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Curious about crypto taxes in Thailand? Explore the comprehensive guide, from legalities to tracking transactions. Discover how to navigate the evolving tax landscape.
Wondering How to Navigate Crypto Taxes in South Africa? Read our detailed guide on South African Crypto Taxes!
Curious about crypto taxation in Luxembourg for 2023? Our guide covers everything you need to know about crypto taxation in Luxembourg.
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.
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16/04/24- Updated to accommodate ICO, crypto gifts and donation taxes
16/04/24- Updated to accommodate DAO taxes
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:
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.
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-
Note that capital gains for amounts up to €30,000 will be taxed at 30% while anything above this will be taxed at 34%.
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.
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-
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.
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.
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.
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.
Listed below are some strategies that allow you to pay fewer taxes without getting into legal trouble:
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.
Crypto gifts under €5,000 are tax-free 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.
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
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.
Not all crypto transactions attract tax liabilities, here are some crypto transactions that are considered tax-free by Vero.
If you’re engaging in any of the following activities during the tax year, you may result in potential tax liabilities to Vero:
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.
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.
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.
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.
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.
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.
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.
NFTs
In Finland, the following transactions attract taxation.
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.
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:
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.
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:
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 Kryptoskatt 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.
If you’re filing tax returns to Vero, you should maintain sufficient documentation to substantiate the claims made on their tax returns.
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 Kryptoskatt can make this task easier for you:
If you still need clarification regarding the integrations or generating your tax reports, you refer to our video guide here.
There’s no legal way to avoid crypto taxes legally. However, you can use these strategies to lower your tax bill.
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.
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.
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.
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!
Curious about crypto taxes in Thailand? Explore the comprehensive guide, from legalities to tracking transactions. Discover how to navigate the evolving tax landscape.
Wondering How to Navigate Crypto Taxes in South Africa? Read our detailed guide on South African Crypto Taxes!
Curious about crypto taxation in Luxembourg for 2023? Our guide covers everything you need to know about crypto taxation in Luxembourg.
