect you, you’ve landed right where you should because we will tell you everything you need to know to conveniently file your crypto taxes at the end of this financial year.

How is Crypto Taxed in Portugal?

According to the changes proposed by the new budget, crypto assets are now defined as "any digital representation of value or rights that can be transferred or stored electronically using distributed ledger technology or similar". Which considers every class of crypto asset except single crypto and non-fungible tokens.

This definition complies with the agreement reached within the Regulation of the European Parliament, the Council on Markets in Crypto-assets and Amending Directive (EU) 2019/1937. Crypto assets are taxable in Portugal starting 2023, and any gains made from the disposal of such assets will be subjected to capital gains tax. Any income generated from these assets is considered business income and taxed accordingly.

In Portugal, there are three categories for crypto transactions:

PIT Category E (Capital Income): A Tax rate of 28% applies.

PIT Category G (Capital Gains Income): The Tax rate ranges from 14% to 53% based on the duration of holding the assets.

PIT Category B (Self Employement Income): Income derived from personal involvement in crypto issuance events like mining, staking, and ICOs

These categories are discussed in further detail later in the blog. The income generated from crypto transactions is subject to a progressive tax rate that varies from 14% to 53% based on your total income.

Example:

Consider the following transactions:

You bought 1 BTC for €12,000 in March 2022, and you later disposed of that BTC in July 2022 for €16,000.

Now capital gain/loss is simply the difference between the disposal amount and the cost basis (the amount paid for acquiring the asset).

Capital Gain/Loss =  €16,000 -  €12,000 =  €4,000

A flat rate of 28% is charged on this €4,000 gain. If your taxable income, including aggregate gains and losses, reaches or exceeds €78,834, progressive tax rates ranging from 14.5% to 53% will be applied to those gains based on your income level.

Moreover, for any gains incurred from transactions that are not mining profits, not airdrops, not NFTs, not PoS newly minted tokens and not capital gains, 15% of the income is taxable under the regular income tax brackets, and 85% is pure profit.

For instance, if you make a €100 gain, then €15 will be taxable under existing income tax brackets and the rest €85 will be profit.

Crypto Capital Gains Tax

Since crypto assets now have a new definition which allows for their taxation, any gains incurred from the disposal of crypto assets will be subjected to a capital gains tax. Unlike most European countries, Portugal doesn't have a progressive tax system and levies a flat tax rate across all capital gains transactions, irrespective of income group, demographic, or any other categorisation. A flat rate will apply to a positive balance of capital gains and losses arising from the disposal of said assets unless they are held for more than 365 days, in which case the transactions will be tax exempt. Although such transactions need to be reported on the tax return.

Capital Gains Tax Rate Portugal

There are three categories your transaction might fall into for tax purposes. Of which two categories attract capital gains tax.

PIT Category E(Capital Income)When you receive compensation in fiat currency as a result of your passive crypto investments, without involving any crypto transactions, it falls under this classification. The tax rate applied to such income is a fixed 28%. This category applies if your crypto income doesn't fall under any other classification.

PIT Category G(Capital Gains Income)In Portugal, the taxation of crypto assets entails several factors to consider. If you’ve held crypto for less than one year, any capital gains made with fiat currency will be subject to a 28% tax rate. On the other hand, gains accumulated over a year are tax exempt.

Security tokens are classified as securities and are taxed accordingly. Moreover, capital gains and losses from the sale of shares and other securities must be aggregated if they are held for less than 365 days and the total tax base in a year exceeds EUR 78,834.

The 365-day rule does not apply to individuals or entities outside the European Economic Area or jurisdictions without a Double Tax Agreement. If a person stops being a tax resident of Portugal, an Exit Tax of 28% will be imposed on all crypto assets held at the time, based on the difference between their market value and acquisition value determined through the FIFO accounting method.

PIT Category B(Independent Worker, Contractor)

Transactions involving the issuance of crypto assets, such as mining or validating crypto asset transactions through consensus mechanisms, are considered commercial and industrial activities and are taxed at a progressive rate ranging between 14.5 to 53% depending on the total income.

Income derived from the aforementioned transactions is considered realized at the moment of transferring the crypto assets in exchange for consideration. Termination of the activity or loss of Portuguese residency is treated as equivalent to transfers for consideration.

How to Calculate Crypto Gains and Losses

In Portugal, capital gains are taxable, and losses can be deducted from taxes. Therefore, it is important to understand how to calculate your crypto gains and losses accurately. The process involves two steps when dealing with a tax system that imposes capital gains tax on crypto disposals.

Firstly, you need to calculate the cost basis for each asset that you have sold, gifted, or exchanged during the tax year. This includes adding up the acquisition cost and any associated fees such as transaction fees and gas fees. You can deduct the following expenses during cost basis calculations:

Blockchain transaction fees Centralized Exchange transaction feesProfessional costs to draw up a contract for the acquisition or disposal of the tokensCosts of making a valuation or apportionment to be able to calculate gains or losses

You can use the FIFO accounting method to calculate the cost basis and once the cost basis is determined, you can calculate your capital gains or losses by subtracting the cost basis from the disposal amount. If the result is positive, it represents a gain and is subject to capital gains tax. Conversely, if the result is negative, it indicates a loss. Although losses do not incur tax liabilities, it is essential to track them as they can be deducted from your taxes in Portugal.

Example:

Consider the following set of transactions:

13/01/23 - Kevin bought 12 BTC for €12,000 each12/02/23 - Kevin bought 10 ETH tokens for €1,400 each15/03/23 - Kevin sells 12 BTC for €20,000 each17/04/23 - Kevin sells 10 ETH for €1,800 each

As evident from the above ledger, Kevin made 2 disposals, so let’s calculate the collective gain from both disposals.

1st Disposal

12 BTC sold for €20,000 each

Note that we will use the FIFO accounting method, as recommended by the tax authorities, to calculate individual gains. With FIFO, you sell the first asset you bought as an investor.

These BTC tokens are the same ones acquired on 13/01/23 for €12,000 each

Cost basis = €12,000

Disposal Amount = €20,000

Capital Gains/loss = Disposal Amount - Cost Basis = €20,000 - €12,000 = €8,000 (For 1 BTC)

Gain from 12 BTC = 12*8,000 = €96,000

2nd Disposal

10 ETH sold for €1,800 each

These ETH tokens are the same ones acquired on 12/02/23 for €1,400 each

Cost Basis = €1,400

Disposal Amount = €1,800

Capital Gain = Disposal Amount - Cost basis = €1,800 - €1,400 = €400(for 1 ETH)

Gain from 10 ETH = 10*400 = €4,000

Total Gain from both disposals = €96,000 + €4,000 = €1,00,000

The gains will be taxed at a flat 28% tax rate since the disposal was made within a year.

Crypto Losses

According to the new tax regime, losses incurred via the disposal of crypto assets can be treated as tax-deductible in Portugal, given that losses are reported on the tax return in the same year they occur. A negative balance between crypto gains and losses can be used to offset up to 70% of your gains and can be carried forward for up to 5 years. Lost or Stolen Crypto

In Portugal, lost or stolen crypto is not considered a tax-deductible expense. This means you cannot claim a deduction for any losses incurred due to theft, loss, or other similar circumstances. However, if you have suffered a loss due to theft or another crime, you may be able to claim compensation or insurance benefits, which could help to offset your losses.

Crypto Tax Breaks Portugal

Although the crypto tax regime in Portugal is new and barely talked about, we were able to extract a few strategies that may help you lower your tax bill. However, note that this is purely subject to the assumption that no new additions will be made to the new tax regime this year.

Long-Term Capital Gains Tax

As previously mentioned in the blog, if you’ve held your crypto for more than a year, you don’t need to pay any taxes on your gains unless the assets in your portfolio are categorised as securities.

Gift Crypto to Your Friends and Family

If you donate to a family member or friend, it may be subject to the gift tax. The gift tax rate in Portugal varies depending on the value of the gift and the relationship between the donor and the recipient.

For example, if you give a gift to a spouse, descendant, or ascendant, the gift tax rate is 0.8% for gifts up to €1,000,000 and 1.2% for gifts over €1,000,000. For gifts to other individuals, the gift tax rate is 10%.

Convert Crypto to Stablecoins

Crypto-to-crypto trades are tax-free in Portugal and investors can couple this with the 365 day rule to pay zero taxes on their gains. So, Instead of converting crypto assets to fiat, investors can convert them to stablecoins to avoid immediate taxation.

This has two direct benefits-

Investors can escape market volatility, keeping their gains safeThe stablecoins, once held for 365 days or more, become tax free

Here’s an example-

Let’s say Lisbon buys 20 ETH for €40,000 in June 2021 and her investment grows to €65,000 in January 2022. Now, Lisbon wants to keep her gains safe from market volatility, but at the same time doesn’t want to pay capital gains tax.

She can do this by simply converting her ETH tokens to USDT and since crypto-to-crypto trades (or Crypto Swaps) are tax-free in Portugal, the event doesn’t trigger any tax liabilities. Now, all Lisbon needs to do is hold these stablecoins for over a year and then convert them to fiat to enjoy her tax-free gains.

Donate Your Crypto

In Portugal, individuals who donate to registered nonprofit organisations can qualify for tax exemptions on their income tax returns. The tax exemption is calculated at 25% of the donated value, with a maximum limit of 15% of the donor's taxable income.

This means that individuals can donate up to 15% of their taxable income and receive a tax deduction equivalent to 25% of the donation amount. To be eligible for the tax exemption, the nonprofit organisation must be registered with the Portuguese Tax and Customs Authority and meet specific criteria. The donation must be made by a Portuguese resident or a non-resident who receives income from Portuguese sources.

Crypto Cost Basis Method Portugal

The most commonly used method is FIFO (First-In, First-Out) accounting, which assumes that the first items purchased are the first items sold or used. While businesses in Portugal are not prohibited from using LIFO or HIFO accounting, they may need to justify their use of these methods and demonstrate that they are consistent with GAAP and accurately reflect the company's financial position.

Here’s an example that explains how FIFO accounting works:

Let's say you bought 1 Bitcoin (BTC) for €5,000 on January 1st, another 2 BTC for €7,000(each) on March 1st, and 3 BTC for €8,000(each) on May 1st. On June 1st, you decide to sell 1 BTC for €12,000.

Based on the FIFO accounting method, the BTC you sold would be the first one you bought in January, with a cost basis of €5,000. You sold it for €12,000, resulting in a capital gain of €7,000.

Crypto Income Tax Portugal

Under Portugal's tax laws, income from transactions involving crypto-assets is considered professional or commercial. If the taxpayer's gross business income in the previous fiscal year is below €200,000, it will be taxed as business income.

For income generated from crypto-asset operations conducted as a business, 15% of the gross income will be subject to progressive tax rates without considering other deductions or costs. The effective tax rate should not exceed 8% of the gross proceeds in such cases. In the case of mining activities, 95% of the gross income will be taxable at progressive rates.

Income Tax Rate Portugal

Income derived from crypto transactions is taxed at a progressive tax rate ranging between 14-48%. Non residents pay a flat tax rate of 25% on any Portugese-sourced income.

‍

How to Calculate Crypto Income

Calculating your crypto income is a fairly straightforward process, you just need to add all the individual gains and any additional income incurred from activities like staking and mining. The value of the assets received as mining and staking rewards is simply taken to be the fair market value of the assets upon disposal.

Tax-Free Crypto Transactions

Under the new tax regime in Portugal, most crypto transactions are now taxable. However, there are still some transactions that remain tax-free-

• Buying crypto with fiat
• Buying/selling/trading NFTs
• Holding crypto for over a year
• Trading one crypto for another
• Inheriting crypto assets
• Transferring crypto assets between wallets

Taxed Crypto Transactions

Here are taxable crypto transactions in Portugal:

• Selling cryptocurrency for fiat currency
• Receiving cryptocurrency as payment for goods or services rendered
• Mining cryptocurrency
• Using cryptocurrency to purchase goods or services (may be subject to VAT)
• Gifting crypto
• Donating crypto

Tax on Mining Crypto 

In Portugal, income derived from mining activities related to cryptocurrencies is considered a professional or commercial activity and is subject to taxation under the country's tax laws.

The Portuguese Tax Authority applies progressive tax rates to mining activities, where 95% of the gross income is subject to taxation. This means that as the income amount increases, the tax rate also increases progressively.

The remaining 5% is presumed to be a fixed expense while carrying out the mining activities. Alternatively, if the mining activity is ceased, 85% of the sale price is considered taxable income. For instance, if a taxpayer earns €1,000 from mining, they will only be taxed on €950 in the former scenario, or €150 in the latter.

Taxpayers with income not exceeding €200,000 ($210,000) of gross business income in the previous fiscal year will be subject to a special tax regime. Under this regime, 15% of the gross income from the majority of cryptocurrency operations carried out under a business activity will be taxable at progressive rates, with the effective tax rate capped at 8% of gross proceeds.

Tax on Staking Crypto

Staking and mining are two different ways of adding and validating transactions on a blockchain. Proof-of-Work networks support mining and Proof-of-stake networks support staking. 

The Portuguese Tax Authority (AT) has not provided specific guidance on the taxation of staking rewards. However, it is generally understood that tax authorities consider staking and mining rewards as similar. Therefore, it can be reasonably assumed that staking rewards would be subject to the same tax liabilities as mining rewards in Portugal.

In the same vein, we suggest seeking guidance from an experienced tax professional to avoid complications.

Crypto Margin Trades, Futures, and CFDs

In Portugal, income derived from crypto margin trades, futures, and Contracts for Difference (CFDs) is subject to taxation as capital gains. The capital gains tax applies to the difference between the purchase price and the sale price of the asset, and the applicable rate varies depending on the capital gains earned by the taxpayer.

Crypto Gifts and Donation Taxes

When donating to a family member or friend in Portugal, the gift tax rate depends on the value of the gift and the relationship between the donor and recipient. Rates range from 0.8% to 10%. Free transfers of crypto assets are subject to Stamp Tax at a rate of 10%. This applies when the crypto assets are deposited in institutions located in Portugal. Moreover, the tax is applicable if the author of the transfer has their domicile in Portugal in the case of inheritance, or if the beneficiary has their domicile in Portugal in the case of other free transfers. 

For donations to nonprofits, the tax exemption is calculated at 25% of the donation's value, up to a maximum of 15% of the donor's total taxable income. The nonprofit organization must be registered with the Portuguese Tax and Customs Authority, and the donor must be a Portuguese resident or receive income from Portuguese sources to qualify for the tax exemption.

ICO Taxes

The AT is yet to release any concrete guidance on the taxation of income from ICOs. The Portuguese Securities Market Commission (CMVM) is closely monitoring the launch of tokens through Initial Coin Offerings (ICO). In a press release dated July 23, 2018, CMVM advised that anyone planning to launch a cryptocurrency should first contact them. CMVM emphasised the need to evaluate each case individually due to the complexity of cryptocurrencies.

However, we’re still awaiting fresh guidance regarding their taxation and will update relevant details here as soon as the guidelines are released.

DAO Taxes

The AT is yet to release any guidelines on income received from DAOs. We are constantly looking for new guidelines, and all relevant details will be added here as soon as they hit our radar.

NFT Taxes Portugal

The new tax regime doesn’t have any guidance concerning the taxation of NFT-related transactions since the revised definition of digital assets doesn’t have any mention of NFTs, therefore, it can be assumed that NFT transactions are exempt from personal income tax laws.

DeFi Crypto Taxes Portugal

There is no specific guidance on how DeFi transactions will be taxed in the new tax regime. However, a few details can be inferred from the existing guidelines and looking at how other European countries with similar tax laws view DeFi transactions.

Drawing from the current tax legislation, it appears that any income made from lending activities will be categorised as capital income and subjected to taxation. Moreover, if an investor earns a reward from a DeFi platform based outside of Portugal for staking, or offering liquidity, such earnings may be exempted from taxation if they have already been taxed in the source state given that a double tax agreement exists between that state and Portugal.

How are Airdrops and Forks Taxed in Portugal?

Airdrops

In Portugal, if an individual receives free cryptocurrency through an airdrop, it is taxed under stamp duty laws. The value of the tokens received would be determined based on their market value at the time of conversion of the airdrop to fiat. The applicable tax rate ranges from 4% to 10%.

Forks

In Portugal, in the event of a fork where a new cryptocurrency is created from an existing one, the new tokens may be viewed as taxable income. However, whether it is taxable or not would depend on the specific circumstances of the fork and whether it meets the criteria set by the tax authorities for taxable income.

When to Report Crypto Taxes in Portugal?

The tax year in Portugal runs from January 1st to December 31st. Tax returns must be filed by April 30th of the following year, unless the taxpayer has a certified tax representative or has opted for an extension to file the return, in which case the deadline is extended to May 31st. 

It's important to note that taxpayers who fail to submit their tax returns on time may be subject to penalties and fines. Moreover, if a taxpayer's tax situation changes during the year, they may need to report and pay taxes quarterly or monthly.

How to File Crypto Taxes in Portugal

In Portugal, taxpayers can file their tax returns online through the Tax Authority's website or the eFatura platform. Here’s a stepwise tutorial on how you can file your crypto taxes online using the eFatura portal:

1. First, gather all necessary details and documentation related to crypto transactions, such as the date of purchase, the amount purchased, the purchase price, and the sale price. You must also have a valid Portuguese tax identification number (NIF).

2. Log in to the eFatura portal using your NIF and password. If you don't have an account, you can register for one on the portal's website.

3. Once you are logged in, navigate to the section for "Atividades Económicas" or "Economic Activities."

4. Under "Atividades Económicas," select the option for "IRS" or "Imposto sobre o Rendimento das Pessoas Singulares," which is the personal income tax.

5. Next, select the option for "Rendimentos Empresariais e Profissionais" or "Business and Professional Income."

6. In the section for "Rendimentos Empresariais e profissionais," select the option for "Regimes Especiais de Tributação" or "Special Taxation Regimes."

7. Under "Regimes Especiais de Tributação," select the option for "Criptomoedas" or "Cryptocurrencies."

8. Once you have selected "Criptomoedas," you will be prompted to enter the details of your crypto transactions, including the date, amount, purchase price, and sale price.

9. After you have entered all the necessary information, review your submission and make sure all details are correct.

10. Finally, submit your crypto tax report through the eFatura portal. The Tax Authority will review your submission and send you a confirmation of receipt.

How to File Crypto Taxes Using Kryptos?

Now that you’re aware of how your crypto transactions are taxed and what forms you need to fill out to complete your tax report, here’s a step-wise breakdown of how Kryptos can make this task easier for you:

1. Visit Kryptos.io and sign up using your email or Google/Apple Account
2. Choose your country, currency, time zone, and accounting method 
3. Import all your transactions from wallets and crypto exchanges
4. Choose your preferred report and click on generate report option on the left side of your screen and let Kryptos do all the accounting.
5. Once your Tax report is ready, you can download it in PDF format.

If you need more details regarding the integrations or generating your tax reports, you refer to our video guide here.

What Records will the Autoridade Tributária e Aduaneira want?

When filing taxes in Portugal, the Autoridade Tributária e Aduaneira (AT) may require individuals to provide various records and documents related to their crypto activities. Some of the records that may be requested by the AT include-

• Records of all crypto transactions made during the tax year, including the date, amount, and value of each transaction.

• Proof of ownership and transfer of any cryptocurrencies, such as digital wallet addresses and private keys.

• Records of any earnings or gains from crypto activities, such as mining, trading, or staking.

• Expense documentation related to crypto activities, such as fees for trading or mining equipment.

• Records of any losses from crypto activities, including documentation of the loss amount and evidence of the transaction that resulted in the loss.

How to Avoid Crypto Taxes in Portugal?

Although there’s no legal way to avoid paying crypto taxes entirety, you can use some of the strategies given below to lower your tax bill:

1. HODL Your Crypto Assets: Holding your crypto assets for over a year is tax-free in Portugal unless your assets are classified as securities
2. Gift Crypto to Your Friends and Family: Gifting crypto to your friends and family attracts a nominal tax rate of 0.8% in Portugal.
3. Donate Crypto to a Registered Charity: In Portugal, when you donate to a nonprofit organisation, you may be eligible for tax exemptions on your income tax return.
4. Crypto to Crypto or Crypto Into Stablecoins: Since exchanging crypto is now tax exempt in Portugal, you can convert your crypto into stablecoins to avoid immediate tax obligations.

These strategies have been discussed in detail above under the section titled “Crypto Tax Breaks Portugal”.

Frequently Asked Questions(FAQs)

1. Is Crypto Legal in Portugal?

Yes, cryptocurrency is legal in Portugal. In 2021, the Portuguese Parliament passed legislation offering a legal framework for the issuance and use of cryptocurrencies, blockchain technology, and related services.

