Wondering How to Navigate Crypto Taxes in South Africa? Read our detailed guide on South African Crypto Taxes!
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.
Curious about the future of crypto taxation in Malaysia? Explore our 2023 Crypto Tax Guide for expert insights on crypto taxation in the region!
If you search for “Crypto-Friendly Countries” on Google, you will find Lithuania on every list and that’s because Lithuania has been nurturing a crypto-friendly ecosystem ever since crypto made a name for itself. Lithuania is home to one of the first crypto exchanges in Eastern Europe and boasts a tight community of crypto enthusiasts. It is one of the only countries that has retained its badge of crypto-friendliness despite the ferocious regulations and guidelines put forth by the European Union to regulate the crypto space.
However, when it comes to crypto taxes, Lithuania doesn’t have a dedicated tax law for their taxation. Crypto transactions are taxed under the existing tax laws and guidelines and therefore navigating these regulations and interpreting them in the context of crypto taxes can be challenging for most individual investors.
That’s why we decided to create this detailed crypto tax guide that answers critical questions like “How is crypto taxed in Lithuania?” “When to report crypto taxes in Lithuania?” “How to calculate capital gains tax in Lithuania?” “How to file crypto taxes in Lithuania?”.
In Lithuania, cryptocurrency taxation comes under the ambit of two fundamental laws: the Income Tax Act and the Law on the Taxation of the Financial System. These regulations classify cryptocurrency as a "precious metal or a financial asset" and apply taxation accordingly. Moreover, tax obligations arise from crypto asset sales, not from their possession.
For occasional cryptocurrency traders, who do not consider crypto trading as their primary work activity, gains from crypto transactions are treated as additional income derived from the sale of personal assets. Lithuania imposes a non-taxable threshold of 2500 euros for sales of personal assets. Any income exceeding this limit is subject to a flat tax rate of 15%. However, if non-work-related income, including dividends, interest, and capital gains, is over 120 times the AW* (AW* stands for Average Wage and In 2023: 1 AW – EUR 1,684.90), a higher tax rate of 20% is levied on the income.
Self-employed traders are required to pay:
Personal Income Tax Health Insurance ContributionsState Social Insurance Contributions
In 2023, the personal income tax rate for income from self-employment is 15%. However, it may be lower for previous years. You can use this income tax calculator to calculate your income tax liabilities as a registered trader in Lithuania.
As a member EU state, the VMI has access to KYC details and investor data from crypto service providers across Europe under the DAC-8 directive. There’s also the AMLD-6 regulatory framework that is pushing for stricter KYC/AML regulations for companies offering crypto-related financial services in the region.
Moreover, the Lithuanian government is bolstering cryptocurrency regulations to combat money laundering risks. Amendments to anti-money laundering (AML) and financial fraud countering (CTF) policies will require stricter customer identification and prohibit completely anonymous accounts. To enhance market transparency, the rules demand cryptocurrency exchange operators to raise their authorised capital to at least €125,000 from January 1, 2023.
Starting February 1, 2023, Registrų Centres has listed virtual currency exchange and depository wallet operators. These changes aim to strengthen oversight and align with upcoming EU-level regulations. They apply from November 2022 for new companies and December 2022 for existing ones.
So it’s safe to assume that the VMI can track your investments and any discrepancies in your tax report can be identified easily. We suggest reporting all your gains and income from crypto transactions in your tax return and paying your crypto taxes promptly.
There is no dedicated capital gains tax in Lithuania as such. Income derived from the sale of crypto assets is categorised based on the nature of transactions. If an individual occasionally trades crypto assets and makes a gain from their disposal, then the income is considered additional income and is taxed accordingly.
However, if the individual is registered as a self-employed trader and is frequently involved in the sale and purchase of crypto assets, then the capital gains derived from such assets will be taxed as personal income at a flat tax rate of 15% in 2023.