2. Is any Crypto tax-free in Portugal?

No, no cryptocurrency is inherently tax-free in Portugal. The Portuguese tax system requires individuals to report any income or gains earned from cryptocurrency transactions and pay taxes accordingly.

3. How to file crypto taxes using Kryptos?

We’ve already discussed how to file your crypto taxes in the above sections of the guide offering a step-wise breakdown of the entire process. However, we agree that it is unreasonably complicated even for someone with a fair amount of prior knowledge. Although there’s an easy way to file your crypto taxes using a crypto tax software called Kryptos

All you need to do is log in on the platform, add all your trading accounts, wallets, and DeFi accounts and sip coffee while Kryptos does all the heavy lifting for you. The platform can auto-fetch all your transaction from the tax year and generate a legally compliant tax report within minutes while suggesting ways to lower your tax bill. It works like magic all you need to do is try it once.

4. How is Crypto as Wages Taxed in Portugal?

In Portugal, the tax treatment of cryptocurrency wages depends on the nature of the income received. If cryptocurrency wages are classified as salary (Category A under the PIT Code), they will be subject to capital income tax. On the other hand, if cryptocurrency is classified as self-employment income (Category B under the PIT Code), it will be taxed as self-employment income.

All content on Kryptos serves general informational purposes only. It's not intended to replace any professional advice from licensed accountants, attorneys, or certified financial and tax professionals. The information is completed to the best of our knowledge and we at Kryptos do not claim either correctness or accuracy of the same. Before taking any tax position / stance, you should always consider seeking independent legal, financial, taxation or other advice from the professionals. Kryptos is not liable for any loss caused from the use of, or by placing reliance on, the information on this website. Kryptos disclaims any responsibility for the accuracy or adequacy of any positions taken by you in your tax returns. Thank you for being part of our community, and we're excited to continue guiding you on your crypto journey!

Switzerland has been widely regarded as a haven for crypto investors and startups. It is home to more than 900+ crypto companies, and the crypto adoption rate stands at 20%, well above the global average of 16%. Part of the reason why crypto adoption is high is because most individual investors don’t have to pay capital gains tax in Switzerland. If you have invested in BTC, ETH, or any other crypto as an individual investor, you don’t need to pay CGT on your gains, but other types of taxes may apply. Fortunately, the Federal Tax Administration (FTA) in Switzerland has clear guidelines on how different crypto transactions are taxed.

You can either refer to the detailed guidance here or read this guide where we have structured all the important details in a more digestible fashion. The guide goes at length to discuss various aspects of crypto taxation like How is crypto taxes in Switzerland? How to avoid crypto taxes? What are some tax-saving strategies? When to file crypto taxes? And more. 

Note that this guide is quite extensive, therefore, we suggest you read it thoroughly to ensure that you don’t miss out on any crucial details. Moreover, this guide will be updated regularly to accommodate any new guidelines/laws/rules, so make sure you keep revisiting the guide to stay updated on taxation trends in Switzerland. 

How is Crypto Taxed in Switzerland

Crypto is categorised as kryptobasierte vermögenswerte or crypto-based assets in Switzerland since the authorities do not consider them to be legal tender. This means that crypto assets are similar to securities like stocks and bonds, which is good news for individual investors because there is no capital gains tax on gains derived from private wealth assets in Switzerland.

However, you do need to pay CGT on your gains if you’re a trader or operating as a business. However, your capital gains are directly added to your income and taxed at regular income tax rates. 

There are two other types of taxes crypto transactions attract in Switzerland, they’re income tax and wealth tax.

Income Tax

Income taxes are slightly complicated when compared to other taxes in Switzerland. There are three types of income taxes:

1. Federal Income Taxes
2. Cantonal Income Taxes 
3. Municipal Income Taxes

Regardless of where you reside in Switzerland, the federal income taxes remain the same

The federal income tax rates are the same regardless of where you stay in Switzerland. However, the cantonal income tax rates may vary. There are a total of 26 cantons and 2,136 municipalities in Switzerland. The federal income tax rates vary from 0 to 11.5% based on the level of income.

Wealth Tax

Wealth tax applies to all personal wealth assets in Switzerland including:

1. Stocks and Bonds
2. Physical assets like precious metals, property, and automobiles
3. Crypto Assets

Wealth tax applies to the value of the assets reported at the end of the financial year. The total value of crypto assets is to be calculated at the end of the tax year based on the price list published by the FTA. If the price of a particular asset is not specified by the FTA, you can use the fair market value of the asset from a reputable source and pay taxes on the value.

Wealth tax varies based on the canton you live in, although most cantons have a tax rate of 0.3 to 1%.

Can the FTA Track Crypto

Data security is often mistaken for data anonymity in the crypto space. Blockchains have public ledgers and all your transactions are stored there, so it’s easy to track someone’s crypto transactions if one knows where to look. Due to the strict regulations governing investments in digital assets, exchanges usually have to comply with stricter KYC regulations. Under the proposed AMLD-6 (Anti-Money Laundering Directive), companies offering financial services in Europe are mandated to share KYC details and investor records with all EU member states.

Moreover, directives like the DAC-8, expected to come into force by January 2026, are aimed at boosting data visibility and better compliance to fight money laundering and tax frauds in the crypto sphere.

We suggest you get rid of any doubts you have about the FTA being able to track your transactions and any plans you might have for not reporting some of your gains on the tax report. 

Capital Gains Tax

As mentioned previously, individual investors are exempt from capital gains tax in Switzerland. However, it’s a different story if you’re a trader or if you operate in a business setting. To be categorised as an individual investor, you have to meet the following criteria:

• The investor has held crypto for over 6 months
• The trading turnover is less than 5 times the holdings at the beginning of the tax year
• The capital gain is less than 50% of the investor’s total income in a tax year
• The investor has zero debt-financing 
• The investor uses derivatives only as a hedge to protect investments

Each canton decides whether you’re an individual investor or a professional trader, so if you’re not sure what category you fall in, seek advice from an experienced tax accountant.

Capital Gains Tax Rate 

There’s no dedicated capital gains tax in Switzerland, any gains are simply added to the income and taxed based on the income tax rates in the case of professional traders and businesses.

How to Calculate Crypto Gains and Losses

Calculating your capital gains and losses is a straightforward process. You just need to deduct your cost basis from the disposal amount of the asset. However, the concept of cost basis might be a little intimidating for new investors. The cost basis is simply the price you pay to acquire the asset inclusive of any gas fees or transaction fees.

You can use this formula to calculate your capital gains and losses:

Capital Gain/Loss = Disposal Amount - Cost Basis

Consider the following example:

Julia bought 1 BTC for 20,000 CHF 

Julia sold 1 BTC for 27,600 CHF

Let’s say Julia paid 150 CHF in exchange fees while acquiring the BTC

Cost Basis = 20,000 CHF + 150 CHF = 20,150 CHF

Now, 

Capital Gain/Loss = Disposal Amount - Cost Basis = 26,500CHF - 20,150CHF = 6,350 CHF

Crypto Losses

Since capital gains are not taxable in Switzerland as an individual investor, you won’t be able to deduct your crypto losses. However, it’s a different story if you’re a professional trader or a business.

You can claim a deduction on your capital losses since the FTA assesses them on a case-by-case basis. Therefore, we suggest contacting the FTA regarding the same.

Loss or Stolen Crypto

There is no specific guidance on how lost or stolen crypto is viewed from a tax perspective. But, likely, you won’t be able to deduct lost or stolen crypto from your crypto income because crypto capital gains are not taxable.

Crypto Tax Breaks Switzerland

Avoiding crypto taxes can attract legal trouble in Switzerland. However, here are some strategies you can use to lower your tax bill.

1. Make Investments as an Individual Investor

As mentioned earlier, capital gains are exempt from taxation for individual investors. So any gains you make from your crypto investments are exempt from taxation, given that you fulfil the criteria set by the FTA to be an individual investor.

2. Wealth Tax Allowance 

There are exemption limits for wealth tax in Switzerland. If the total value of your assets is less than the exemption limit, you owe no gift taxes. However, these exemption limits are canton-specific and will vary based on where you live. Also, note that the exemption limit goes up if you have dependents.

3. Income Tax Allowance

In Switzerland, every citizen is allowed a federal income tax allowance of 14,500 CHF, meaning that you only pay income taxes on the amount that exceeds this allowance. You might also get a canton-specific income tax allowance based on where you live.

Crypto Cost Basis Method Switzerland

Cost basis calculations are irrelevant for private investors because capital gains are tax-exempt. If you’re a professional trader or a business, you can use any one of the following cost-basis methods to calculate your cost base.

1. FIFO (First-In-First-Out)

The FIFO accounting method states that the first asset you buy is the first one you sell. This simply means that the acquisition price of the earliest acquired asset shall be the cost basis for the first disposal.

2. LIFO (Last-In-First-Out)

The LIFO method states that the last asset you buy is the first one you sell. Meaning that the acquisition price of the latest asset you buy is to be used as the cost basis for your first disposal.

3. HIFO (Highest-In-First-Out)

The HIFO accounting method considers the asset with the highest acquisition price as the first one sold. 

4. ACB (Average Cost Basis Method)

The average cost basis method is different from all the other accounting methods on the list. Because it states that the cost basis for a particular asset is equal to its average acquisition price across all acquisitions. In other words, the cost basis remains constant across all disposals.

Consider the following example:

13/01/22 - Eric Bought 1 ETH for 1,200 CHF

19/03/22 - Eric Bought 1 ETH for 1,800 CHF

15/06/22 - Eric Bought 1 ETH for 1,500 CHF

23/07/22 - Eric Sold 1 ETH for 2,000 CHF

Now, since Eric acquired ETH at three separate instances for different prices, he will have to use one of the above-listed accounting methods for cost-basis calculations.

We shall use each of the following to see the effect on the final gain.

1. Using FIFO 

Since FIFO suggests that the acquisition price of the first asset is the cost basis for the disposal.

Cost Basis = 1,200 CHF

Disposal Amount = 2,000 CHF

Capital Gain = Disposal Amount - Cost Basis = (2,000 - 1,200) CHF = 800 CHF

2. Using LIFO

LIFO is the opposite of FIFO and suggests that the acquisition price of the first asset is the cost basis for the first disposal.

Cost Basis = 1,500 CHF

Disposal Amount = 2,000 CHF

Capital Gain = Disposal Amount - Cost Basis = (2,000 - 1,500) CHF = 500 CHF

3. Using HIFO

HIFO is different from FIFO and LIFO, it suggests that the highest acquisition price for an asset is used as the cost basis for its disposal.

Cost Basis = 1,800 CHF

Disposal Amount = 2,000 CHF

Capital Gain = Disposal Amount - Cost Basis = (2,000 - 1,800) CHF = 200 CHF

4. Using ACB

ACB simply assumes the average acquisition price across all instances to be the cost basis for the disposal.

Cost Basis = (1,200 + 1,500 + 1,800)/3 = 1,500 CHF

Disposal Amount = 2,000 CHF

Capital Gain = Disposal Amount - Cost Basis = (2,000 - 1,500) CHF = 500 CHF

 Crypto Income Tax

As an individual investor, you might be exempt from the capital gains tax, however, you have to pay income tax on any crypto received as compensation for the provisioning of services or labour. For instance, any compensation received as salary in crypto, the payment received for providing a service as a freelancer or contractor, or tokens received through airdrops, mining, and staking are all considered income and taxed under the same laws.

There are three different categories of income tax in Switzerland.

1. Federal Income Tax- As mentioned earlier, the federal income tax rate is independent of where you reside in Switzerland.

2. Cantonal Income Tax- Each canton has the authority to set independent rates for people residing in the area.

3. Municipal Income Tax- Municipalities are governed by the cantons they fall into, and although they have the authority to introduce independent tax rates, they usually have one assigned by the cantonal authorities.

There are 26 cantons and 2,136 municipalities in Switzerland, and the tax rate you end up paying depends heavily on where you reside in Switzerland. 

Crypto Income Tax Rate

Of the three types of income taxes in Switzerland, only federal income tax has a fixed rate. Federal Income Taxes are progressive and are divided into income-based brackets. Following are the tax brackets and the corresponding federal income tax rates:

How to Calculate Crypto Income 

Calculating your crypto Income is less complicated than calculating capital gains and losses. You just need to add the individual value of assets received as income including those received from airdrops, staking, mining, or as compensation for provisioning a service. It is important to maintain records of the fair market value of the assets at the time of receipt. 

Tax-Free Crypto Transactions

Several transactions do not attract tax liabilities in Switzerland:

1. Buying crypto with CHF
2. Selling/Trading Crypto as an individual investor
3. Spending Crypto
4. Transferring crypto between personal wallets
5. HODLing Crypto

Taxed Crypto Transactions

Here are some transactions that are taxed in Switzerland:

1. Mining Crypto
2. Staking Crypto
3. Receiving Crypto through airdrops

Tax on Mining Crypto

Assets received as compensation for validating new blocks of transactions on a proof-of-work network (staking) are considered income both by the cantonal authorities and the FTA. This means that you’ll have to pay income tax on the fair market value of the assets upon receipt. The amount of tax you pay varies based on where you live in Switzerland. 

Note that the tax implications will vary heavily, based on how your mining activities are perceived at the federal and cantonal levels. Mining activities can be perceived as the following:

1. Mining as an individual investor
2. Mining as a trader
3. Mining as a business

To complicate things further, each canton has its own set of rules and limits to determine which category you fall in. If you’re seen as a hobbyist miner (mining as an individual investor), you’ll only have to pay income tax on the FMV of the assets at the time of receipt. 

Tax on Staking Crypto

Although mining and staking are different in the way they verify and add new transaction blocks to the network, they’re viewed through the same lens by the tax authorities. The FTA is no exception, staking rewards are considered similar to mining rewards from a tax perspective and taxed accordingly. 

In the latest guidelines around crypto taxation, the FTA states that income derived from staking on proof-of-stake networks is classified as movable property if you’re an individual investor. However, if you happen to be a trader, then the staking rewards are viewed as income generated from self-employment.

Whatever may be the case, staking rewards are taxed as income on receipt. The exact amount of tax you pay on these rewards and any deductions allowed vary based on where you live.

How are Airdrops and Forks Taxed in Switzerland

The latest guidelines on crypto taxation make it very clear that any assets received from airdrops are seen as income from the movable property and taxed accordingly at the time of receipt. The FMV of the asset at the time of receipt is your taxable income base.

The FTA has not yet provided specific guidelines regarding the taxation of income from forks in the cryptocurrency space. Soft forks, where no new tokens are created, are likely to be considered non-taxable. However, hard forks are treated differently. Tokens received from hard forks may be viewed as income, given the FTA's strict stance on tokens received from airdrops.

To gain a deeper understanding of how such transactions are taxed, it is advisable to consult with an experienced tax professional to better understand the tax implications of such transactions.

Crypto Gifts and Donation Taxes

Gifting

Gifting crypto assets is a taxable event in Switzerland and the amount of taxes you pay depends on what region you reside in. The tax rate varies from 0-36% and each canton has its own set of rules and guidelines around gift taxation.

The tax rate you pay on gifted assets depends on the following factors:

1. The total value of the gifted assets
2. Kind of assets being gifted
3. The canton you reside in
4. Your relationship with the recipient

To know more about the canton-specific tax rules, visit here.

Donations

While there is no specific guidance regarding the tax-deductibility of crypto donations, it's important to note that donating over 100 CHF to a qualified Swiss charity can be deducted from your taxable income. The deductibility of crypto donations may vary depending on the jurisdiction and local tax regulations. It is recommended to consult with a tax professional or refer to the canton-specific guidelines to determine the tax implications of crypto donations and their potential deductibility.

Crypto Margin Trades, Futures, and CFDs

Although the FTA is yet to release specific guidance on how margin trades, futures, and CFDs are taxed, however, they do have detailed guidance on the taxation of traditional securities and derivatives. And it’s good news yet again for individual investors because just like in the case of traditional crypto assets, individual investors are exempt from capital gains tax derived from margin or leverage trades. 

However, such gains attract CGT if you’re a professional trader or a business operating in the region.

Crypto ICO Taxes

ICOs (Initial Coin Offerings) and IEOs (Initial Exchange Offerings) are special events that allow investors to invest in new projects in exchange for native tokens like ETH or BTC. Such transactions are generally viewed as crypto-to-crypto trades across tax jurisdictions and the FTA likely holds a similar view.

If that happens to be the case, any income from ICOs or IEOs will be exempt from CGT for individual investors.

NFT Taxes Switzerland

In Switzerland, there is currently no specific guidance on how NFT (Non-Fungible Token) transactions are taxed. However, we can make inferences based on existing guidelines regarding cryptocurrency taxation to understand how a majority of NFT transactions may be taxed:

1. Buying NFTs with fiat: Tax-Free if you’re an individual investor
2. Converting NFTs to fiat: Tax-Free if you’re an individual investor
3. Swapping NFTs: Tax-Free for individual investors
4. Minting NFTs: Likely Tax-Free for an individual investor
5. Creating and Selling NFTs: Depending on the scale of your operations, this may be viewed as an income, and taxed accordingly. We suggest seeking guidance from an experienced tax professional to better understand the tax implications.

DAO Taxes

DAOs are member-owned communities with a shared vision. All the decisions in a DAO are made by members in the absence of central leadership. DAOs are new-age institutions that aim to democratise decision-making and allow people to have a say in decisions that directly affect them. DAOs are often called the soul of Web3 and enable members to earn rewards in multiple ways. DAO contributors are rewarded for their contributions to the organization, similar to how centralized organizations pay salaries to their employees. They also pay out bounties for one-time projects and redistribute any profits generated through operations.

There is no specific guidance on how income from DAOs is viewed from a tax perspective, however, income from DAOs will likely be viewed as compensation for contributions to a DAO and hence taxed under existing income tax laws. It would be prudent to seek guidance from an experienced tax professional to understand the tax implications of such transactions

DeFi Crypto Taxes

The FTA is yet to release detailed guidance on how DeFi transactions are viewed from a tax perspective. But like in most other instances that does not make DeFi transactions tax-free. It just means that you need to interpret the current guidance in the context of DeFi and proactively record and report such transactions. And since that might be a complicated task, we made the effort for you. Here are the possible tax implications of individual DeFi transactions:

• Staking on DeFi protocols: Income Tax
• Liquidity Mining: Income Tax on any new liquidity pool tokens
• Yield Farming: Personal Income Tax
• Interest Income from DeFi protocols: Income Tax(likely)
• Adding/Removing Liquidity: Tax-Free
• Borrowing from DeFi protocols: Tax-Free
• Income from Play-2-Earn, Engage-2-Earn protocols: Tax-Free for individual investors

When to report Crypto Taxes in Switzerland

In Switzerland, the tax year aligns with the calendar year, and taxpayers are required to submit their tax returns by March 31st of each year. Therefore, for the 2022 calendar year, the tax return should be filed by March 31, 2023. However, if you can’t make the deadline, you can typically obtain a free extension in most cantons.

How to File Crypto Taxes in Switzerland

Switzerland comprises 26 cantons, and each canton is responsible for collecting wealth and income tax from its residents and reporting it to the Federal Tax Authority (FTA). Due to the variations in rules and guidelines across cantons, there is no universal tax filing procedure in Switzerland. The amount of tax you pay is dependent on the region in which you reside. Listed below are some examples of how different cantons have different taxation rules.

Canton of Zug

• Crypto assets are declared in the securities list (code 160 for asset income, code 600 for assets).

Canton of Zurich

• Crypto assets are declared as other assets in the securities and assets register.
• Proof of digital wallet storage is required.

Canton of Lucerne

• Crypto assets are declared as other assets alongside securities.
• Proof of digital wallet storage is required.

Canton of Aargau

• Crypto assets are listed in annual tax returns using Form 101.05 (list of securities and credit balances).
• Proof of asset storage (end-of-year holdings report) is required.

Canton of Berne

• Crypto assets are declared in tax returns using Form 3 (Wertschriftenverzeichnis und Rückerstattungsantrag Verrechnungssteuer).

The easiest way to file your tax returns would be to use traditional paper forms and file them using the online portal. Each canton in Switzerland has an independent portal for tax reporting, you can find a list of the different cantons and the links to their tax portals here.

What Crypto Records Will the FTA Want

Tax agencies across the globe have strict regulations around crypto record-keeping to ensure compliance with the existing tax laws and proper reporting of crypto transactions and the FTA is no exception to this. You are required to maintain the following records for a hassle-free tax filing experience.