As mentioned earlier, capital gains are taxed at a flat rate of 15% for registered professional traders and the tax rates for non-registered occasional traders may vary based on their total income:
Calculating your crypto gains and losses is a pretty straightforward process and you can do that using this formula:
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Capital Gains = Disposal Amount - Cost Basis
For those of you who aren’t familiar with the term “Cost Basis”, it is simply the amount you pay to acquire an asset. This may also include any additional fees like gas fees and transaction fees.
Consider the following example:
13/01/23- Andrius purchased 1 ETH for €1,800
19/06/23- Andrius sold 1 ETH for €2,200
Now, if we consider a total of €75 in transaction fees, the additional cost would be added to the acquisition price for accurate cost-basis calculations.
Cost Basis = Price of asset + additional costs incurred during the acquisition
Cost Basis = €1,800 + €75 = €1,875
Disposal Amount = €2,200
Capital Gains = €2,200 - €1,875 = €325
Losses are deductible in Lithuania under specific conditions. Losses from selling shares and certain financial instruments can be used to reduce profits from similar sales within the same tax year, subject to certain restrictions. However, losses from the sale of other property, such as real estate, cannot offset taxable gains from other property sales. Moreover, losses resulting from capital gains cannot be carried forward.
So, while Lithuania allows for the deduction of losses, the tax treatment depends on the nature of the asset and the specific transaction involved. We suggest seeking the advice of an expert tax consultant to gain more clarity on the subject.
There is no specific guidance on the tax treatment of lost or stolen crypto in Lithuania. However, since capital losses aren’t tax deductible in Lithuania, the tax deductibility of lost or stolen assets is unlikely.
We do suggest contacting VMI officials directly regarding the same to better understand how lost or stolen crypto transactions are assessed.
However, someone can't avoid paying crypto taxes entirely in Lithuania. There are certain deductions offered by the authorities that you can use to lower your tax bill.
1. Personal Expenses Deduction
Taxpayers can deduct expenses for building finishing and repairs, car repairs, childcare services, and certain vocational training or higher education expenses. The total deductible expenses are capped at 25% of taxable income, with a maximum limit on life insurance premiums and pension contributions.
2. Tax-Exempt Amount (TEA)
TEA is applied to employment-related income, helping lower-income earners. The TEA amount varies based on income levels and can significantly reduce the tax burden for lower-earning individuals.
3. Business Expenses Deduction
Self-employed individuals can deduct expenses incurred for generating income. They have two options: deduct actual expenses with supporting documents or claim a flat 30% deduction of income without requiring documentation.
4. Child Allowances
Families with children receive allowances paid by local municipal offices. These allowances are intended to support families and vary depending on the number of children, income levels, and other criteria.
5. Pension Contributions
Contributions to certain pension funds can be deductible, particularly if they exceed 3% of the individual's income used for social security contribution calculations.
6. Special Deductions
Special deductions are available for individuals who make payments for their or their spouse's vocational training or higher education. These deductions encourage lifelong learning and skill development.
The solution is simple; You employ a specialized accounting method dictated by the tax authorities in your jurisdiction. However, there is no explicit mention of a particular accounting method on the VMI's website. The VMI recommends utilizing the i.APS portal for tax-related accounting.
Chances are, the VMI will likely accept the use of fundamental accounting methods such as LIFO, FIFO, HIFO, and ACB, akin to other tax jurisdictions in Europe. In the following sections, we will dive into each of these methods individually to offer a better understanding of these accounting principles.
LIFO or the 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.
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.
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.
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.
Consider the following example:
18/01/23: Gabija bought 1 BTC for €20,000
21/03/23: Gabija bought 1 BTC for €28,000
19/05/23: Gabija bought 1 BTC for €25,000
29/08/23: Gabija sold 1 BTC for €32,000
We will use the above-mentioned accounting methods to calculate the capital gains on this disposal.
1. Using FIFO
According to FIFO, the acquisition price of the first asset is the cost basis.
Cost Basis = €20,000
Disposal Amount = €32,000
Capital Gains = €32,000 - €20,000 = €12,000
2. Using LIFO
According to LIFO, the acquisition price of the last asset is the cost basis.