• Time and date of transactions
• Type of cryptocurrencies 
• Category of transactions (Disposal, Acquisition, Trade)
• Quantity of assets
• The market value of the assets at the time of the transaction
• Exchange records
• Personal wallet addresses for custodial wallets

How to File Crypto Taxes using Kryptos

Now that you’re aware of how your crypto transactions are taxed and what forms you need to fill out to complete your tax report, here’s a step-wise breakdown of how Kryptos can make this task easier for you:

1. Visit Kryptos and sign up using your email or Google/Apple Account
2. Choose your country, currency, time zone, and accounting method 
3. Import all your transactions from wallets and crypto exchanges
4. Choose your preferred report and click on generate report option on the left side of your screen and let Kryptos do all the accounting.
5. Once your Tax report is ready, you can download it in PDF format.

If you still need clarification regarding the integrations or generating your tax reports, you refer to our video guide here.

Tax Saving Strategies Switzerland

There are three strategies you can use to pay less taxes in Switzerland.

1. Make investments as a private investor because private investors are exempt from CGT in Switzerland.
2. Each canton in Switzerland has a wealth tax allowance exempt from taxation.
3. In Switzerland, every citizen is allowed a federal income tax allowance of 14,500 CHF.

These strategies have been discussed in detail in the above section titled “Crypto Tax Breaks”.

FAQs

1. Is Crypto Legal in Switzerland?

Yes, cryptocurrency is legal in Switzerland. Switzerland has been known for its favourable attitude towards cryptocurrencies and blockchain technology. The Swiss government has implemented a regulatory framework that supports the development and use of cryptocurrencies within the country.

Switzerland has taken a progressive approach to cryptocurrency regulations, aiming to foster innovation while maintaining financial stability and protecting investors. The Swiss Financial Market Supervisory Authority (FINMA) is the regulatory authority responsible for overseeing financial activities, including cryptocurrencies and initial coin offerings (ICOs). FINMA has provided guidelines and regulations to ensure compliance with anti-money laundering (AML) and know-your-customer (KYC) requirements.

Switzerland is home to "Crypto Valley," a region located in Zug that has become a hub for blockchain and cryptocurrency companies. Many blockchain startups and established companies have set up operations in Switzerland due to its favourable regulatory environment and supportive ecosystem.

2. How Is Crypto Taxed in Switzerland?

In Switzerland, cryptocurrency is not considered legal tender or a currency. Instead, it is categorised as crypto-based assets or kryptobasierte vermögenswerte. This categorization treats cryptocurrencies similarly to stocks and bonds, which are considered private wealth assets. As an individual investor, you are not subject to capital gains tax (CGT) on private wealth assets.

However, if you are a trader or operate a business involving cryptocurrencies, you are required to pay CGT on your gains. These capital gains are added to your income and taxed at the regular income tax rates.

Crypto transactions in Switzerland also attract income tax and wealth tax. Income tax has three types: federal income taxes, cantonal income taxes, and municipal income taxes. The federal income tax rates are consistent throughout Switzerland, but cantonal and municipal income tax rates vary. Each canton has its income tax rate, and municipal income taxes are governed by the canton they fall under. The rates for federal income tax range from 0 to 11.5% based on income level.

Wealth tax applies to all personal wealth assets, including stocks, bonds, and physical assets like precious metals, property, and cryptocurrencies. The value of crypto assets is calculated at the end of the tax year using the price list published by the Swiss Federal Tax Administration (FTA). If the FTA doesn't specify the price of a particular asset, you can use the fair market value from a reputable source to determine the tax value. Wealth tax rates vary among cantons, with most having rates ranging from 0.3% to 1%.

3. How can Kryptos simplify crypto taxes for you?

We’ve already discussed how to file your crypto taxes in the above sections of the guide offering a stepwise breakdown of the entire process. However, we agree that it is unreasonably complicated even for someone with a fair amount of prior knowledge. Although, there’s an easy way to file your crypto taxes using a crypto tax software called Kryptos.

Where all you need to do is log in on the platform, add all your trading accounts, wallets, and DeFi accounts and sip coffee while Kryptos does all the heavy lifting for you. The platform can auto-fetch all your transactions from the tax year and generate a legally compliant tax report within minutes while also suggesting ways to lower your tax bill. It works like magic, all you need to do is try it once.

4. What are the different types of income taxes in Switzerland? 

There are three types of income taxes in Switzerland: federal income taxes, cantonal income taxes, and municipal income taxes. The federal income tax rates are consistent across Switzerland, while cantonal and municipal income tax rates vary.

‍

All content on Kryptos serves general informational purposes only. It's not intended to replace any professional advice from licensed accountants, attorneys, or certified financial and tax professionals. The information is completed to the best of our knowledge and we at Kryptos do not claim either correctness or accuracy of the same. Before taking any tax position / stance, you should always consider seeking independent legal, financial, taxation or other advice from the professionals. Kryptos is not liable for any loss caused from the use of, or by placing reliance on, the information on this website. Kryptos disclaims any responsibility for the accuracy or adequacy of any positions taken by you in your tax returns. Thank you for being part of our community, and we're excited to continue guiding you on your crypto journey!

Singapore has long been hailed as a haven for both crypto investors and businesses alike owing to its lenient tax regulations and the government’s crypto-friendly approach. It is one of the reasons why major crypto companies like Crypto.com are based out of Singapore. Crypto investors in Singapore enjoy zero taxes on capital gains and long-term investments and while some clear guidelines and regulations govern the taxation of crypto assets in Singapore, the impetus for interpreting these regulations lies with the investors themselves, which can be overwhelming at times depending on the nature of transactions. 

That’s why we have curated this detailed tax guide covering all the crucial aspects of crypto taxation in Singapore. We have answered pivotal questions like “How is crypto taxed in Singapore?” “How to file crypto taxes in Singapore?” “How to avoid paying crypto taxes in Singapore?” “How are Airdrops, ICOs, and forks taxed?”. The objective of this guide is to educate investors on the subject of crypto taxes and help them file their crypto taxes conveniently. 

Note that this guide is quite comprehensive and will be updated regularly to accommodate new guidelines and regulations. We suggest revisiting this guide regularly to stay updated on the new tax trends.

Latest Updates/Guidelines

Tax Forms

How is Crypto Taxed in Singapore?

In Singapore, cryptocurrency taxation varies depending on the nature of your activities involving digital tokens. When trading cryptocurrencies as a business, gains and losses are considered regular income and are subject to income tax, requiring them to be reported on your annual tax return. However, capital gains from long-term investments in cryptocurrencies are not taxed, setting Singapore apart from countries imposing capital gains tax. Using cryptocurrencies for payments is treated as barter trade, with businesses taxed on the value of goods or services provided in the transaction.

An 8% GST is chargeable on the fees pertaining to crypto transactions in Singapore. Profits gained from professional trading and crypto-related business activities are treated as regular income and subjected to income tax. Short-term and long-term trades, on the other hand, do not trigger immediate tax obligations, given Singapore's lack of capital gains tax.

For regulatory compliance, businesses offering digital payment tokens falling outside the securities token category must disclose non-approval by the Monetary Authority of Singapore (MAS) and outline associated risks. In a cryptocurrency landscape marked by diverse activities, Singapore's taxation approach remains nuanced, favouring long-term investors through its absence of capital gains tax while accounting for income tax implications related to trading and business activities.

Can the MAS Track Crypto?

Yes, the MAS can track the crypto transactions of investors in Singapore, particularly when these transactions involve digital payment tokens and fall under the regulatory framework set by the MAS. As part of its regulatory efforts to combat money laundering and ensure compliance with anti-money laundering (AML) and counter-terrorism financing (CTF) regulations, MAS requires licensed digital payment token service providers to implement customer due diligence measures and monitor transactions.

MAS expects crypto service licensees to conduct proper customer due diligence for all digital payment transactions. This includes assessing customer risk levels and taking enhanced due diligence measures for customers with higher money laundering risks. Additionally, licensees are required to monitor their business relationships with customers on an ongoing basis and ensure that transactions align with customer profiles and risk assessments.

Furthermore, per the value transfer rules, digital or crypto service providers are expected to transmit originator and beneficiary information securely and promptly to beneficiary service providers.

Through these regulatory requirements and measures, MAS can obtain insights into crypto transactions taking place within Singapore's jurisdiction. Therefore we suggest reporting all your transactions to the MAS judiciously to avoid legal and tax trouble.

Capital Gains Tax

There is no dedicated capital gains tax structure in Singapore as such. Capital gains from crypto transactions are not subject to taxation in Singapore. Unlike some other countries, Singapore does not impose taxes on capital gains. Therefore, any profits made from buying and selling cryptocurrencies, when intended as long-term investments, are exempt from taxation. 

This policy encourages individuals to engage in the long-term holding of cryptocurrencies without incurring capital gains tax obligations. However, it's important to note that capital gains taxation exemption applies to long-term investments specifically, and other activities involving cryptocurrencies, such as trading as a regular business activity, may still be subject to income tax.

In business settings, the tax treatment of gains and losses depends on the nature of the transaction and the individual's intention at the point of purchase. While if the cryptocurrencies were held for trading purposes as part of a business or trade, any gains or losses from their disposal are treated as taxable income or allowed as deductions.

If the cryptocurrencies were not held for trading purposes (e.g., held as personal investments), resulting gains or losses from disposal are generally not taxable or allowed as deductions.

Determining whether gains/losses are considered part of a business or trade involves evaluating factors such as the purpose of holding, frequency of transactions, and holding periods. These factors help determine whether the gains are subject to income tax or treated differently.

Capital Gains Tax Rate 

As previously mentioned, there is no capital gains tax in Singapore and income from crypto transactions is either exempt from taxation or is taxed as income (when categorised as part of a business or trade). The taxes that do apply to capital gains in Singapore are equal to the income tax rates as mentioned in the later sections of the guide.

How to Calculate Capital Gains and Losses

Capital gains calculations don’t make much sense for individuals with a long-term investment strategy as they are non-taxable. However, it’s a different story for investors/traders operating in a business or trade setting. Calculating your capital gains or losses is a pretty straightforward process, you can use this formula to do so:

‍

‍

For those who are not aware of the term cost basis, it is simply the price you pay to acquire a certain asset inclusive of any fees paid in the process. Here’s an example:

Suppose you bought 1 BTC for 30,000 SGD and you paid 200 SGD in transaction fees in the process, then your cost basis would then be equal to 30,200 SGD.

Let’s say you decide to sell this BTC for 40,000 SGD and you incur a transaction fee of 200 SGD again. Then your cost basis would change to 30,400 SGD.

For calculating the capital gain, we will use the above-listed formula:

Capital Gain/Loss = Disposal Amount - Cost Basis = 40,000 SGD - 30,400 SGD = 9,600 SGD

Crypto Losses

Crypto losses can be tax deductible in Singapore under certain circumstances. If an individual engages in buying and selling crypto as part of a business or trade and incurs losses, these losses can be deducted from their overall income for tax purposes. 

However, if the losses stem from cryptocurrencies held for investment purposes (e.g., personal investments), they may not be eligible for deduction.

Lost or Stolen Crypto

Unfortunately, the MAS is yet to release specific guidance on how lost or stolen crypto is viewed from a tax perspective. However, you can seek legal remedies if you've lost your assets in a crypto scam or rug pull. 

Investors who fall victim to crypto scams and frauds in Singapore have recourse to legal remedies for seeking redress within the existing legal framework. Despite the absence of specific legislation directly addressing crypto-related fraud, several potential avenues exist for pursuing justice.

Civil claims based on fraud and misrepresentation are among the primary remedies available. Investors can bring legal action if they can demonstrate intentional deception or false information that led to their investment losses. Similarly, breach of trust and claims of deceit can be explored, especially if the fraudulent scheme involved entrusting wrongdoers with investors' funds.

To safeguard their interests and assets, victims can seek urgent and interim relief from the court. Freezing injunctions can prevent wrongdoers from diminishing the value of stolen crypto-assets, given the swift movement of digital assets. Moreover, proprietary injunctions that directly target the property itself, and Mareva injunctions that prevent the disposal of assets, offer legal tools to preserve the value of stolen crypto-assets during legal proceedings.

Once frozen crypto assets are identified, victims can proceed with the main legal action. This involves seeking proprietary declarations or vesting orders to officially establish ownership and potentially reclaim stolen assets. Victims must collaborate with experienced legal professionals well-versed in handling crypto-related cases, as enforcement can pose challenges, particularly when wrongdoers are situated in different jurisdictions.

Crypto Tax Breaks Singapore

There isn’t much you can do to lower your crypto tax bill besides offsetting your gains using your losses. Because the Singaporean authorities don’t offer much when it comes to tax credits and deductions on crypto investments.

Crypto Cost Basis Method Singapore

The examples we have used so far are fairly simplistic and do not represent real-world transactions. Investors usually buy multiple assets of the same kind at different prices and that makes cost basis and capital gain calculations very complicated. That’s why one needs to rely on specialised accounting methods to simplify these calculations. Tax authorities in most jurisdictions have clear rules and guidelines regarding the use of specific cost-basis methods.

However, the MAS is yet to declare clear guidelines on which one to use in Singapore. You can likely use one of the mainstream accounting methods that most countries rely on for cost-basis calculations in Singapore.

Listed below are the top 4 most popular accounting methods:

‍

‍

1. LIFO

LIFO or Last-In-First-Out accounting method states that the acquisition price of the most recent asset you buy is to be used as the cost basis for capital gains calculations upon disposal.

2. FIFO

FIFO or First-In-First-Out accounting method states that the acquisition price of the earliest asset you buy is to be used as the cost basis for capital gains calculations upon disposal.

3. HIFO

HIFO or Highest-In-First-Out accounting method simply states that the highest acquisition price for an asset across all acquisition instances is to be used as the cost basis for capital gains calculations upon disposal.

4. Average Cost Basis Method

The average cost basis method simply states that the cost basis for an asset is simply equal to the average acquisition price of all tokens that you currently have in your portfolio.

Note that your capital gains change when you use different accounting methods. Here’s an example:

13/01/22- Lucas bought 1 ETH for 3,500 SGD

17/03/22- Lucas bought 1 ETH for 3,800 SGD

21/05/22- Lucas bought 1 ETH for 3,200 SGD

28/06/22- Lucas sold 1 ETH for 4,000 SGD

We shall use each one of the above-mentioned accounting methods to observe how capital gains change when using a specific accounting method:

1. Using LIFO

According to LIFO, the acquisition price of the last asset you buy is the cost basis.

Cost Basis = 3,200 SGD

Disposal Amount = 4,000 SGD

Capital Gain = 4,000 SGD - 3,200 SGD = 800 SGD

2. Using FIFO

According to FIFO, the acquisition price of the first asset you buy is the cost basis

Cost Basis = 3,500 SGD

Disposal Amount = 4,000 SGD

Capital Gain = 4,000 SGD - 3,500 SGD = 500 SGD

3. Using HIFO

According to HIFO, the highest acquisition price is the cost basis

Cost Basis = 3,800 SGD

Disposal Amount = 4,000 SGD

Capital Gain = 4,000 SGD - 3,800 SGD = 200 SGD

4. Average Acquisition Price Method

The cost basis is the average of all acquisition prices 

Cost Basis = 3,200 SGD + 3,500 SGD +3,800 SGD/3 = 3,500 SGD

Disposal Amount = 4,000 SGD - 3,500 SGD = 500 SGD

Crypto Income Tax 

Income tax in Singapore applies to specific instances of crypto transactions, primarily on trading conducted as a regular business activity. When individuals engage in trading crypto as part of their business operations, any profits and losses derived from these trades are subject to income tax. Such gains are treated as ordinary income and must be included in the annual tax return. The requirement to record gains and losses from crypto trading on the tax return is stipulated by the Monetary Authority of Singapore (MAS) to ensure accurate income reporting.

Note that capital gains resulting from long-term investments in cryptocurrencies are exempt from taxation. However, for transactions not falling under the category, any gains realised are subject to income tax if the intention is not primarily for long-term investment purposes.

While the use of cryptocurrencies for payments does not directly trigger income tax for the user, businesses accepting crypto payments are taxed based on the transaction value. Individuals engaged in crypto trading should maintain precise records and comply with tax regulations to meet reporting requirements and avoid potential legal issues. 

Income Tax Rate

Income tax varies for residents and non-residents in Singapore.

Tax Rates for Residents

‍

‍

Non-Resident Tax Rates

Employment income for non-residents is either taxed at a flat rate of 15% or a progressive resident income tax rate. Income from other sources is taxed at a flat rate of 22%.

Tax-Free Crypto Transactions

Listed below are some of the tax-free crypto transactions:

1. Investing in crypto with a long-term perspective
2. Making a capital gain on crypto transactions in an individual capacity
3. Buying crypto with fiat
4. Buying a product or service with crypto
5. Moving crypto between personal wallets
6. Mining crypto as a hobby

Taxed Crypto Transactions

Listed below are some of the taxed crypto transactions:

1. Selling crypto as a business or trade
2. Accepting payment in crypto
3. Mining crypto in a professional business setting

Tax On Mining Crypto

In Singapore, crypto mining is categorised as a hobby or a business pursuit and is taxed based on the level of effort and intent behind the mining activities.

For individuals who engage in crypto mining as a hobby, and without a systematic and habitual focus on profit, the gains from selling the mined tokens are considered capital gains. Such capital gains are exempt from taxation. However, it's important to note that mining expenses are non-deductible.

If an individual undertakes crypto mining with a systematic and habitual intention to derive profits, this activity may be categorised as a business pursuit. 

Therefore the gains made from the mining operations are treated as taxable income. Individuals who engage in mining as a business must declare the resulting income as "business income" on their annual tax declarations. These gains are then subject to the applicable income tax rates.

Moreover, companies registered with the Accounting and Corporate Regulatory Authority in Singapore that partake in crypto mining fall under the purview of corporate income tax rates for the profits generated through mining activities.

It's imperative for individuals and businesses involved in crypto mining to identify which category they fall into.

Tax on Staking Crypto

In Singapore, the taxation of crypto staking depends on the income earned from the staking activity. Individuals who stake crypto and generate a yearly income of 300 SGD or more will likely be subject to income tax on their staking gains.

Individuals are responsible for declaring taxes related to their cryptocurrency staking earnings, similar to other types of income tax in Singapore. 

The process of crypto staking taxation in Singapore is straightforward. Individuals incorporate their staking income into their total earnings. The combined income, inclusive of staking profits, is then subject to taxation at the applicable marginal tax rate based on their overall income level.

How are Airdrops and Forks Taxed in Singapore?

Although there is no clear guidance on how airdrops and forks are viewed from a tax perspective, the income from airdrops and forks will likely be non-taxable similar to the tokens received through mining in an individual capacity.

However, we do suggest seeking guidance from an experienced tax professional to better understand the tax implications of such transactions.

Crypto Gifts and Donation Taxes

There is no clear guidance regarding crypto gifts and donations and their taxation in Singapore. However, if we consider crypto donations to be the same as cash donations, we can infer a few things about their taxation from existing guidelines.

According to the IRAS website:

 “Cash and non-cash gifts relating to festive and special occasions which do not exceed the exemption threshold of $200 are considered to be not substantial in value and are not taxable due to an administrative concession granted. If a gift exceeds the exemption threshold, the full value of the gift is taxable. For example, if the baby gift set is worth $250, the taxable value is $250”

Here’s a summary of gift taxation and exemption.

‍

‍

However, we do suggest seeking guidance from an experienced tax professional to better understand how such transactions are taxed.

Crypto Margin Trades, Futures, and CFDs

The MAS doesn’t differentiate between normal trades and leverage or margin trades. Therefore, the taxation of any income derived from such trades will follow the same trend as regular trades.

Crypto ICO Taxes

ICOs are special events that allow investors to own native tokens from unreleased projects in exchange for mainstream tokens like Bitcoin and Ethereum. They are similar to IPOs in the regular securities market.

Tokens received from ICOs are not clearly defined as income in Singapore's tax rules. The government hasn't given specific instructions on how to tax these tokens yet.

ICOs create tokens that are different from regular money, and they usually don't mean you're buying a share in a company. Saying ICO tokens are like buying shares could cause problems with securities laws.

Right now, we don't know for sure how ICO tokens are taxed in Singapore. The government hasn't explained it yet. So, if you're involved in ICOs, it's important to keep an eye out for any new rules or guidance from the government.

We suggest seeking guidance from an experienced tax accountant to better understand the tax implications of such transactions.

NFT Taxes

There is no specific guidance on how NFT transactions are taxed in Singapore. However, income from NFTs will likely be non-taxable for individual investors with a long-term investment strategy.

We do suggest seeking guidance from an experienced tax professional to better understand how such transactions are taxed.

DAO Taxes

DAOs are member-owned communities with a shared vision. All the decisions in a DAO are made by the members in the absence of central leadership. They are new-age institutions that aim to democratise decision-making and allow people to have a say in decisions that directly affect them. DAOs are often called the soul of Web3 and allow members to earn rewards in multiple ways. DAO contributors are rewarded for their contributions to the organization, similar to how centralized organizations pay salaries to their employees. They also pay out bounties for one-time projects and redistribute any profits generated through operations.

Although there is no specific guidance on the taxation of income received from DAOs, it is likely non-taxable. It is advisable to seek guidance from an experienced tax professional or directly contact the MAS to better understand the tax implications of such transactions.

DeFi Taxes

The subject of DeFi transactions is rarely discussed and is a potential grey area in the Singaporean tax framework. We do know that any income from lending or staking on DeFi protocols is taxable and is added to the overall income of an individual and is later taxed at a progressive tax rate based on the tax bracket one falls into.

Other than this, not much is known about DeFi taxation in Singapore. We suggest contacting the MAS directly or seeking the guidance of a tax professional to better understand the taxation of such transactions.

When to Report Crypto Taxes in Singapore?

In Singapore, individuals are required to report their crypto taxes based on the calendar year. 

‍

‍

However, if the tax return is submitted electronically, the deadline is extended to April 18th. It's essential to adhere to these deadlines to ensure compliance with Singapore's tax regulations regarding cryptocurrency transactions.

How to File Crypto Taxes in Singapore?

Filing crypto taxes in Singapore is a straightforward process that follows guidelines from the IRAS. Here's how you can do it step by step:

First, gather all the info about your crypto transactions, like buying, selling, and exchanges. Then, sort them into two main groups: ones where you used crypto for money, goods, or services, and those that are investment gains.

Next, you'll need to fill out the right tax forms from IRAS. These forms ask for your personal and financial details, like where your income comes from and the types of digital assets you dealt with.

If you made profits by selling cryptocurrencies, it's essential to tell IRAS about it on the forms. This step is really important to make sure everything is correct.

Make sure to send in your tax forms by April 15th. If you're filing online, you have until April 18th. This deadline is important to remember to stay on track.

You can find more information about the tax forms here. It's a good resource to help you get everything right.

What Crypto Records Will the Tax Agency Want?

Although the MAS has no official record-keeping list, you should maintain the following documents as a precautionary measure to avoid complications while filing crypto taxes:

1. List of all transactions with dates and time
2. A detailed record of the acquisition and disposal amount
3. Details about the type of asset and the parties involved in the transaction
4. A list of cost basis for each asset
5. A detailed record of all assets held in digital wallets you have private keys for

How to File Crypto Taxes Using Kryptos?

Now that you’re aware of how your crypto transactions are taxed and what forms you need to fill out to complete your tax report, here’s a step-wise breakdown of how Kryptos can make this task easier for you:

Visit kryptos.io and sign up using your email or Google/Apple Account

Choose your country, currency, time zone, and accounting method 

Import all your transactions from wallets and crypto exchanges

Choose your preferred report and click on the generate report option on the left side of your screen and let Kryptos do all the accounting.

Once your Tax report is ready, you can download it in PDF format.

If you still need clarification regarding the integrations or generating your tax reports, you refer to our video guide here.

How to Avoid Crypto Taxes in Singapore

As previously mentioned, Singapore doesn’t levy much taxes on gains from crypto transactions and nor does it offer many exemptions or tax credits for such transactions. Crypto losses are non-deductible in Singapore and there’s not much you can do to lower your tax bill.

Frequently Asked Questions (FAQs)

1. Is Crypto Legal in Singapore?

A better way to ask this question would be “Are crypto investments legal in Singapore?” and the answer is yes. The country has a clear regulatory framework for digital assets, which includes guidelines and regulations for various crypto-related activities. The Monetary Authority of Singapore (MAS) oversees the regulatory aspects of crypto and has categorised different types of tokens to differentiate their treatment. Utility tokens and payment tokens have specific definitions and regulations, while security tokens are subject to securities laws.

Singapore has been proactive in embracing blockchain and crypto technologies while also focusing on investor protection and preventing illicit activities. As long as individuals and businesses comply with the relevant regulations and tax obligations, investing in crypto within the legal framework of Singapore is permissible.

2. How is Crypto Taxed in Singapore?

In Singapore, the taxation of crypto depends on the nature of activities. Trading crypto as a business incurs income tax, while long-term investments are generally not subject to taxation due to the absence of capital gains tax. Using crypto for payments is considered barter trade, and businesses providing goods/services in exchange for crypto are taxed based on the value. Fees in crypto transactions are subject to an 8% goods and services tax. 

Mining is assessed based on whether it's a hobby or business activity, with business income being taxable. Staking and lending crypto may lead to income tax if earnings exceed a certain threshold. Reporting accurate crypto-related income is crucial to avoid legal issues.

3. Does Singapore have a capital gains tax?

No, Singapore does not have a capital gains tax. This means that capital gains from investments, including those made in cryptocurrencies, are not subject to taxation in the country. As a result, individuals and businesses can realise profits from their investments without incurring capital gains tax liabilities. However, it's important to note that while capital gains are generally not taxable, other forms of taxation, such as income tax, may apply to specific crypto-related activities based on their nature and purpose.

4. How can Kryptos simplify crypto taxes for you?

We’ve already discussed how to file your crypto taxes in the above sections of the guide offering a stepwise breakdown of the entire process. However, we agree that it is unreasonably complicated even for someone with a fair amount of prior knowledge. However, there’s an easy way to file your crypto taxes using a crypto tax software called Kryptos.

All you need to do is log in on the platform, add all your trading accounts, wallets, and Defi accounts and sip coffee while Kryptos does all the heavy lifting for you. The platform auto-fetches all your transactions from the tax year and generates a legally compliant tax report within a matter of minutes while also suggesting ways to lower your tax bill. It works like magic, all you need to do is try it once.

‍

All content on Kryptos serves general informational purposes only. It's not intended to replace any professional advice from licensed accountants, attorneys, or certified financial and tax professionals. The information is completed to the best of our knowledge and we at Kryptos do not claim either correctness or accuracy of the same. Before taking any tax position / stance, you should always consider seeking independent legal, financial, taxation or other advice from the professionals. Kryptos is not liable for any loss caused from the use of, or by placing reliance on, the information on this website. Kryptos disclaims any responsibility for the accuracy or adequacy of any positions taken by you in your tax returns. Thank you for being part of our community, and we're excited to continue guiding you on your crypto journey!

Estonia is one of few countries that has released clear guidelines on the categorisation of crypto and its taxation despite not having a dedicated tax regime. Back in 2021, Crypto adoption in Estonia was at 2.4% and this number has only risen in the past few years. This is one of the reasons why Estonian authorities are constantly searching for innovative ways to manage crypto taxes. 

This in turn means that the crypto tax authorities are in the middle of drafting new rules and guidelines around the same, and the crypto tax landscape in Estonia is bound to evolve. The impetus for compliance with the evolving tax structure lies with investors, which is not as easy as it sounds. That’s why we created this detailed tax guide on crypto taxation that addresses key pointers like “How is Crypto Taxed in Estonia?” “What are the tax rates?” “How to file crypto taxes in Estonia?” “How are De-Fi and NFT transactions taxed?” “How to calculate crypto gains and losses?” and more.

This guide will be updated regularly to accommodate any new rules and guidelines. It would be prudent to keep revisiting this guide just to stay updated on new trends and guidelines.

Latest Updates/Guidelines

• Income Tax Act
• Subsections 15(1) and 37(1) of the Act
• Subsection 39 of the Income Tax Act

How is Crypto Taxed in Estonia?

Crypto is taxed in Estonia (for regular taxpayers like us) based on income from various cryptocurrency activities. Taxable transactions include trading, converting cryptocurrency into fiat or other cryptocurrencies, and using cryptocurrency to pay for goods or services. Income from cryptocurrency mining is considered business income. Moreover, taxable income received in cryptocurrency, like rent, interest, and business income, is subject to income tax.

The Court of Justice of the European Union ruled that exchanging virtual currency for traditional currency and vice versa is considered the provision of services for consideration and is exempt from VAT. However, transactions involving non-traditional currencies are treated as financial transactions if parties accept them as alternatives to legal tender.

Income can be generated through price changes during sales or exchanges, paying with crypto, mining, and computer data rental. Non-taxable activities include donating, buying a cryptocurrency with fiat, transferring between wallets, and giving cryptocurrency as a gift.

Gains from cryptocurrency transfers, including exchanges, are subject to income tax and are taxed at a flat rate of 20%. The gain is calculated based on the difference between selling and purchase prices or the price of the received property and the purchase price of the cryptocurrency. Losses from cryptocurrency exchange cannot be deducted for tax purposes.

Cryptocurrency is considered property, and taxable income should be declared in the income tax return. Each transfer transaction, including exchange, is treated as a separate object of taxation. Cryptocurrency exchanges with traditional currency must be converted to euros at the market rate on the date of receipt.

Can the MTA Track Crypto?

Estonia being an EU member state has access to KYC details and transaction records from all exchanges and companies offering crypto-related services in the region, all thanks to regulations like AMLD-6 and DAC-8. These regulations ensure better compliance and reporting on the part of crypto companies for investor protection and to subdue money laundering efforts in the region. 

Recent efforts to boost transparency in the crypto space have been fruitful as Estonia has signed up to the international Crypto Asset Reporting Framework allowing for exchange with tax related information between tax jurisdictions to prevent cross border tax evasion and money laundering.

Moreover, if you’re using an account from a regional bank, funds used to acquire crypto assets and funds received from their disposal, are all accessible from your bank statement. This information can be correlated from public ledgers to identify any discrepancies in tax reports. So it’s safe to say that the MTA is aware of all your crypto transactions and can easily identify if you’re underreporting your gains. So make sure you report all your transactions to the MTA and pay your taxes judiciously to avoid getting in trouble with the tax authority.

Capital Gains Tax Estonia

There’s no dedicated capital gains tax in Estonia and all transactions that result in a gain are taxed as regular income. When you engage in activities like trading cryptocurrency, converting it into regular fiat currency, or exchanging one cryptocurrency for another, the gains you incur are taxable.

The following transactions constitute a capital gain:

• If you buy crypto and later sell it at a higher price, the difference between the selling price and the purchase price is considered a gain, and you'll have to pay income tax on that gain.

• When you convert your cryptocurrency into regular fiat currency (like euros) and make a profit on that exchange, the profit amount is treated as a gain and becomes taxable.

• If you exchange one cryptocurrency for another and end up with more value in the new cryptocurrency, the difference in value is seen as a gain and is subject to income tax.

• In Estonia, if you mine cryptocurrency and make money from it, that income is considered business income and is taxable as well.

Moreover, it's not just the act of earning crypto that's taxable; even income received in cryptocurrency, such as rent, interest, and business income, is subject to income tax.

Capital Gain Tax Rate

As mentioned earlier, there is no dedicated capital gains tax in Estonia. 

‍

‍

How to Calculate Crypto Gains and Losses?

Calculating your crypto gains and losses is a pretty straightforward process. You can use the following formula for that:

‍

‍

For those who are unaware of what cost basis means, it is simply the price you paid to acquire the asset. 

Consider the following examples:

Example 1

Let’s say you buy 2 BTC for €15,000 each, and you decide to sell 1 BTC 6 months later for €20,000. Since the token has been appreciated since the acquisition, the transaction constitutes a gain. You can calculate the gain by reducing the cost basis from the disposal amount i.e., Gain = €20,000 - €15,000 = €5,000

Example 2

A person buys 5 Ethereum for 1,000 euros each, spending 5,000 euros. Later, they exchange 3 Ethereum for 0.3 Bitcoin worth €4,500 making the value of each ETH token €1,500. The value of each ETH token has gone up by €500, so the transaction constitutes a gain of €1,500 (for 3 ETH tokens).

Crypto Losses

In Estonia, losses incurred from cryptocurrency transactions are treated differently from gains. Unlike gains, losses from crypto exchanges cannot be used to reduce your tax liability.

If you make a loss on a cryptocurrency transaction, you won't be able to offset that loss against your taxable income. This means that you cannot deduct your crypto losses from your overall income to lower the amount of income tax you owe.

For example, if you bought 1 Bitcoin for €18,000 and later sold it for €12,000, resulting in a loss of €6,000, you won't be able to use that €6,000 loss to reduce the income tax you owe on your other sources of income.

Lost or Stolen Crypto

There are no current guidelines on how lost or stolen crypto assets are viewed from a tax perspective. However, the MTA will likely make a case-by-case analysis of individual claims and then decide how such transactions will be treated. So we suggest contacting the MTA directly for more information on the subject.

Crypto Tax Breaks

Since losses are not tax deductible in Estonia, taxpayers cannot use tax-loss harvesting to lower their tax bill. However, the Estonian government does offer a basic exemption for all taxpayers. In 2023, individuals are entitled to a basic exemption of up to €700 per month, allowing for a total of €8,400 annually.

For those who are of pensionable age or attain it, the basic exemption rises discreetly to €704 per month, resulting in €8,448 per year.

Crypto Cost Basis Method Estonia

The examples we have used so far to explain capital gain calculations are fairly simplistic and do not represent real-world transactions. An investor buys multiple assets of the same kind at different prices and that makes capital gain calculations a bit complicated because how does one decide which acquisition price to use as the  cost basis?

That’s exactly why one must use a specialised accounting method for cost-basis calculations to avoid discrepancies. The MTA allows the use of FIFO and Weighted Average Accounting methods for cost-basis calculation in Estonia. Let’s look at how both of them work.

1. FIFO 

The FIFO or First-In-First-Out accounting method states that the acquisition price of the first asset you buy is to be used as the cost basis for the latest disposal. In simpler terms, the first asset you buy is the first one you sell.

2. Weighted Average Method

The weighted average method states that the cost basis for disposal is equal to the average acquisition price of all assets in inventory at the time of disposal.

These accounting methods can be better understood using an example.

Consider the following ledger of transactions:

13/01/22 - Mark buys 1 ETH for  €1,400

26/03/22 - Mark buys 1 ETH for  €1,200

18/05/22 - Mark buys 1 ETH for  €1,800

17/07/22 - Mark sells 1 ETH for  €2,200

We will use both accounting methods to calculate the gain on the disposal to understand how they work and the effect they have on your gains.

1. Gain calculations using FIFO

 If we use FIFO, then the cost basis would be equal to the acquisition price of the ETH tokens acquired first.

Cost Basis =  €1,400

Disposal Amount =  €2.200

Using the formula:

Capital Gain = Disposal Amount - Cost Basis =  €2,200 -  €1,400 =  €800

2. Gain Calculations using the Weighted Average Method

According to the weighted average method, the cost basis is simply the average of the acquisition price of all assets in inventory.

Cost Basis = (€1,400 + €1,200 + €1,800)/3 = €1,467

Disposal Amount = €2,200

Using the formula = Disposal Amount - Cost Basis = €2,200 - €1,467 = €733

Notice how your gains are lower when you use the weighted average method instead of FIFO for capital gains calculations.

Crypto Income Tax Estonia

According to the Income Tax Act, cryptocurrencies are categorised as property. Gains from cryptocurrency transfers, including exchanges, are subject to income tax under subsections 15(1) and 37(1) of the Act.

Private individuals who receive income from trading, buying, selling, or exchanging cryptocurrency must declare this income as gains from the transfer of other property in their income tax return (tables 6.3 or 8.3).

The gain is calculated as the difference between the selling price and the purchase price, or in the case of an exchange, between the value of the received property and the purchase price of the cryptocurrency.

Only transactions that generate income need to be declared, and each transfer transaction, including exchanges, is treated as a separate object of taxation.

Losses incurred from exchanging cryptocurrency cannot be taken into account for taxation purposes unless the exchange involves securities under § 39 of the Income Tax Act. Such losses cannot be used as a deductible cost because crypto is not considered a security.

‍

Income Tax Rate 

Unlike its neighbours, Estonia doesn’t have a progressive income tax rate. 

Any gains incurred from crypto transactions are taxed at a flat rate of 20% regardless of the source.

Income tax on all transactions is expected to increase from 20% to 22% from January 1 2025.

Taxed Crypto Transactions

The following transactions are taxed in Estonia:

• Selling crypto for Fiat
• Exchanging one crypto for another
• Buying a product or service with crypto
• Mining and staking crypto
• Earning crypto as an income

Tax-Free Crypto Transactions

The following transactions do not attract tax liabilities in Estonia:

• Donating crypto
• Buying cryptocurrency for a regular currency (euro, US dollar etc.)
• Transferring cryptocurrencies between your electronic wallets
• Giving cryptocurrency as a gift

Tax in Mining Crypto

In Estonia, crypto mining is considered a business activity and is taxed accordingly. Mined cryptocurrency is subject to taxation upon transfer, which includes converting it into regular currency, exchanging it for another cryptocurrency, or using it for purchases of goods or services. The income derived from mining must be declared in the income tax return Form E.

If an individual privately engages in cryptocurrency mining or data processing, income tax is not withheld, and they must declare this income as business income. However, private individuals cannot deduct expenses, such as equipment and electricity costs, incurred for mining.

Individuals involved in permanent cryptocurrency mining must register as a sole proprietor or a legal entity (company) in the Business register. Registered businesses can declare business-related expenses and deduct them from their business income. Income tax, social tax, and a contribution to a mandatory funded pension are levied based on the net income from the business, following the income tax return.

‍

Tax on Staking Crypto

In Estonia, crypto staking is treated as lending cryptocurrency. When a natural person lends cryptocurrency for staking, it is not considered a taxable event. However, if the person earns interest income from the lending of cryptocurrency through staking, they must declare the interest received in Part II of Table 5.1 or Table 8.1 of their income tax return. The interest income should be reported in the income tax return corresponding to the year in which the interest was received.

How are Airdrops and Forks taxed in Estonia?

There is no current guidance on how airdrops and forks are taxed in Estonia. However, tokens received through airdrops and hard forks will likely be taxed as income. Soft forks are non-taxable in most jurisdictions because no new tokens are created and redistributed among the chain participants.

Note that this is a speculation, and the MTA might hold a different view. Therefore, it would be prudent to consult a tax professional to understand the tax implications of such transactions.

Crypto Gifts and Donation Taxes

The taxation of gifts and donations is governed by several distinct sections of the Income Tax Act and the tax implications are different for a legal person and a natural person. 

A legal person is someone in public law, political parties, non-profit associations, foundations, etc. Regular investors are usually referred to as natural persons. 

If we consider crypto donations to be the same as fiat donations, we can infer details about how such transactions are taxed. Crypto gifts made by a natural person to another natural person or a registered entity are tax-free. 

In Estonia, donations made by private individuals to listed non-profit associations and foundations are eligible for tax deductions up to €1200, which includes interest on housing loans and training expenses. Recipients must submit a "Declaration of gifts and donations received" (Form INF 4) to the Tax and Customs Board, and this information is pre-filled in donors' income tax returns. Donations made by calling or messaging require donors to provide their details and the donated amount to the NGO in January, along with a phone bill as proof. Donors can review and amend the pre-filled information in their income tax returns if needed. Donating income tax refunds to eligible associations is possible. However, tax incentives do not apply when donating directly to certain Ukrainian entities. Overall, donors can support non-profits and benefit from tax deductions through this system.

Crypto Margin Trades, Futures, and CFDs

The MTA views margin and leverage trades to be the same as regular trades. Any gains incurred from margin or leverage trades are taxed as income and subjected to a flat 20% income tax.

Crypto ICO Taxes

ICOs are special events that allow investors to own project native tokens from unreleased projects in exchange for mainstream tokens like BTC and ETH. They are similar to IPOs in traditional securities markets.

Although there is no clear guidance on how tokens received through ICOs are taxed, these transactions are likely viewed as crypto-to-crypto trades and any gains incurred from such transactions will be taxed as income. 

We do suggest seeking guidance from experienced tax professionals to better understand how such transactions are taxed.

NFT Taxes Estonia

In Estonia, the taxation of NFTs varies based on the transaction's content from the perspectives of both the NFT creator and purchaser. If the NFT creator receives a resale fee, it is considered a royalty and must be declared as a licence fee in the income tax return.

For natural persons who buy and sell NFTs to earn income, the profits obtained from these transactions are subject to taxation. All profitable NFT transfers must be declared in Table 6.3 or 8.3 of the income tax return.

DAO Taxes

DAOs are member-owned communities with a shared vision. All the decisions in a DAO are made by the members in the absence of central leadership. DAOs are new-age institutions that aim to democratise decision-making and allow people to have a say in decisions that directly affect them. DAOs are often called the soul of Web3 and enable members to earn rewards in multiple ways. DAO contributors are rewarded for their contributions to the organization, similar to how centralized organizations pay salaries to their employees. They also pay out bounties for one-time projects and redistribute any profits generated through operations.