Cost Basis = €25,000
Disposal Amount = €32,000
Capital Gains = Disposal Amount - Cost Basis = €32,000 - €25,000 = €7,000
3. Using HIFO
According to HIFO, the highest acquisition price is the cost basis.
Cost Basis = €28,000
Disposal Amount = €32,000
Capital Gains = €32,000 - €28,000 = €4,000
4. Using ACB
ACB considers the average acquisition price as the cost basis.
Cost Basis = €(20,000 + 25,000 + 28,000)/3 = €24,333 (approx.)
Disposal Amount = €32,000
Capital Gains = Disposal Amount - Cost Basis = €32,000 - €24,333 = €7,667
Notice how the acquisition price changes when we use different accounting methods.
As previously mentioned, crypto investors pay income tax on crypto gains as well as income. Nonetheless, the tax liability individuals face hinges on the nature of their crypto transactions.
For individuals involved in cryptocurrency trading as a hobby (not as a business), their gains are categorised as additional income. These gains, encompassing cryptocurrency profits, are treated as components of their personal assets.
In contrast, those aiming to derive consistent income through regular crypto trading and operating autonomously are required to register as self-employed traders. They become subject to income tax rates that span from 5% to 15%. Moreover, self-employed traders bear responsibility for other taxes, including health insurance and social security contributions.
There is a non-taxable limit of €2,000 for asset sales, and any surplus income is taxed at a rate of 15%. An increased tax rate of 20% applies when all non-work-related income exceeds 120 times the average salary for that tax period.
Listed below are some tax-free transactions in Lithuania:
Listed below are some taxed transactions in Lithuania:
There is no specific guidance regarding the taxation of income from mining crypto. However, it's probable that tokens received for providing mining services as an individual investor aren't taxed upon receipt, akin to regular income.
Nonetheless, when you decide to sell your mining rewards, the income from this sale is treated as regular income. If mining is done as a hobby, the income is subject to a tax rate of either 15% or 20%, depending on the income level. For registered individuals mining with professional equipment, gains are taxed at a fixed rate of 15%.
To gain a clearer understanding of the taxation of such transactions, it's advisable to consult a professional tax accountant.
Although mining and staking are two entirely different ways of adding and validating new blocks of transactions on public ledgers, most European tax jurisdictions consider mining and staking rewards to be the same when it comes to their taxation.
Since there is no specific guidance on how staking rewards are taxed, it is likely that staking rewards are taxed in the same way as mining rewards. Note that this is a speculation on our part and it would be best to seek the advice of an experienced tax professional to gain more clarity on the subject.
There is no clear guidance on how crypto airdrops and forks are taxed in Lithuania. But that does not imply that tokens received from such avenues are tax-free. It simply means that you need to interpret the existing guidelines in the context of such transactions and figure out the tax liabilities on your own.
Based on the existing guidelines, it is likely that new tokens received through airdrops or forks are not taxed on receipt. However, they attract income tax when the recipient finally decides to dispose of them. These tokens inherit a cost basis equal to zero so that the entire value of these tokens is taxed upon disposal.
There are no gift taxes, therefore gifting crypto is tax-free in Lithuania.
When it comes to crypto donations, there is no specific guidance on how crypto donations are taxed. It is likely that crypto donations are tax-exempt just like crypto gifts. However, we suggest seeking guidance from experienced tax professionals to better understand how crypto gifts and donation taxes work in Lithuania.
In Lithuania, crypto margin trades, futures, and other derivatives aren’t much different from regular trades from a tax perspective. The gains incurred from such transactions are simply taxed as regular trades.
Simply put, if a non-registered individual makes occasional gains from such trades, it would be taxed at either 15 or 20% depending upon the total value of these gains. For registered individuals, the gains are taxed at a flat rate of 15%.
The VMI has been very specific about the regulation of ICOs in the country in an attempt to make the IT and tech infrastructure more inclusive of blockchain-based startups. Lithuanian authorities have issued extensive guidelines regarding the taxation and accounting of tokens received through ICOs.
ICO income is categorised as income from individual activities. To be taxable, the activities must exhibit continuity, autonomy, and a profit motive. Continuity implies ongoing, non-limited involvement, while autonomy means independent action. These activities should also be aimed at economic gains. Income generated from ICOs, along with other virtual currency transactions, is subject to a 15% fixed income tax rate. Therefore, individual investors who consistently participate in ICOs and meet these criteria are liable to pay a 15% income tax on their ICO-related income.
The trade of crypto assets including NFTs attracts income tax in Lithuania. If you’re trading NFTs as a hobby, then the gains will be taxable at regular income tax rates (15 or 20% depending on the amount of gains you have made).
However, for a professional NFT trader, the total gain is taxable at a flat rate of 15%.
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 guidance on how income from DAOs is taxed, this income would likely be categorised as additional income and taxed under the regular income tax laws. We do suggest seeking the advice of an experienced tax accountant for better clarity on the subject.
Lithuanian authorities are yet to release specific guidance on the taxation of DeFi transactions. However, the personal income tax laws suggest that any interest received from crypto assets is considered additional income and is taxed under the income tax laws.
Interests received from staking or lending tokens on DeFi protocols are likely taxed as income. We are constantly on the lookout for new guidelines and will update any relevant details here as soon as they hit our radar.
In Lithuania, monthly tax returns (GPM313) are due by the 15th of the following month. Annual tax returns (GPM313) must be submitted by February 15th of the following year. For PIT on class A income, payments made before the 15th of the month should be paid to the budget by the 15th of the same month, while payments made after the 15th of the month should be paid by the last day of the same month.
Here’s a step-wise tutorial on how you can file your crypto taxes in Lithuania.
Note that if you can't access EDS through e-banking or e-signature, contact the Tax Information Department at 1882 or +370 5 260 5060 to request a login and password. After following the required steps, you'll receive your login details via email, allowing you to access EDS and file your tax returns.
Although the VMI doesn’t have a specified list of documents for crypto record keeping, here are some of the important ones you should maintain to ensure a smooth tax filing experience:
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:
Once your Tax report is ready, you can download it in PDF format.
You can refer to the section titled “Crypto Tax Breaks” to take a look at all the deductions and tax exemptions offered by Lithuanian authorities. Moreover, since crypto-to-crypto trades are non-taxable in Lithuania, you can convert your crypto assets into stablecoins at liquidation to guard your assets against immediate taxation.
This question can be better phrased as whether investing in crypto is legal in Lithuania. Just like most other tax jurisdictions, Lithuanian authorities don’t consider crypto as legal tender, but rather as an asset for tax purposes. This simply means that any transaction involving crypto that results in a gain is taxed under the existing income tax laws.
In simpler terms, yes it is legal to invest in crypto in Lithuania. Lithuania is one of the friendliest countries when it comes to crypto with its thriving ecosystem and crypto-friendly regulations.
In Lithuania, cryptocurrency is considered a current asset for income and VAT purposes. For income tax, residents may face a 15% fixed rate on gains from buying and selling cryptocurrencies. The Bank of Lithuania's classification of tokens as securities doesn't necessarily affect their tax treatment. ICOs may incur income tax if they meet specific criteria. Taxpayers must submit monthly or annual tax returns on time. The Electronic Declaration System (EDS) simplifies the tax filing process, accessible through e-banking or by requesting login details from the Tax Information Department if needed.
Lithuania doesn’t have a dedicated capital gains tax. Although it imposes a 15% fixed income tax rate on gains from individual purchases and sales of virtual currencies, it effectively functions as a capital gains tax on cryptocurrency transactions. However, the tax treatment can vary depending on the circumstances and the classification of tokens. Taxpayers in Lithuania need to be aware of these regulations to ensure compliance with tax obligations related to capital gains from cryptocurrencies.
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!