The MTA is yet to release specific guidelines on how income from DAOs is to be taxed. Compensation for work received in crypto is usually non-taxable in Estonia because the taxation is accounted for by the employer. However, this is not the case with DAOs since they’re autonomous organisations with no specific guidelines or structure for taxation. Therefore, it would be prudent to consult a tax professional to better understand how income from DAOs is taxed.

DeFi Crypto Taxes Estonia

In Estonia, crypto lending is generally not taxable for the lender. When a natural person lends cryptocurrency to another individual or a company (or a DeFi protocol), the act of lending itself is not considered a taxable event. However, if the lender receives interest on the loan, whether, in the form of cryptocurrency or any other form, the interest income is subject to income tax.

Interest income must be declared in the income tax return corresponding to the year of receipt. It's important to note that the taxation of crypto lending on decentralised platforms follows general tax principles, and the specific nature of the transactions on these platforms should be taken into account. Overall, while the act of lending crypto is not taxed, interest income from crypto lending is subject to income tax and should be declared accordingly.

When to Report Crypto Taxes in Estonia

In Estonia, residents are required to submit their tax returns by 30th April (or May 2 for 2023) of the following year. Electronic filing of tax returns is accessible from 15th February. 

Self-employed individuals are required to make advance tax payments. The deadlines for advance payments of social security contributions are as follows: 15th March (for Quarter 1), 15th June (for Quarter 2), 15th September (for Quarter 3), and 15th December (for Quarter 4

How to File Crypto Taxes in Estonia

There are three ways you can file your taxes in Estonia:

1. Using the e-MTA portal to file your taxes electronically. However, you will need a government-authorised ID card, a Mobile-ID, a smart ID, or an e-ID of an EU country
2. By sending a post to the Tax and Customs Board’s Service Bureau
3. Using paper forms 

Here’s a video tutorial on how you can navigate the e-MTA dashboard once you have signed into the portal.

When reporting gains from cryptocurrency transactions on your tax return, use either table 6.3 or 8.3, titled "Transfer of other property."

• If the platform through which you made crypto transactions is registered in Estonia, indicate the transactions in Table 6.3.
• If the platform is registered abroad, indicate the transactions in Table 8.3.
• In the table, select "cryptocurrency" as the type of property.
• Enter the acquisition cost and expenses related to the transfer and the sales price/market price.
• The acquisition cost is the value of the purchased cryptocurrency in euros at the time of purchase.
• Sales price/market price is the value of cryptocurrency in euros at the time of sale or exchange.

What Records will the MTA want?

You should maintain the following records to have a seamless tax filing experience.

1. A detailed record of all transactions made in a tax year (with date and time)
2. A detailed record of the acquisition price for every token
3. A list of all disposals made within a tax year
4. The fair market value of tokens on receipt
5. Details of the type of asset bought, sold, exchanged, or traded

How to File Crypto Taxes Using Kryptos?

Now that you’re aware of how your crypto transactions are taxed and what forms you need to fill out to complete your tax report, here’s a step-wise breakdown of how Kryptos can make this task easier for you:

1. Visit Kryptos and sign up using your email or Google/Apple Account
2. Choose your country, currency, time zone, and accounting method 
3. Import all your transactions from wallets and crypto exchanges
4. Choose your preferred report and click on generate report option on the left side of your screen and let Kryptos do all the accounting.
5. Once your Tax report is ready, you can download it in PDF format.

If you need clarification regarding the integrations or generating your tax reports, you refer to our video guide here.

How to Avoid Crypto Taxes in Estonia

Unfortunately, there are not a lot of ways you can avoid paying crypto taxes in Estonia since crypto losses aren’t tax deductible. However, there are exemptions and other strategies you can employ to lower your tax bill.

1. General Income Tax Allowance: In 2023, the basic exemption ranges from 654 euros per month to 7,848 euros per year based on income. For those of pensionable age, it's a fixed 704 euros per month or 8,448 euros per year.

2. Gifting Crypto: Gifting crypto is tax-free in Estonia

3. Donating Crypto: In Estonia, donations made by private individuals to listed non-profit associations and foundations are eligible for tax deductions up to €1200

FAQs

1. Is Crypto legal in Estonia?

This question is better phrased as “Are crypto investments legal in Estonia?” because just like most other countries crypto isn’t considered a legal tender, however, that doesn’t imply that investments in crypto assets are illegal as such. The government has specific regulations and guidelines for taxing crypto-related activities, such as trading, mining, staking, and lending. The Estonian Tax and Customs Board treats cryptocurrency as property, and gains from crypto transactions are subject to income tax. Additionally, crypto donations, crypto lending, and crypto staking are all addressed in the Estonian tax system.

2. Are cryptocurrency transactions visible in the investment account statement?

An investment account with a European bank displays all transactions, including contributions, withdrawals, purchases, and sales of financial assets. If you buy cryptocurrencies through an investment account, the transactions will be visible in the account statement. However, note that cryptocurrency is not considered a financial asset under the Income Tax Act, and gains cannot be tax-deferred. When reporting crypto transactions, purchases are declared as withdrawals in Table 6.5, and sales are declared as contributions in the income tax return. Moreover, gains from crypto transactions should be declared in Table 6.3 or 8.3.

3. Do you pay tax on crypto in Estonia?

Crypto in Estonia is taxed based on income from various cryptocurrency activities, including trading, converting to fiat or other cryptos, and using it for goods/services. Mining income is considered business income and taxable income in crypto is subject to income tax. 

The Court of Justice ruled that crypto-to-fiat exchanges are exempt from VAT, while non-traditional currency transactions are treated as financial if accepted as legal tender alternatives. Income can come from price changes, mining, and more, while non-taxable activities include donating and transferring between wallets. Gains from crypto transfers are subject to a 20% income tax, calculated based on price differences. Cryptocurrency is considered property, and each transfer is a separate taxable object.

4. How can Kryptos simplify crypto taxes for you?

We’ve already discussed how to file your crypto taxes in the above sections of the guide offering a stepwise breakdown of the entire process. However, we agree that it is unreasonably complicated even for someone with a fair amount of prior knowledge. However, there’s an easy way to file your crypto taxes using a crypto tax software called Kryptos.

Where all you need to do is log in on the platform, add all your trading accounts, wallets, and DeFi accounts and sip coffee while Kryptos does all the heavy lifting for you. The platform can auto-fetch all your transactions from the tax year and generate a legally compliant tax report within a matter of minutes while also suggesting ways to lower your tax bill. It works like magic, all you need to do is try it once.

‍

All content on Kryptos serves general informational purposes only. It's not intended to replace any professional advice from licensed accountants, attorneys, or certified financial and tax professionals. The information is completed to the best of our knowledge and we at Kryptos do not claim either correctness or accuracy of the same. Before taking any tax position / stance, you should always consider seeking independent legal, financial, taxation or other advice from the professionals. Kryptos is not liable for any loss caused from the use of, or by placing reliance on, the information on this website. Kryptos disclaims any responsibility for the accuracy or adequacy of any positions taken by you in your tax returns. Thank you for being part of our community, and we're excited to continue guiding you on your crypto journey!

Poland has long been one of the most prominent destinations for crypto-based startups owing to its lenient crypto regulations and a comparatively softer stance on crypto as an industry. Crypto investors have enjoyed a similar environment as well, according to a report by Triple A, more than 900,000 people owned crypto in Poland. Moreover, Poland was the first country ever to integrate blockchain for the provisioning of emergency services. In November 2020, Olsztyn completed a successful trial run of Smart Key, a bridging technology that connects blockchain with physical assets, to aid in police, fire and ambulance services. 

Global crypto adoption has soared in the past 3 years, and Poland has followed suit. That is part of the reason why Polish authorities have been actively publishing new guidelines regarding crypto taxation. They have also released a new tax form called PIT-38 to help Polish taxpayers report crypto transactions conveniently. Although there are guidelines around crypto taxation in Poland, navigating those guidelines and interpreting them in the context of specific crypto investments is tedious. That’s why we created this comprehensive tax guide covering every aspect of crypto taxation.

Note that this guide will be updated regularly to accommodate any new guidelines. Therefore, we suggest you keep revisiting this guide regularly to keep up with the tax trends.

Latest Updates Guidelines

‍
Polish Accounting Act

National Accounting Standards

How is Crypto Taxed in Poland?  

In Poland, the taxation of cryptocurrencies follows specific guidelines based on the country's tax laws. According to the Personal Income Tax Act, virtual currency is defined as a digital representation of value that can be exchanged into legal tender and accepted as a means of exchange. However, it's important to note that virtual currency excludes certain categories such as legal tender issued by national banks, international units of accounts, electronic money, financial instruments, bills of exchange, and cheques.

When it comes to taxation, revenue generated from trading cryptocurrencies is considered revenue from monetary capital. Disposing of virtual currency in exchange for payment involves different scenarios:

• Exchange of virtual currency for legal tender (e.g., selling cryptocurrency for fiat)

• Exchange of virtual currency for goods, services, or property rights

• Settlement of liabilities with virtual currency

It's worth noting that not only the conversion of virtual currency into fiat currency triggers a tax liability but also exchanging it for goods, services, or property. However, exchanging one cryptocurrency for another or converting it into stablecoins does not result in a tax liability.

The taxation rate for cryptocurrencies in Poland is 19%. There is no specific tax threshold in this case, and all income derived from cryptocurrencies, regardless of the amount, is subject to the 19% tax rate. It's essential for investors to accurately report their income from virtual currencies and fulfil their tax obligations accordingly.

Can the Tax Administration Chamber Track Crypto

The answer is yes. Poland is a member of the EU and hence comes under provisions like DAC-8 that are meant for better compliance and investor protection in the space. DAC-8 mandates all crypto companies provisioning financial services in the region to collect and share investor data with all EU member states. Couple that with the AMLD-6 directive, which calls for stricter KYC norms for crypto service providers and it's safe to assume that the TAC has access to your transaction details and can co-relate this information with data on public ledgers to identify any discrepancies in tax reports.

Therefore we suggest reporting all your crypto transactions and paying your taxes judiciously to avoid legal complications.

Capital Gains Tax

In Poland, certain cryptocurrencies do qualify the definition of securities and their disposal results in gain from monetary capital. However, this does not make much of a difference when it comes to their taxation. Because Poland does not have a dedicated capital gains tax, all crypto transactions are taxed at a flat rate of 19%. 

Capital Gains Tax Rate

As mentioned earlier there is no dedicated capital gains tax rate in Poland and all crypto transactions are taxed at a flat rate of 19%.

How to Calculate Capital Gains

Calculating your income from sale of crypto is fairly simple in Poland. You can use the formulae below to calculate -

Income from sale of crypto = Aggregate revenue from sale in the year - Tax deductible costs in the year

In Poland, crypto taxes are levied on the conversion of crypto into fiat or if you've spent your crypto in exchange of any goods or services. Accordingly, the method is straightforward, as explained below:

• each buy generates "tax deductible costs" which are aggregated on an annual basis.
• each sell generates "tax revenues" which are aggregated on an annual basis

At the year end, if tax deductible costs are in excess of tax revenues then loss will be reported and carried forward in the next year.

Here’s an example:

Let’s say Antony bought 1 BTC and 1 ETH for 80,000 PLN in January 2022 and decided to sell both these tokens later that year for 1,10,000 PLN.

Disposal Amount = 1,10,000 PLN

Cost Basis = 80,000 PLN

Let’s use the formula:

Capital Gains = (1,10,000 - 80,000) PLN = 30,000 PLN

A flat tax rate of 19% will be levied on the 30,000 PLN gain.

Crypto Losses

Crypto losses are tax deductible in Poland. If you’ve made losses that far exceed your gains, you can report them in the PIT-8 tax form and any assets that you’ve bought and not sold in a financial year are to be reported as expenses to be accounted for in your tax return. Now, as long as you have losses in the current financial year and expenses to be accounted for in the subsequent financial year, you can carry your losses forward until the gains made from the disposal of crypto assets exceed these losses.

There is no provision that states that capital losses aren’t tax deductible, therefore one should definitely report all losses to tax authorities and avail tax benefits.

Lost Or Stolen Crypto

There are no established provisions or guidelines that determine the tax treatment of lost or stolen crypto. And therefore it is likely that the Resolution hinges on individual cases and subsequent tax relief offered.

Hence, we recommend reaching out to tax authorities directly to clarify how lost or stolen crypto is viewed from a tax perspective.

Crypto Tax Breaks Poland

There is no way to avoid crypto taxes entirely. However, tax authorities in Poland do offer some ways to reduce your tax bill:

1. Offsetting Capital Losses

Individual taxpayers can carry their capital losses forward as long as they have expenses to be accounted for in the subsequent tax year. 

2. HODL Your Assets

• HODLing your assets is not a taxable event in Poland and gains are only taxed when they’re realised.

Furthermore, authorities in Poland provide certain exemptions and tax benefits for residents. However, it's unclear if these apply to crypto investments. We advise consulting experienced tax professionals to confirm their applicability.

• Charitable Contributions- Donations to registered charities can be deducted from gross income, up to a limit of 6% of taxable income.
  
  
• Internet Connection Expenses- Individuals who qualify can claim a relief of 760 PLN for internet connection expenses. This relief can be claimed for up to two consecutive years.
  
  
• Free of Charge Blood Donation- Based on the amount of blood donated, individuals can deduct the money equivalent, up to 6% of their total income subject to progressive taxation.
  
  
• Payments to Individual Insurance Security Account (IKZE)- Deductions can be made for payments to the non-obligatory IKZE, up to 4% of the pension insurance assessment basis for the individual in the previous year.
  
  
• Rehabilitation Expenses- Expenses related to rehabilitation and aiding life activities for disabled taxpayers or those supporting disabled individuals can be deducted. Proper documentation is required.
  
  
• Thermo-modernization Relief- Owners/co-owners of residential buildings can deduct expenses related to thermo-modernisation projects, up to a total of 53,000 PLN for all projects.

• Deduction of Social Security Contributions- Employee's social security contributions can be deducted within specified limits. Deductions for contributions paid in another EU or EEA member state or Switzerland are also possible under certain conditions.
  
  
• Relief for Renovation of Monuments- Owners of properties listed in the Register of Cultural Property can deduct expenses for renovation and purchase of historic properties. The formula for this relief will change starting in 2023.
  
  
• Standard Deduction for Employees- A standard deduction of 250 PLN per month is available for employees, with an annual limit of tax costs not exceeding 3,000 PLN. For multiple employment relationships, the upper limit is 4,500 PLN.

Crypto Cost Basis Method Poland

The examples we have used above to explain capital gains calculations are fairly simplistic and don’t reflect real-world transactions. Investors buy multiple assets of the same kind at different prices in the same tax year and that makes capital gains calculations much more complicated. If you have multiple acquisition prices for the same asset, which one would you use to calculate the cost basis for such transactions? That’s exactly why investors should use specialised accounting methods as specified by their respective tax authorities for cost-basis calculations.

In general, there are following cost basis methods which are used for calculating capital gains.

1. LIFO

LIFO or Last-In-First-Out accounting method states that the acquisition price of the most recent asset you buy is to be used as the cost basis for capital gains calculations upon disposal.

2. FIFO

FIFO or First-In-First-Out accounting method states that the acquisition price of the earliest asset you buy is to be used as the cost basis for capital gains calculations upon disposal.

3. HIFO

HIFO or Highest-In-First-Out accounting method simply states that the highest acquisition price for an asset across all acquisition instances is to be used as the cost basis for capital gains calculations upon disposal.

4. Average Cost Basis Method

The average cost basis method simply states that the cost basis for an asset is simply equal to the average acquisition price of all tokens that you currently have in your portfolio.

However, as mentioned above, Poland follows a simple method for calculator of income from sale of crypto assets, where buying crypto generated deductible costs and selling them leads to tax revenues both aggregated annually.

Crypto Income Tax

Income from crypto assets is simply taxed as regular income under the existing income tax rules. In Poland, income obtained from cryptocurrencies is categorised as income from monetary capital and is subject to taxation at a rate of 19%. This taxation applies to various crypto-related activities, including trading, mining, and participating in Initial Coin Offerings (ICOs).

When selling virtual currencies, the taxable amount is determined by the difference between the sale price and the purchase price. This difference is considered income and is subject to the 19% tax rate. This means that any profits made from cryptocurrency trading, as well as other transactions involving virtual currencies, is considered income.

Moreover, it's interesting to note that for goods and services tax (VAT) purposes, cryptocurrencies are considered means of payment rather than property. This classification by the Ministry of Finance influences their treatment under VAT regulations.

It's important to note that not all aspects of crypto transactions are covered by specific tax laws, which may cause ambiguity in some instances. As a result, seeking advice from an experienced tax advisor is recommended to ensure compliance and proper reporting.

Crypto Income Tax Rates

As mentioned previously, a blanket tax rate of 19% applies to income from crypto transactions in Poland. 

Tax-Free Crypto Transactions

Listed below are some tax-free transactions in Poland:

Taxed Crypto Transactions

Listed below are some taxed crypto transactions:

Tax on Mining Crypto

Mining rewards are non-taxable at the point of receipt. The tokens received as a result of mining inherit the cost basis of 0 PLN, which essentially means that once you dispose of these assets and convert them to fiat, the entire amount will be taxed at a flat rate of 19%.

Tax on Staking Crypto

Although mining and staking are two separate ways of adding and validating new blocks of transactions on public ledgers, Polish authorities view them through the same lens when it comes to their taxation.

Staking rewards are taxed in the same way as mining rewards.

How are Airdrops and Forks Taxed in Poland?

Tokens received through airdrops and forks aren't taxed upon receipt. They can even be converted to other crypto without immediate tax implications. However, upon conversion to fiat, they inherit a cost basis of 0 PLN, triggering taxation.

Due to the zero cost basis, the tax rate applies to the entire amount upon disposal.

Crypto Gifts and Donations Taxes

There are no guidelines that dictate the taxation of crypto gifts and donations in Poland. However, if we assume crypto gifts and donations to be the same as fiat donations, we can infer the tax implications on such transactions.

Just like with regular assets and property rights, the value of crypto assets and rights received through gifts, donations, or inheritance would be subject to Polish gift and inheritance tax. This tax would apply if the recipient of the assets is a Polish national, a Polish permanent resident, or if the donation contract is concluded in Poland.

Non-residents might not have to pay gift and inheritance tax on movable crypto assets and rights inherited or donated within Poland, as long as the donor is neither a Polish resident nor a Polish citizen.

The exemptions that apply to traditional assets and property rights, such as acquisition by close family members and certain types of property, could potentially also apply to crypto assets. However, it's important to note that the tax-free amounts and specific rules might vary depending on the personal relationship between the recipient and the donor or deceased person.

The tax calculation for crypto gifts, donations, and inheritance would be based on the fair market value of the crypto assets on the day when the tax event occurs (such as the acceptance of inheritance or donation). The tax rate would be determined based on the relationship between the recipient and the donor or deceased, just like in the case of traditional assets.

Note that these guidelines are speculative. We suggest seeking guidance from an experienced tax professional to better understand how such transactions are taxed.

Crypto Margin Trades, Futures, and CFDs

Although there is no specific guidance on how income from margin trades, futures, and CFDs are taxed, income from margin or leverage trades would likely attract tax liabilities similar to that of regular trades.

This essentially means that any gains incurred from such trades would attract a flat tax rate of 19%. However, it would be prudent to seek guidance from tax professionals to understand how such transactions are taxed.

Crypto ICO Taxes

ICOs are special events that allow investors to own native tokens from unreleased projects in exchange for mainstream tokens like Bitcoin and Ethereum. They are similar to IPOs in the regular securities market.

Any tokens received from ICOs are not taxable at receipt. These tokens inherit the cost base equal to 0 NLP and are taxed when they’re disposed of, attracting a flat tax rate of 19%.

NFT Taxes

The Polish tax authorities are yet to release specific guidelines on NFT taxation. Any income from trading NFTs will likely be taxed as regular income. However, we do suggest seeking guidance from an experienced tax professional to better understand how NFTs are taxed.

DAO Taxes

DAOs are member-owned communities with a shared vision. All the decisions in a DAO are made by the members in the absence of central leadership. They are new-age institutions that aim to democratise decision-making and allow people to have a say in decisions that directly affect them. DAOs are often called the soul of Web3 and allow members to earn rewards in multiple ways. DAO contributors are rewarded for their contributions to the organization, similar to how centralized organizations pay salaries to their employees. They also pay out bounties for one-time projects and redistribute any profits generated through operations.

It is likely that any income from DAOs won’t be taxed at receipt and would simply be taxed at a flat tax rate of 19%. The cost basis for such transactions would be 0 NLP, as is the case with tokens received through airdrops and ICOs.

Since there is no clear guidance on the taxation of income from DAOs, this is a mere speculation on our part. We suggest seeking the advice of tax experts to better understand how such transactions are taxed.

DeFi Crypto Taxes

The subject of DeFi taxation is barely touched upon by tax authorities in Poland and is therefore one possible grey area in the Polish tax regime. Any income from staking or lending on DeFi protocols would likely be treated the same way as income from ICOs, airdrops, or hard forks.

We suggest seeking guidance from an expert tax professional to better understand how such transactions are taxed.

When to Report Crypto Taxes in Poland

Crypto taxes in Poland should be reported between 15 February and 30 April of the year following the fiscal year in which the income was earned or losses were sustained. This reporting timeframe applies to various tax returns, including forms such as PIT-37, PIT-36, PIT-36S, PIT-36L, PIT-36LS, PIT-38, and PIT-39.

For the lump-sum tax on revenues, the tax return should be submitted between 15 February and the end of February of the year following the fiscal year. This timeline is specifically applicable to the PIT-28 and PIT-28S tax returns.

It's important to note that if 30 April falls on a Saturday or a holiday, the deadline for submitting tax returns would be the first working day following the holiday(s).

How to File Crypto Taxes in Poland

You can submit your crypto taxes in two ways primarily:

• Using paper forms
• Through the online portal or desktop application 

If you choose the latter, you have three different avenues for submitting your tax return:

• an interactive PDF file,
• e-Deklaracje Desktop application,
• Twój e-PIT service.

The tax return prepared with taxpayer information gathered by the revenue authority can be accessed by the taxpayer through the e-Tax portal. The annually generated tax return is automatically considered submitted once the deadline has passed.

What Records Will the Tax Administration Chamber Want

There is no official list of documents that one needs to maintain as per the tax authorities. However, it would be best to maintain the following records for a smooth tax filing experience.

1. List of all transactions with dates and times from the exchange
2. A detailed record of the acquisition and disposal amount
3. Details about the type of asset and the parties involved in the transaction
4. A list of cost basis and disposal amount for each asset
5. A detailed record of all assets held in digital wallets you have private keys for

How to File Crypto Taxes Using Kryptos?

Now that you’re aware of how your crypto transactions are taxed and what forms you need to fill out to complete your tax report, here’s a step-wise breakdown of how Kryptos can make this task easier for you:

• Visit Kryptos.io and sign up using your email or Google/Apple Account
• Choose your country, currency, time zone, and accounting method 
• Import all your transactions from wallets and crypto exchanges
• Choose your preferred report click on the generate report option on the left side of your screen and let Kryptoskatt do all the accounting.
• Once your Tax report is ready, you can download it in PDF format.

If you still need clarification regarding the integrations or generating your tax reports, you refer to our video guide here.

How to Avoid Crypto Taxes in Poland

Avoiding crypto taxes can cause legal trouble in Poland. However, there are ways you can lower your tax bill legally:

1. Carry your losses forward and offset them against your gains
2. HODL your assets for the long term and convert them to stablecoins when you want to liquidate your positions since crypto gains are only taxable when they’re converted to fiat

Frequently Asked Questions (FAQs)

1. Is crypto legal in Poland?

The question can be better framed as “Is investing in crypto legal in Poland?” and the answer to that would be yes. Although the Polish authorities do not consider crypto to be legal tender, investing in crypto is completely legal in Poland. In fact, Poland is the first country in the world that has integrated blockchain into its public welfare system. Poland is widely regarded as a crypto-friendly nation across the world.

2. How is Crypto Taxed in Poland?

In Poland, the taxation of cryptocurrencies follows a clear framework. Income generated from the sale of virtual currencies is considered income from monetary capital and is subject to a flat tax rate of 19%. This taxation encompasses various crypto activities such as trading, exchanging, mining, and participating in Initial Coin Offerings (ICOs). Tax liability arises when cryptocurrencies are sold, based on the difference between the sale and purchase prices, resulting in either income or capital loss.

However, specific regulations for all crypto-related transactions aren't fully established, introducing some uncertainty. Seeking guidance from a specialist or experienced tax advisor is recommended to ensure accurate adherence to tax laws. Taxpayers are individually responsible for reporting their cryptocurrency-related income and transactions, and regulations concerning virtual currencies can change from one tax year to the next.

3. Does Poland have a capital gains tax?

No, Poland does not have a dedicated capital gains tax. The tax system in Poland treats income from the sale of assets, including investments like stocks and cryptocurrencies, as capital gains. When individuals sell cryptocurrencies at a profit, the resulting gain is considered a capital gain and is subject to taxation. The tax rate for capital gains in Poland is currently set at a flat rate of 19%.

4. How can Kryptos simplify crypto taxes for you?

We’ve already discussed how to file your crypto taxes in the above sections of the guide offering a stepwise breakdown of the entire process. However, we agree that it is unreasonably complicated even for someone with a fair amount of prior knowledge. However, there’s an easy way to file your crypto taxes using a crypto tax software called Kryptos.

All you need to do is log in on the platform, add all your trading accounts, wallets, and DeFi accounts and sip coffee while Kryptos does all the heavy lifting for you. The platform auto-fetches all your transactions from the tax year and generates a legally compliant tax report within minutes while also suggesting ways to lower your tax bill. It works like magic, all you need to do is try it once.

‍

All content on Kryptos serves general informational purposes only. It's not intended to replace any professional advice from licensed accountants, attorneys, or certified financial and tax professionals. The information is completed to the best of our knowledge and we at Kryptos do not claim either correctness or accuracy of the same. Before taking any tax position / stance, you should always consider seeking independent legal, financial, taxation or other advice from the professionals. Kryptos is not liable for any loss caused from the use of, or by placing reliance on, the information on this website. Kryptos disclaims any responsibility for the accuracy or adequacy of any positions taken by you in your tax returns. Thank you for being part of our community, and we're excited to continue guiding you on your crypto journey!

Are you a Japanese Crypto Investor struggling with crypto taxes? Don’t worry you’re not alone. A majority of crypto investors in Japan struggle with crypto taxes given the complexity of the guidelines governing the taxation of such assets and the inherent complexity of crypto as an asset. Japan is among the strictest nations in the world when it comes to crypto taxes having one of the highest tax rates on crypto transactions which may go up to 55% in some instances. 

We realise that navigating crypto taxes can be an intimidating task for most investors, that’s why we have curated a detailed tax guide covering all the aspects of crypto taxation in Japan. In this guide, we will cover everything from crypto gains and income to DeFi and NFT taxes. We will also answer pivotal questions like “How is crypto taxed in Japan?”, “How to file crypto taxes?”, “Can the tax authority track crypto?”, “How to calculate crypto gains and losses?” and more. 

So let’s hop in.

Latest Updates/Guidelines

Payment Services Act
Financial Instruments and Exchange Act
Detailed Crypto Guidelines

How is Crypto Taxed in Japan

The Japanese National Tax Authority views crypto as property and any gains incurred from their sale attract income tax. Moreover, crypto received through airdrops, staking, and mining is also subject to income tax. So if the total gain or income from crypto assets exceeds 2,00,000 JPY in a tax year, you need to report your gains/income to the NTA and pay taxes on them in compliance with the Payment Services Act (PSA) and the Financial Instruments and Exchanges Act (FIEA). You can access the detailed guidelines here.

Any income/gain reported by an individual or business is categorized as “Miscellaneous Income” and the tax rates may go up to 55%, that’s pretty steep because gains from securities are taxed at a flat rate of 20% in Japan. 

Japan has a progressive tax on miscellaneous income, ranging from 5% to 45% on profits. Moreover, Japanese taxpayers are obligated to pay an inhabitant tax of 10% on their profits, which includes a prefectural rate of 4% and a municipal rate of 6%. Consequently, the effective crypto tax rate varies between 15% and 55%. For non-permanent residents of Japan, a flat 20% tax applies to all income earned within the country.

Can the NTA Track Crypto?

Crypto exchanges operating in Japan are categorized as Crypto-Asset Exchange Service Providers (CAESP) and have to go through a 6-month long registration process with the NTA that compels them to follow stricter KYC- regulations and share investor details with authorities for better compliance and reporting.

So, if you use a crypto exchange for investing in crypto assets, it is likely that the NTA already knows about it. Moreover, Japan is also a founding member of the FATF (Financial Action Task Force), a global money laundering and terror financing watchdog, and a member of the APG (Asia-Pacific Group for Money Laundering), making Japan one of the most vigilant states in the world when it comes to tax reporting and compliance.

Crypto Capital Gains Tax

As mentioned earlier there is no capital gains tax on crypto transactions in Japan. Crypto gains are instead added to the income and taxed accordingly. Businesses and investors are pushing for miscellaneous income from crypto assets to be taxed under capital gains tax laws similar to securities, given the lenient capital gains taxation rates. 

Capital Gains Tax Rate

Since Capital Gains are taxed as income, the tax rates are the same as the income tax rates discussed later in the guide.

How to Calculate Crypto Gains and Losses

Even though there is no capital gains tax in Japan, you still need to calculate the gains incurred from disposing of crypto assets to be able to report them alongside your income and pay taxes on them.

Calculating crypto gains is a pretty straightforward process. All you need to do is to deduct your cost basis from the disposal amount. You can use the following formula to calculate your capital gains:

‍

However, most investors find cost basis intimidating as a concept. The cost basis is simply the amount your pay to acquire a particular asset inclusive of any additional fees paid in the process. 

Here’s an example:

Let’s say Toshiro san acquired 1 ETH for 2,00,000 JPY

And he paid 2,500 JPY in transaction fees in the process.

Then the cost basis would simply be (2,00,000 + 2,500) JPY 

Let’s say Toshiro san finally decides to dispose of the ETH token for 2,50,000 JPY

In that case,

Capital Gain/Loss = Disposal Amount - Cost Basis = 2,50,000 - 2,02,500 = 47,500 JPY

Crypto Losses

Unfortunately, you cannot deduct crypto losses in Japan. Currently, only losses from businesses, asset transfers, real estate, and forestry income are considered deductible by the tax authorities and since crypto doesn’t fall in any of these categories, losses from crypto assets are non-deductible in Japan. 

Lost or Stolen Crypto

Keeping in mind NTA’s strict stance around crypto and the non-deductibility of crypto losses, it is highly likely that you will not be able to deduct lost or stolen crypto from your gains. We suggest contacting an experienced tax professional to have a better understanding of how lost or stolen crypto is treated by the tax authorities.

Crypto Tax Breaks Japan

The way Japan taxes crypto transactions, there’s not much you can do to lower your tax bill. As mentioned earlier, you cannot offset your losses against gains in Japan and beyond there’s barely any way to lower your taxes strategically.

One thing you can consciously decide to do is to dispose of your assets in a low-income year to keep the overall gains under 200,000 JPY, which is the regular income tax exemption limit in Japan. Japan also has an employment income deduction that allows employees from a corporate background to deduct a certain amount from their taxable income. Given below are the income brackets and the deductions allowed in each bracket.

‍

‍

Although it’s not clear whether these deductions are permissible for income from crypto transactions. We suggest seeking guidance from an experienced tax professional to gain clarity on the subject.

Crypto Cost Basis Method Japan

Japan allows two accounting methods, the total average accounting method and the moving average accounting method or the ACB (Average Cost Basis Method). 

‍

‍

The total average accounting method is what the investors/traders are supposed to use by default. However, if you choose to use the moving average accounting method, make sure you use it for all your cost-basis calculations to avoid discrepancies in your tax report. 

The moving average method also known as the Average Cost Base (ACB) method, assumes the average cost of the assets of the same kind you currently possess as the cost basis for a subsequent disposal. The total average method is quite similar with just one exception, it considers the average cost of all the assets (of a particular kind let’s say ETH) that you’ve bought in a financial year. 

In simpler terms, the cost basis might change for every disposal depending upon the disposal. However, when you use the total average accounting method, you have a constant cost basis regardless of time, place, or the sequence of your disposal. 

Here’s an example to understand how the Moving average accounting method works:

2022/02/21 - Ishida san bought 1 ETH for 2,00,000 JPY

2022/03/17 - Ishida san bought 3 ETH for 1,90,000 JPY each

2022/05/23 - Ishida san sold 1 ETH for 2,10,000 JPY

2022/06/04 - Ishida san bought 2 ETH for 1,70,000 JPY each

2022/08/27 - Ishisa san sold 1 ETH for 2,40,000 JPY

As evident from the above ledger of transactions, Ishida san made two disposals.

Let’s use the Moving Average Accounting Method to calculate the cost basis for both disposals.

Now, before the first disposal was made, ETH tokens were acquired on two separate occasions. So we have to calculate the average acquisition price:

Average Acquisition Price = (1*2,00,000 + 3*1,90,000)/4 = 1,92,500 JPY

So the cost basis now becomes 1,92,500 JPY for the disposal

Capital Gain on the first disposal = Disposal Amount - Cost Basis = 2,10,000 - 1,92,500 JPY = 17,500 JPY

But now since 1 ETH token is disposed, the total number of ETH tokens in possession goes down to three. And on top of that Ishida san bought 2 more ETH tokens at an average price of 1,70,000 JPY each.

So now the average acquisition price changes.

Value of 3 ETH tokens in possession = 1,92,500 * 3 = 5,77,500 JPY

Value of 2 ETH tokens acquired after 1st disposal = 1,70,000 * 2 = 3,40,000 JPY

Average Acquisition Price = (5,77,500 + 3,40,000)/5 = 9,17,500/5 = 1,83,500 JPY

Now the cost basis changes to 1,83,500 JPY

So, for the second disposal

Capital Gain = Disposal Amount - Cost Basis = 2,40,000 - 1,83,500 = 56,500 JPY

Total Gain from both Disposals = 74,000 JPY

Let’s now consider the same ledger of transactions and use the total average method for calculating the capital gains for both disposals.

Using the total average method is a lot simpler as it considers the average cost of all acquisitions made in a financial year divided by the total number of assets.

So, the average acquisition price = (1*2,00,000 + 3*1,90,000 + 2*1,70,000)/6 = 1,85,000 JPY

Which imputes a cost basis of 1,85,000 JPY

Now for the 1st Disposal

Capital Gain = Disposal Amount - Cost Basis = 2,10,000 - 1,85,000 = 25,000 JPY

And for the 2nd Disposal 

Capital Gain = Disposal Amount - Cost Basis = 2,40,000 - 1,85,000 = 55,000 JPY

Total Gain from both disposals = 80,000 JPY

Notice that the capital gain is 6,000 JPY higher when you use the total average accounting method.

Crypto Income Tax Japan

As mentioned earlier, any gains or income from crypto transactions is taxed as miscellaneous income by the NTA. You are viewed to be making miscellaneous income in Japan if you participate in the following transactions:

• Disposing of crypto for fiat
• Swapping one crypto asset for another
• Buying goods or services with crypto
• Receiving compensation in crypto 
• Rewards from mining, staking and liquidity pools
• Rewards from DeFi transactions
• Converting NFTs to crypto or fiat
• Ardops or interest income

Any income or gain incurred from such transactions is to be added and reported in your tax return. The tax rate on such income can go up to 55% depending on the nature of transactions and where you reside in Japan. 

Crypto Income Tax Rate

The crypto tax rate in Japan can go up to 45% depending on which tax bracket you fall into. You will also have to pay a local inhabitant tax of 10% on top of the income tax. The following are the income tax rates in Japan:

‍

‍

How to Calculate Crypto Income

Calculating your crypto income is pretty straightforward. You just need to add the gains/income from all transactions. We’ve discussed in the above sections how you can calculate your gains from crypto transactions, any tokens that you’ve received from airdrops, staking, mining, or liquidity pools shall be perceived as income and you must track the fair market value of the tokens on receipt, to later add it to your gains and report your actual taxable income base.

Tax-Free Crypto Transactions

Following are some tax-free crypto transactions in Crypto:

• Buying crypto with fiat
• Transferring crypto between wallets

Taxed Crypto Transactions

Following are some taxed crypto transactions in Crypto:

• Selling crypto for fiat
• Swapping crypto 
• Staking crypto
• Mining crypto
• Liquidity Mining
• Yield Farming
• Spending crypto
• Receiving crypto as compensation

Tax on Mining Crypto

Any rewards from mining crypto tokens are viewed as miscellaneous income and taxed under income tax laws regardless of whether you are an individual investor or a business. 

‍

‍

Tax on Staking Crypto

Although mining and staking are different in the way they add and validate new transactions on a public ledger (blockchain), both mining and staking rewards are treated similarly by tax jurisdictions around the globe and Japan is no exception. 

Both mining and staking rewards are viewed as miscellaneous income and are taxed under income tax laws. The value of the tokens is simply taken to be the fair market value of the tokens at the time of receipt. 

How are airdrops and forks taxed in Japan?

Any new tokens received through airdrops and hard forks are grouped under miscellaneous income and are taxed according to income tax laws.

Crypto Gifts and Donation Taxes

The NTA is yet to release specific guidance on how crypto gifts and donations are taxed in Japan. However, if we consider crypto gifts and donations to be the same, we can extrapolate the tax implications of such transactions. Gifts up to 25 million JPY are exempt from taxation in Japan. However, if the total amount of gifted assets exceeds the exemption limit, then you’re liable to pay gift taxes in Japan.

Gifts in Japan are taxed at a rate of 20% on the amount exceeding the cumulative threshold of JPY 25 million. If gift tax is applicable, it will be treated as a prepayment of tax towards any potential future inheritance tax liability.

In Japan, charitable contributions made to organizations designated by the Ministry of Finance are eligible for tax deductions, but with certain limitations. Generally, only charities based in Japan qualify for these deductions.

Qualified contributions or donations, totaling JPY 2,000 or more in aggregate, are deductible when calculating the national tax. However, the total deduction is limited to 40% of the individual's income, less JPY 2,000.

Note that this is just a speculation and crypto gifts and donations might not be treated the same way as other assets. Therefore, we suggest seeking the advice of an experienced tax professional to better understand the regulations around the same.

Crypto Margin Trades, Futures, and CFDs

Since no regulation separates professional traders from individual investors when it comes to crypto, income from margin and leverage trades would likely be treated as miscellaneous income and taxed under the income tax laws. 

However, we do suggest reaching out to an experienced tax professional to better understand the tax implications of such transactions.

Crypto ICO Taxes

ICOs (Initial Coin Offerings) and IEOs (Initial Exchange Offerings) are special events that allow investors to gain access to native tokens from an unreleased project in exchange for mainstream tokens like ETH and BTC. They are similar to IPOs in the traditional securities market.

Since ICOs involve the exchange of mainstream tokens like BTC and ETH for project-native tokens, they’re simply viewed as crypto-to-crypto trades and the new tokens received from the event are viewed as miscellaneous income and taxed under the income tax laws.

NFT Taxes

There is no specific guidance on how NFT transactions are taxed in Japan. However, any proceeds from the sale or trade of NFTs will likely be treated as miscellaneous income and taxed at the regular income tax rates.

We do suggest seeking guidance from an experienced tax professional to better understand the tax implications of such transactions.

DAO Taxes

DAOs are member-owned communities with a shared vision. All the decisions in a DAO are made by the members in the absence of central leadership. DAOs are new-age institutions that aim to democratise decision-making and allow people to have a say in decisions that directly affect them. DAOs are often called the soul of Web3 and enable members to earn rewards in multiple ways. DAO contributors are rewarded for their contributions to the organization, similar to how centralized organizations pay salaries to their employees. They also pay out bounties for one-time projects and redistribute any profits generated through operations.

The NTA categorizes any gains realised by the sale of crypto assets, or any assets received as a reward, as miscellaneous income. And income from DAOs is likely to be under the same list. Since these rewards are compensation for active contributions in the DAO, they can be treated as salary and taxed at regular income tax rates.

DeFi Crypto Taxes 

Any new coins you receive from engaging in DeFi transactions are categorized as miscellaneous income and are taxed at regular income tax rates. 

When to Report Crypto Taxes in Japan

The Japanese tax year runs from January 1st to December 31st, and you can file your taxes between February 16 and March 15 every year.

How to File Crypto Taxes in Japan

There are two ways you can file your tax return in Japan.

1. Using Paper Forms
2. Using NTA’s Online Portal

If you wish to file your crypto taxes using paper forms, you should use Form A to declare your employment and miscellaneous income. However, note that if the miscellaneous income from other sources does not exceed 2,00,000 JPY, you’re not eligible to file a tax return.

Here’s a stepwise tutorial on how you can file your crypto taxes using NTA’s online portal:

1. The first step is to log in on the NTA’s website using your registered credentials. If you’re not registered with the NTA, you can do that here.
2. Once you’ve done that, navigate the options and go to “Salary” under “Relevant Income”.
3. From here, go to “Miscellaneous Income”
4.  Once you do this, you will be asked the following question “Do you wish to receive deductions for your home?”. Answer with a Yes/No and move ahead
5. In this step, you need to enter your e-tax number or connect your account to the My Number Portal Website
6. Now you need to enter the total miscellaneous income you’ve earned during a tax year and the profit or loss
7. Now select “Crypto” from the drop-down list to specify the category
8. Now enter the name of the exchanges you’ve used and their legal addresses

What Records Will the NTA Want

There is no official guidance on crypto record keeping by the NTA. However, it would be prudent to maintain detailed records for all your transactions dating back to at least 3 years to ensure a hassle-free tax filing experience. Following is the list of documents you should maintain:

1. Date and time of transactions
2. Nature of transactions and intent of the parties involved
3. A detailed record of FMV of assets received through staking, mining, airdrops, or as compensation
4. Wallet addresses that you have private keys to
5. Details of the type of assets owned
6. Receipts of purchase and disposals

How to File Crypto Taxes Using Kryptos?

Now that you’re aware of how your crypto transactions are taxed and what forms you need to fill out to complete your tax report, here’s a step-wise breakdown of how Kryptos can make this task easier for you:

1. Visit Kryptos and sign up using your email or Google/Apple Account
2. Choose your country, currency, time zone, and accounting method 
3. Import all your transactions from wallets and crypto exchanges
4. Choose your preferred report and click on generate report option on the left side of your screen and let Kryptos do all the accounting.
5. Once your Tax report is ready, you can download it in PDF format.

If you still need clarification regarding the integrations or generating your tax reports, you refer to our video guide here.

How to Avoid Crypto Taxes in Japan

Japan has taken a strict stance on crypto taxation, so there are not many options for someone looking to save some taxes by employing tax-saving strategies like tax-loss harvesting. However, there are a couple of ways you can save up on your tax bill:

1. Sell your assets in a low-income year so that the total gains from crypto assets don’t exceed 2,00,000 JPY (the income tax exemption limit).
2. Gift crypto assets. Crypto gifts up to the amount of 25 million JPY are tax-exempt.

Frequently Asked Questions(FAQs)

1. Is crypto legal in Japan?

Yes, cryptocurrencies are legal in Japan. Japan has taken a progressive approach to regulating cryptocurrencies and blockchain technology. In April 2017, the Japanese government passed a law that officially recognised Bitcoin as a legal payment method. This move allowed businesses to accept Bitcoin and other cryptocurrencies as a form of payment.

Moreover, the Japanese Financial Services Agency (FSA) implemented a licensing system for cryptocurrency exchanges in 2017. Exchanges are required to register with the FSA and comply with certain regulatory requirements to operate legally in the country.

However, it's worth noting that Japan also has strict regulations to prevent money laundering and protect investors. The FSA closely monitors the cryptocurrency industry to ensure compliance with these regulations and protect consumers. As a result, some cryptocurrency exchanges have faced regulatory challenges and have been required to improve their security and customer protection measures.

2. Are crypto gains subject to income tax or capital gains tax?

There is no capital gains tax in Japan and income from all crypto transactions is categorized as miscellaneous income and is taxed under the existing income tax laws. The income tax rate varies between 0 to 45% depending on the amount of income made by an individual taxpayer.

3. Are there any tax exemptions for long-term crypto investors?

Since no tax framework separates short-term capital gains tax from long-term capital gains tax in Japan, there are no relaxations of benefits offered to long-term investors. However, investors may choose to hold on to their assets in a high-income year and later dispose of them in a low-income year to stay under the income-tax exemption limit of 2,00,000 JPY to avoid any taxation on their gains.

4. How can Kryptos simplify crypto taxes for you?

We’ve already discussed how to file your crypto taxes in the above sections of the guide offering a stepwise breakdown of the entire process. However, we agree that it is unreasonably complicated even for someone with a fair amount of prior knowledge. Although, there’s an easy way to file your crypto taxes using a crypto tax software called Kryptos.

Where all you need to do is log in on the platform, add all your trading accounts, wallets, and Defi accounts and sip coffee while Kryptos does all the heavy lifting for you. The platform can auto-fetch all your transactions from the tax year and generate a legally compliant tax report within minutes while also suggesting ways to lower your tax bill. It works like magic, all you need to do is try it once.

‍

All content on Kryptos serves general informational purposes only. It's not intended to replace any professional advice from licensed accountants, attorneys, or certified financial and tax professionals. The information is completed to the best of our knowledge and we at Kryptos do not claim either correctness or accuracy of the same. Before taking any tax position / stance, you should always consider seeking independent legal, financial, taxation or other advice from the professionals. Kryptos is not liable for any loss caused from the use of, or by placing reliance on, the information on this website. Kryptos disclaims any responsibility for the accuracy or adequacy of any positions taken by you in your tax returns. Thank you for being part of our community, and we're excited to continue guiding you on your crypto journey!

South African investors are required to pay 18% capital gains tax on any gains incurred through crypto transactions and regular income tax rates apply to income bearing crypto transactions. But, here’s the caveat, there are no clear guidelines concerning the demarcations between income and CGT transactions leaving crypto investors in a stir. Moreover, the authorities are yet to release specific guidelines on the tax implications of more complex transactions such as Airdrops, Forks, and DeFi.

That’s why we created this comprehensive guide to help investors navigate the crypto tax landscape conveniently and guide them through their tax filings to avoid tax troubles in the future.

Note that this guide is quite extensive and will be updated regularly to accommodate any new rules or guidelines. Therefore, we suggest revisiting this guide regularly to not miss out on these updates.

Latest Updates/Guidelines

Circular on Crypto Staking

Crypto Assets and Tax

Income Tax Act

How Is Crypto Taxed in South Africa?

The South African Revenue Service (SARS) does not consider crypto to be legal tender and categorises it as "assets of an intangible nature," which significantly impacts the tax treatment. Crypto transactions are taxed in South Africa depending on the nature of the transactions.

If the transaction is capital in nature, it is subject to Capital Gains Tax. Taxpayers receive an annual exclusion of 40,000 ZAR and are only taxed on 40% of the total gain at a maximum effective tax rate of 18%. This means that individuals pay tax on just 40% of their profit, making the tax burden comparatively lighter, particularly for long-term investors. However, this calculation can vary depending on the total taxable income.

On the other hand, if gains from a transaction are considered as revenue income in nature, it is taxed under the existing income tax laws. This can range from 18% to 45%, placing a higher tax burden on individuals with greater income from cryptocurrency activities.

Note that the tax treatment also depends on whether the taxpayer is classified as an individual or a legal entity. For transactions conducted under a legal entity, such as a company, the corporate tax rate applies, which is typically 28%, although it's reduced to 27% starting March 31, 2023. Legal entities are taxed on 80% of cryptocurrency gains exceeding the 40,000 ZAR tax credit.

However, a caveat to all these considerations is that the tax treatment isn't solely based on these factors. It also depends on whether the investment activities are seen as holding assets as capital assets or trading stock.

Can the SARS Track Crypto?

The simple answer would be yes. The SARS can track crypto transactions. Cryptocurrency exchanges and financial institutions are required by the Income Tax Act to share customer details like KYC and investment activity with the authorities. This means that if an individual has participated in crypto transactions, SARS can likely access their transaction details.

Moreover, blockchain transactions are stored on distributed ledgers and are visible to everyone, making it easier for tax authorities to use decentralised Web3 tools to link these transactions with the KYC details and identify any discrepancies in tax reports.

Therefore, we suggest reporting all your crypto transactions on your tax report and paying your taxes judiciously to avoid penalties for tax evasion.

Capital Gains Tax

It's worth noting that while CGT is a key component of crypto taxation, the specific rules and guidance can be somewhat complex. Investors in South Africa pay capital gains tax while traders pay income tax.

One of the essential aspects about CGT in South Africa is the tax rate. Capital gains on cryptocurrencies are subject to a maximum effective tax rate of 18%. However, this rate is only applied to gains that exceed the annual exclusion threshold. South African taxpayers receive an annual exclusion of 40,000 ZAR, which means that the first R40,000 of capital gains from cryptocurrency transactions are exempt from taxation. Gains exceeding this threshold are subject to the 18% tax rate, but only after applying the exclusion.

The calculation of the effective tax rate is a bit unique and can be favourable for taxpayers. Once capital gains exceed the 40,000 ZAR exclusion, you are taxed on only 40% of those gains. For instance, if you have a total capital gain of 100,000 ZAR, you would only pay tax on 40% of the amount exceeding the 40,000 ZAR exclusion limit i.e the tax base would be equal to 40% of (100,000 ZAR- 40,000 ZAR), which comes out to be 24,000 ZAR. 

Investors vs Traders

As discussed earlier, the tax implications vary based on whether you’re categorised as a trader or an investor. In South Africa, authorities categorise individuals as traders or investors in cryptocurrency transactions based on several key factors:

1. Motive for Buying/Holding Cryptocurrencies

If you intend to hold cryptocurrency as a long-term investment, it's seen as an investment. Buying for short-term profit is typically regarded as trading.

2. Holding Duration

The longer you hold crypto, the more likely gains from disposals will be viewed as capital gains.

3. Transaction Frequency

Frequent transactions suggest trading, especially with a high volume in a tax year.

4. Transaction Scale:

Large-scale, frequent transactions lean toward trader status.

5. Effort and Work

Active management and trading efforts indicate trading; passive holdings are seen as investments.

6. Profit Intent

If you actively seek profits, they're considered revenue rather than capital gains.

7. Changing Intentions

Be aware that intentions can change over time, affecting your tax treatment.

Capital Gains Tax Rate

In South Africa, the capital gains tax (CGT) rate is 18%. This rate applies to gains exceeding the annual exclusion of 40,000 ZAR. The actual tax you pay can vary depending on your total taxable income.

How to Calculate Crypto Gains and Losses

Calculating your crypto gains and losses is a straightforward process. You can use this formula to calculate your crypto gains:

‍
For those of you who aren’t aware of the term cost basis, it is simply the price you pay to acquire an asset inclusive of any additional fees like transaction or gas fees.

Consider the following ledger of transactions:

12/01/22 - Junior bought 3 BTC for 4,00,000 ZAR each

19/08/22 - Junior sold 3 BTC for 4,80,000 ZAR each

Now,

Disposal Amount  = 4,80,000 ZAR (For 1 BTC)

‍
Cost Basis = 4,00,000 ZAR (For 1 BTC)

Capital Gains/Loss = Disposal Amount - Cost Basis = 4,80,000 - 4,00,000 = 80,000 ZAR (For 1 BTC)

Total Gains = 3 X 80,000 ZAR = 2,40,000 ZAR

However, the authorities offer a 40,000 ZAR tax exemption

Effective gain after exemption = 2,40,000 ZAR - 40,000 ZAR = 2,00,000 ZAR

Now, the taxable amount would come out to be 40% of 2,00,000 ZAR i.e 80,000 ZAR

Crypto Losses

From a tax perspective, crypto losses are tax-deductible in South Africa.

When you incur losses from your crypto transactions, you can leverage these losses to offset the gains you’ve accumulated during the same tax year.

Moreover, should you find yourself in a situation where you've accumulated capital losses in a given financial year but lack corresponding capital gains, there's an option to carry forward these losses to future financial years. This can prove advantageous as you can use these losses to offset gains in subsequent tax years when they may be more applicable.

Note that there is a particular rule known as the "bed and breakfasting" rule that is used to avoid taxes by producing fictitious losses. Under this rule, people sell cryptocurrency assets to deliberately create artificial capital losses and then repurchase them within a short timeframe. The SARS has clear guidelines against losses generated through bed and breakfast rule, where any losses incurred from asset repurchased within 45 days of the disposal are discarded.

Lost or Stolen Crypto

The SARS is yet to release specific guidance regarding the tax treatment of assets lost in scams or stolen by hackers. However, losses may be claimed in some instances. To claim a capital loss for lost or stolen cryptocurrency, you must demonstrate that you've permanently lost access to your digital assets with little chance of recovery or compensation. Strong evidence and documentation are crucial, including any relevant reports or communication with authorities.

Normal exclusions and limitations on capital losses may apply, and South Africa's "ring fencing of losses under section 20A" concept could further affect the tax treatment.

From a tax standpoint, there's some flexibility for individuals to offset losses from one business against profits from another, helping to reduce their overall tax burden. However, it's crucial to understand the limitations, especially natural persons. South Africa's Income Tax Act, No 58 of 1962 (the Act), Section 20A, outlines specific scenarios where losses from particular trades may be 'ring-fenced.' This means these losses cannot be used to offset income from other businesses conducted by the same individuals.

Crypto Tax Breaks South Africa

‍

Although there’s no way to avoid paying taxes entirely in South Africa. There are strategies you can employ to lower your tax bill.

1. Reduce the frequency of transactions

Some taxpayers choose to alter their trading strategy to ensure that their profits are classified as capital gains rather than income. This might involve reducing the number of transactions and holding cryptocurrency for a longer duration.

2. Use your annual exemptions

Individual investors can enjoy tax-free treatment on their first 40,000 ZAR of capital gains each year.

3. Use Tax Loss Harvesting

While losing money is not ideal, selling cryptocurrency at a loss can have a silver lining in the form of tax savings. Capital losses can offset capital gains during the same tax year, and if there's a net loss, it can be carried forward to offset future gains.

Note that there’s a specific rule called the bed and breakfast rule that prevents investors/traders from generating superficial losses. If you have disposed of an asset at a loss and repurchased the same asset 45 days before or after the disposal, then that capital loss will be disregarded by the tax authorities.

4. Donate Crypto

Donating cryptocurrency to registered charities as a Public Benefit Organization (PBO) is considered tax-deductible. The first 100,000 ZAR of property donated is exempt from Donations Tax.

5. Deduct Any Expenses

Expenses related to acquiring or disposing of cryptocurrency can be added to your base cost, reducing your tax liability during a disposal event.

6. Use tax rebates to lower your tax bill

South African taxpayers can access various Income Tax rebates, depending on their age, potentially reducing their tax bills. Primary rebates start from 17,235 ZAR for all natural persons.

7. Act more like a Investor

To reduce tax liability, individuals can strategically plan their investment activities to position themselves as investors in the eyes of the SARS instead of traders. Investors benefit from an annual exclusion for capital gains, with only 40% of gains subject to tax, while traders do not receive these benefits.

Crypto Cost Basis Method

The examples we have used so far are primitive and are not reflective of the real world transactions, as they are much more complex. For instance, if a trader buys the same asset for different prices at two separate instances, the task of identifying the cost basis upon disposal of such assets becomes tricky.

That’s why using specialised accounting methods as specified by local tax authorities is advisable. Although there’s no official guidance  by the SARS, it is likely that you have to pick one of the following accounting methods for your cost basis calculations.

1. FIFO

The FIFO or First-In-First-Out Accounting Method states that the first asset you buy is the first one you sell, which essentially means that the acquisition price of the first asset is to be used as the cost basis upon disposal.

2. Specific Identification Method

The specific identification method allows traders to pick the cost basis of their choice given that they can prove which token is being disposed of using the transaction records. Specific transaction IDs are used to identify the transactions and cost basis upon disposal.

Consider the following example:

17/02/22 - Lubanzi bought 1 ETH for 22,000 ZAR

19/04/22 - Lubanzi bought 1 ETH for 20,000 ZAR

22/08/22 - Lubanzi bought 1 ETH for 23,000 ZAR

19/12/22 - Lubanzi sold 1 ETH for 27,000 ZAR

Let’s say we decide to use FIFO for calculating the cost basis for this disposal:

According to FIFO, the acquisition price of the first asset is to be used as the cost basis.

Cost Basis = 22,000 ZAR
Disposal Amount = 27,000 ZAR

Capital Gains = Disposal Amount - Cost Basis = 27,000 ZAR - 22,000 ZAR = 5,000 ZAR

Crypto Income Tax

When you engage in crypto trading, where you frequently buy and sell digital assets, any profits from these transactions are treated as income. This income is subject to Income Tax, and the tax rate is determined based on your total annual income. The applicable marginal tax rate is applied to your entire profit from cryptocurrency trading. Essentially, if you're classified as a trader, you'll be subject to Income Tax on the entirety of your trading profits.

Moreover, some cryptocurrency activities are subject to Income Tax regardless of whether you're categorised as a trader or investor. These activities include cryptocurrency mining, earning staking rewards, receiving income from referral programs related to crypto, and even the sale of Non-Fungible Tokens (NFTs) as a creator. If you partake in any of these activities to generate income, the profits derived are subject to Income Tax.

The tax rate applied in these cases depends on your total annual income, with higher incomes incurring higher tax rates. Note that the guidelines around complex transactions like interest income from DeFi transactions are still unclear. Therefore, it is advisable to seek guidance from an experienced tax professional to gain more clarity on the subject.

Crypto Income Tax Rate

Listed below are the income tax rates for the 2023 and the 2024 tax year

For the 2024 tax year (March 1 2023 to February 29 2024)

‍

For the 2023 tax year (March 1 2022 to February 28 2023)

‍

Tax-Free Crypto Transactions

Although the majority of crypto transactions attract tax liabilities in South Africa, there are some transactions that attract no taxes whatsoever!

The following transactions are tax-free in South Africa:

• Buying Crypto for fiat
• HODLing Crypto
• Transferring crypto between personal wallets – however there should not be any increase in the net value of the assets.

Taxed Crypto Transactions

Listed below are all taxed crypto transactions in South Africa:

• Selling crypto for fiat
• Swapping one crypto for another
• Sending crypto
• Gifting crypto
• Receiving compensation in crypto
• Receiving mining or staking rewards
• Receiving airdrops
• Earning interest income through DeFi protocols

Tax on Mining Crypto

Crypto mining in South Africa is taxed based on how it's classified. If you mine crypto as a business, you're subject to Income Tax based on the fair market value of the crypto on receipt.

Moreover, if you choose to dispose of your mining rewards in the future, you might face additional tax obligations based on SARS' categorization of your activities.

If SARS views your mining as a business, you'll owe Income Tax when you dispose of your mining rewards. This tax depends on the relevant Income Tax rates and your total annual income.

If, however, your activities are considered investments, Capital Gains Tax might apply when you dispose of the mining rewards. Your tax liability here depends on the change in value of the cryptocurrencies from when you received them to when you decide to sell, swap, spend, or gift them.

In a nutshell, South African cryptocurrency miners must pay Income Tax when receiving mining rewards. Tax responsibilities can extend when disposing of these assets, contingent on how SARS perceives your activities, whether as trades or investments.

Tax On Staking Crypto

According to a circular promulgated by the South African Reserve Bank, staking activities are considered to be different from mining and therefore the tax implications for staking are different. However, the circular does not mention the specifics of how income from staking will be taxed.

Depending on the tax treatment of other crypto transactions and the existing regulations, it is likely that staking income is viewed as ordinary income for tax purposes. This implies that when you receive staking rewards, they are likely to be taxed based on the fair market value of the cryptocurrency you earned at the time of receipt.

Moreover, when you decide to dispose of these tokens by selling, trading, spending, or gifting them, additional taxes may apply. The specific tax obligations would be determined based on the capital appreciation or depreciation within the holding period.

How Are Airdrops and Forks Taxed

Although there is no specific guidance on the tax implications of receiving tokens from airdrops or hard forks, it is safe to assume that these transactions are taxable.

We are not certain whether tokens received through hard forks attract income tax or not. However, those received through airdrops will be typically considered income and taxed based on the fair market value of the received tokens at the time of receipt. Subsequent taxes may apply if these tokens are disposed of in the future, depending on any value changes.

Crypto Gifts and Donation Taxes

Generally, when you give or donate crypto in South Africa, it's considered a taxable event. The tax base is calculated based on the change in the cryptocurrency's value since receipt. This means that if the cryptocurrency has appreciated in value from the time of acquisition, you may be liable to pay tax on the capital gain.

However, there are important exemptions to consider. If you give crypto to your spouse, this is usually tax-exempt. Moreover, donations to certain Public Benefit Organizations may also be eligible for tax exemption. To qualify for this exemption, the charity must be officially registered as a Public Benefit Organization (PBO) with the SARS. In such cases, the charity should provide a receipt in accordance with section 18A of the Income Tax Act.

Furthermore, there is a Donations Tax exemption in South Africa. The first R100,000 of property donated by a natural person in a given year is exempt from Donations Tax. This exemption extends to cryptocurrency donations.

Crypto Margin Trades, Futures, and CFDs

There is no specific guidance on how crypto margin trades, futures, and CFDs are taxed. So we naturally turned to mainstream markets to understand the tax implications of such transactions, but to our surprise there were no guidelines for more mainstream markets as well.

Therefore, it would be best to seek help from an experienced tax consultant to gain more clarity on the subject.

ICO Taxes

ICOs are special events that allow investors to own native tokens from unreleased projects in exchange for mainstream tokens like Bitcoin and Ethereum. They are similar to IPOs in the regular securities market.

The SARS has yet to release specific guidelines on the taxation of ICOs. However, since these tokens cannot be viewed as revenue due to their non-recurring nature, ICOs would likely attract capital gains tax in South Africa upon disposal.

We do suggest seeing help from an experienced tax professional to gain more clarity on the topic.

NFT Taxes

Although there is no specific guidance on how NFT transactions are viewed from a tax perspective, we have analysed the existing guidelines and extrapolated the tax implications. NFTs will most likely be subject to taxation based on the nature of the transactions and the taxpayer's classification as a trader or investor.

If you earn revenue from NFTs you've created, your profits are likely to be subject to income tax, especially for primary and secondary sales. If the activity involves swapping of NFTs, a portion of the profits might be subject to capital gains tax.

DAO Taxes

DAOs are member-owned communities with a shared vision. All the decisions in a DAO are made by the members in the absence of central leadership. They are new-age institutions that aim to democratize decision-making and allow people to have a say in decisions that directly affect them. DAOs are often called the soul of Web3 and allow members to earn rewards in multiple ways. DAO contributors are rewarded for their contributions to the organization, similar to how centralized organizations pay salaries to their employees. They also pay out bounties for one-time projects and redistribute any profits generated through operations.

Unfortunately, there are no guidelines on whether the compensation received from DAOs are taxable. We suggest seeking help from an experienced tax professional to gain more clarity on the subject.

DeFi Taxes

The SARS is yet to release guidelines regarding DeFi taxation. However, frequent and recurring interest from DeFi protocols may be viewed as income and subjected to income tax rates based on the existing regulations.

Moreover, based on the new tax filing guidelines issued by the SARS, couples in South Africa who are married in a community of property and have interest investments, may experience a relief. The interest investment certificate will be replicated on both spouses' tax returns and each spouse will be taxed on 50% of the interest income, allowing for a fair and equitable tax distribution within the community of property framework.

That being said, there is no official guidance on the tax treatment of popular DeFi transactions like staking, liquidity mining, and yield farming and we do suggest seeking help from experienced tax professionals to better understand how such transactions are taxed.

When to Report Crypto Taxes in South Africa

In South Africa, the tax deadline varies depending on the type of taxpayer:

For Individual Taxpayers (Non-Provisional)

The tax deadline is typically 23 October of the year following the tax year. For example, for the 2022/2023 tax year, the deadline would be 23 October 2023.

For Provisional Taxpayers

The tax deadline is extended to 24 January of the year following the tax year. So, for the 2022/2023 tax year, the deadline would be 24 January 2024.

How to File Crypto Taxes in South Africa

You can file your crypto taxes through the SARS eFiling platform, which is the online portal for submitting returns and declarations, making payments, and conducting various tax-related interactions.

What Crypto Records will the SARS Want?

Although there is no official list of documents for crypto record keeping as specified by the authorities, the SARS may ask for proof of sale and purchase prices for auditing your tax reports. Therefore, maintaining a record of the following documents is advisable in South Africa:

• Date and time of transactions
• Details about the type of tokens or cryptocurrencies bought or sold
• Details of transaction participants and motive of the transaction
• Fair market value of the assets upon acquisition or receipt

How to File Crypto Taxes Using Kryptos?

Now that you’re aware of how your crypto transactions are taxed and what forms you need to fill out to complete your tax report, here’s a step-wise breakdown of how Kryptos can make this task easier for you:

• Visit Kryptos and sign up using your email or Google/Apple Account
• Choose your country, currency, time zone, and accounting method
• Import all your transactions from wallets and crypto exchanges
• Choose your preferred report, click on the generate report option on the left side of your screen and let Kryptos do all the accounting.

Once your Tax report is ready, you can download it in PDF format.

How to Avoid Crypto Taxes in South Africa

We have discussed multiple strategies to avoid paying excess taxes in the section titled “Crypto Tax Breaks South Africa” above. You can revisit the strategies there. Here’s a brief overview of the strategies:

1. Reduce the frequency of transactions

2. Use your annual exemptions

3. Use Tax Loss Harvesting

4. Donate Crypto

5. Deduct Any Expenses

6. Use tax rebates to lower your tax bill

7. Act more like a Investor

Frequently Asked Questions (FAQs)

1. Is crypto legal in South Africa?

This question would be better phrased as “Are crypto investments legal in South Africa?” and the answer would be yes. The fact that South African authorities have established specific regulations and taxation guidelines for cryptocurrencies strongly indicates their legal status. South Africa has taken steps to address the taxation of cryptocurrencies, which reinforces their legality within the country. These regulations provide a framework for individuals and businesses to engage in crypto-related activities while ensuring compliance with tax obligations. Therefore, crypto investments and transactions are legally recognized in South Africa.

2. How is Crypto taxed in South Africa?

Crypto is taxed in South Africa based on whether it's classified as income or capital gains. Income tax applies to activities such as mining and trading. Capital gains tax is applied when cryptocurrencies are held as assets. Specific rates and treatment vary depending on individual circumstances.

3. Is there a capital gains tax in South Africa?

Yes, there is a capital gains tax in South Africa and investments categorised as infrequent and non-recurring are taxed under the capital gains tax rates.

4. How can Kryptos simplify crypto taxes for you?

We’ve already discussed how to file your crypto taxes in the above sections of the guide offering a stepwise breakdown of the entire process. However, we agree that it is unreasonably complicated even for someone with a fair amount of prior knowledge. However, there’s an easy way to file your crypto taxes using a crypto tax software called Kryptos.

All you need to do is log in on the platform, add all your trading accounts, wallets, and Defi accounts, and sip coffee while Kryptos does all the heavy lifting for you. The platform auto-fetches all your transactions from the tax year. It generates a legally compliant tax report within minutes while also suggesting ways to lower your tax bill. It works like magic, all you need to do is try it once.

‍

Thailand has long been hailed as a crypto-friendly nation with lenient tax regulations for resident investors and traders. According to a report published by Statista in 2022, 12% of the Thai population owns or uses crypto, which is the highest in the world when expressed as a proportion of the population.

However, Thai authorities started tightening their grip on crypto investors by the end of 2022, when the Revenue Department released a 32 page detailed guideline outlining the nuances of crypto taxation in Thailand. This comes at a time when Thailand’s global allies are collectively pushing for crypto regulation and investor protection, in wake of the recent black swan events.

The guidelines offered by the authorities cover everything from personal income taxes and capital gains to mining taxes. This article offers a comprehensive summary of these guidelines to help Thai crypto enthusiasts understand the tax implications of their involvement with the asset. 

Latest Updates and Guidelines

Crypto Tax Guidelines

Thai Revenue Code

Cryptocurrency Definition

Is Crypto Legal in Thailand?

Although crypto is not a legal tender in Thailand, investing, holding, mining, or trading cryptocurrencies in Thailand are considered legal activities. Infact, prior to 2022 resident traders and investors paid zero taxes and the government recognised the potential of crypto in developing the financial infrastructure of the nation.

Thailand is a crypto-friendly nation and although the Thai government had implemented some regulations to oversee cryptocurrency activities, and the Securities and Exchange Commission (SEC) of Thailand played a role in supervising digital asset businesses, the tax rates are fairly reasonable when compared to other countries like Portugal, where taxes on crypto climb as high as 53%. 

Can Authorities Track Crypto?

The simple answer would be ‘Yes’. Tax authorities in many jurisdictions, including Thailand, are increasingly focusing on regulating crypto transactions to ensure compliance with tax regulations. 

In Thailand, the Revenue Department has taken steps to regulate crypto transactions. They have mandated crypto exchanges to register with the authorities and adhere to certain reporting obligations. 

If investors fail to report their crypto transactions accurately on their tax returns, it is possible for tax authorities to detect discrepancies through various means:

• While cryptocurrencies offer a degree of privacy, transactions are recorded on public blockchains. Authorities may use blockchain analysis tools to trace transactions and identify individuals involved.

• Cryptocurrency exchanges often implement Know Your Customer (KYC) and Anti-Money Laundering (AML) procedures. If an individual exchanges cryptocurrency for fiat currency on a regulated platform, authorities may have access to their identity and transaction history.

• Tax authorities may cross-reference information from various sources, such as bank records, exchange data, and other financial records, to identify discrepancies in reported income.

• Tax authorities can conduct audits or investigations if they suspect non-compliance. This may involve reviewing financial records, conducting interviews, and seeking additional information.

Therefore, if you have plans to hide your crypto transactions from authorities by not reporting them, you might end up in serious trouble.

How is Crypto Taxed in Thailand?

In Thailand, the taxation of crypto, collectively referred to as digital assets, is overseen by the Thai Revenue Department, offering a clear framework for crypto taxation. Authorities define digital assets as “electronic data or instruments with intrinsic value”, and profits derived from these assets are subject to progressive Personal Income Tax (PIT) rates, with the maximum rate reaching 35%.

The following Income tax rates apply based on total income in Thailand:

The tax structure is organised into five categories of transactions: trading, mining, remuneration, gifts, and return on investment. Individual taxpayers are obligated to report their digital asset income in their annual returns (PND90, PND91) and can utilise withheld tax (WHT) as a credit against their PIT obligations.

Traders/Investors in Thailand can calculate their cost basis using the First In First Out (FIFO) or Moving Average Cost (MAC) accounting methods. Mining, on the other hand, necessitates the use of the FIFO method, with associated costs, such as bills and wages, considered deductible expenses.

When it comes to the sale, transfer, or exchange of cryptocurrencies, any value exceeding the cost of investment is deemed assessable income. The cost of cryptocurrencies can be calculated using standard accounting methods like FIFO or moving average cost, with valuations based on the acquisition time or average price at acquisition.

Losses incurred from one type of cryptocurrency can be offset against profits from others, but this is applicable only for transactions conducted through digital asset operators under the supervision of the Securities and Exchange Commission (SEC). The cost value of cryptocurrencies held at the end of the year is not considered assessable income and can be carried forward to the next tax year.

Furthermore, withholding tax deducted during the tax year can be used as a tax credit when filing personal income tax returns, offering a mechanism for individuals to offset their tax liabilities. In the realm of crypto mining, receipts from mining activities are not considered assessable income at the time of receipt. However, the subsequent sale, payment, transfer, or exchange of mined cryptocurrencies is taxable.

Note that the Royal Thai Government Gazette has introduced an exemption for the transfer of digital assets traded on SEC-approved platforms and digital currencies launched by the Bank of Thailand. This VAT exemption is in effect from April 1, 2022, until December 31, 2023, offering a temporary relief for certain digital asset transactions.

Future of Crypto Taxation in Thailand

The future of crypto taxation in Thailand appears to be heading towards a more regulated and structured environment, evident from recent guidelines and tightening measures by authorities. The emphasis on tracking crypto transactions, mandatory registration for exchanges, and a comprehensive tax structure indicate a commitment to transparency and compliance. The temporary VAT exemption for specific digital asset transactions suggests a willingness to explore targeted incentives. Thailand's historical crypto-friendly stance aligns with the global trend of formalising tax structures for digital assets, with potential future refinements to address evolving challenges and ensure responsible use of cryptocurrencies.

Kryptoinvestering er sjovt, men kryptoser er ikke. Faktisk aner de fleste danskere ikke, hvordan kryptogevinster beskattes, og det skyldes, at retningslinjerne omkring kryptobeskatning i Danmark er forholdsvis nye og stadig under udvikling. Derfor har vi sammensat denne omfattende guide om kryptobeskatning i Danmark, for at hjælpe dig med at holde trit med de nye og eksisterende retningslinjer udstedt af Skattestyrelsen.

Når du er i den anden ende af denne skattevejledning, har du alt, hvad du behøver at vide om kryptobeskatning i Danmark. Bemærk, at denne vejledning løbende vil blive opdateret i takt med, at skattemyndighederne udsteder nye retningslinjer. Så sørg for kontinuerligt at vende tilbage til denne guide for at holde dig opdateret.

Lad os så komme i gang med guiden…

Kryptogevinstskat

Skattestyrelsen betragter ikke krypto som en fiat-valuta, men som en form for personligt aktiv i skattemæssig henseende. Og personlige aktiver beskattes kun i Danmark under to specifikke omstændigheder:

1. Hvis aktiverne er knyttet til din virksomhed.
2. Hvis det betragtes som et spekulativt aktiv.

Men hvis du tror, at du kan unddrage dig kryptobeskatning blot ved at holde dine aktiver, kan du blive ubehageligt overrasket - de danske skattemyndigheder betragter dine beholdninger som spekulative og dermed skattepligtige. Bemærk, at selvom din oprindelige intention ikke var at holde kryptoaktiver til spekulative formål, kan sandsynligheden for profit ikke elimineres fra billedet. Overvej dette eksempel om at holde Dogecoin for sjov skyld.

Hvis du er i tvivl om, hvorvidt dine aktiver er spekulative eller ikke-spekulative i de danske skattemyndigheders øjne, kan du få din beholdning revideret af dem ved at klikke her. De danske skattemyndigheder skelner mellem Bitcoin, altcoins og stablecoins.

Hvis du har foretaget transaktioner med Bitcoin og altcoins vil du med sandsynlighed være forpligtet til at betale indkomstskat. Hvis du derimod har handlet og investeret i stablecoins, vil gevinsterne, hvis nogen, blive betragtet som en kapitalgevinst og vil blive beskattet i henhold til kryptogevinstskatten.

Skat af kursgevinster i Danmark

Danmark har ikke separate skattesatser for kortsigtede og langsigtede kursgevinster. Der opkræves en fast skattesats på 42% på alle dine gevinster.

Kryptotab

Kryptotab er en kompliceret brik i det danske kryptosepuslespil. I udgangspunktet kan du ikke modregne tab med dine gevinster, men der er visse omstændigheder, hvorunder du kan.

Hvis du, i løbet af et regnskabsår, har haft både tab og gevinst på handel med det samme aktiv, kan du modregne tabet, såfremt du ikke har købt nye aktiver mellem disse transaktioner.

Et eksempel: Du har købt 20 ETH-tokens og derefter solgt 5 tokens over to handler inden for et regnskabsår. Det ene salg gav overskud og det andet resulterede i et tab. I dette tilfælde kan du modregne dit tab, såfremt du ikke køber flere ETH-tokens senere. Gør du det, kan du ikke trække dine tab fra dine gevinster.

Det er også vigtigt at bemærke, at du ikke kan modregne tab i handel med én token med gevinster fra en anden token.

Tabt eller stjålet krypto

Ifølge Skattestyrelsens kendelse i SKM2018.104.SR udgør tab af adgang til kryptovaluta ikke en afhændelsesbegivenhed, og er derfor ikke fradragsberettiget. Såfremt, du kan dokumentere det permanente tab af adgang til din kryptovaluta, kan du anmode om et bindende svar der gør tabet fradragsberettiget som et særligt tilfælde.

Du kan dog få brug for assistance fra skatteeksperter og juridiske konsulenter for at gøre den bindende sag stærk nok til at blive behandlet af skattemyndighederne

Sådan beregnes kryptogevinster og -tab

Det første skridt mod at beregne dine gevinster eller tab er at beregne omkostningsgrundlaget for hvert aktiv i din portefølje. Dit omkostningsgrundlag er den pris, du betalte for at erhverve et bestemt aktiv, inklusive eventuelle gebyrer, såsom gasomkostninger (gebyr for at gennemføre en transaktion på en blockchan) og transaktionsgebyrer.

Når du har fundet ud af det, kan du blot trække dit omkostningsgrundlag fra aktivets bortskaffelsesbeløb (salg). Hvis du har opnået en gevinst på handel med et aktiv, skal du betale en flad indkomstskat af gevinsten. Hvis du derimod har underskud på handel med et aktiv, behøver du ikke betale nogen skat, men du kan modregne disse tab i nogle af dine gevinster, hvis du opfylder visse kriterier som beskrevet i ovenstående afsnit.

Crypto Tax Breaks Denmark

De danske skattemyndigheder har ikke  offentliggjort specifikke skattelettelsesprogrammer for skatteydere, men der findes eksisterende love der giver dig mulighed for at reducere din skatteregning i nogen grad.

Personfradrag: I Danmark har hver enkelt skatteyder, der er 18 år eller derover, ret til et skattefrit personfradrag på 46.700 DKK. Er man gift, kan ubrugt personfradrag overføres mellem ægtefæller. Denne mekanisme sikrer, at berettigede skatteydere kan maksimere deres skattefordele og optimere deres samlede skattepligt.

HODLing Crypto til ikke-spekulative formål: Under visse omstændigheder er det muligt at undgå beskatning af gevinster fra investeringer i kryptovaluta, såfremt investeringerne ikke anses for spekulative. For at afgøre, om dine investeringer falder ind under denne kategori, kan du anmode om en individuel vurdering fra Skattestyrelsen. Denne tilgang giver mulighed for en retfærdig og personlig vurdering af kryptoinvesteringer, hvilket kan resultere i skattebesparelser for kvalificerede investorer.

Kryptovaluta som gave: Ifølge præcedens fra en tidligere dom SKM2019.78.SR,  kan kryptovalua som gave være helt skattefrit, såfremt de er ikke-spekulative og har lav værdi. Du skal dog muligvis betale skat af gaven, hvis ikke den lever op til ovenstående kriterier. I 2022 er den skattefri grænse for gaver 69.500 kr., og for 2021 var den 68.700 kr. For gaver foræret til følgende personer:

• Forældre
• Plejebørn
• Afkom til børn af afkom
• Fælles beboer, der har boet hos dig i over 2 år
• En efterlevende ægtefælle til et bortgået barn eller stedfar
• Stedfar eller børnebørn

Crypto Cost Basis Metode Danmark

Skattemyndighederne anbefaler at bruge FIFO-regnskabsmetoden til at beregne dit omkostningsgrundlag. FIFO eller First-In-First-Out regnskabsmetoden indebærer, at den første token, du køber, er den første token, du sælger. Denne regnskabsmetode er fordelagtig, når du håndterer flere transaktioner på tværs af din portefølje af tokens.

‍

Krypto indkomstskat Danmark

Ifølge de danske skattemyndigheder vil du, hvis du er involveret i transaktioner med kryptoaktiver, der resulterer i gevinster, være pligtig til at betale skat af gevinsten. Du skal enten betrale kapitalgevinstskat eller indkomstskat, afhængigt af arten af disse transaktioner.

Hvis du bruger Bitcoin og andre altcoins til investerings- eller handelsformål, vil enhver gevinst blive betragtet som indkomst af de danske skattemyndigheder og vil være underlagt love og regler angående indkomstskat. Det er kun, når du bruger stablecoin som et investeringsinstrument, at gevinsterne beskattes i henhold til love og regler angående kapitalgevinster.

Satser for Indkomstskat i Danmark

Personskattesatsen i Danmark udgøres af fire skatteklasser:

1 Bundskat

Den faste sats på 12,11 % bundskat i Danmark pålægges alle indkomstmodtagere med det forbehold, at den beregnes efter fradrag af deres godtgørelse og 8 % arbejdsmarkedsbidrag.

2 Topskat

Personer, der tjener over 552.500 kr. Om året i Danmark, pålægges topskatten, som er en ekstra afgift på 15 % af deres indkomst. Det er værd at bemærke, at denne skat beregnes efter indregning af arbejdsmarkedsbidrag.

3 Kommuneskat og Arbejdsmarkedsbidrag

I Danmark skal alle skatteydere betale arbejdsmarkedsbidrag og kommuneskat. Arbejdsmarkedsbdraget er fastsat til 8 % og kommuneskatten varierer med en gennemsnitssats på ca. 25 %. Selvom kryptoaktiver er fritaget for markedsafgiften på 8 %, er forståelsen af denne skat fortsat afgørende for at udtænke effektive skatteplanlægningstilgange.

Det er vigtigt at bemærke, at der i Danmark findes en regulering, der siger, at det samlede beløb af en persons bundskat, topskat og kommuneskat ikke må overstige 52,06 % af vedkommendes indkomst.

Beskatning af kryptotransaktioner

Generelt anses alle kryptovalutatransaktioner, der involverer udveksling af kryptovaluta til fiat-valuta eller andre aktiver, eller som genererer indkomst, for skattepligtige i Danmark. Nedenfor ses nogle af disse transaktioner: