Cryptocurrency and tax

Declaring crypto currency to the tax authorities (in the Netherlands)

• I am a private individual and own cryptocurrencies. These belong in box 3 (assets). The value of your crypto currency on January 1 counts as the reference date (you may determine the lowest price of your crypto on that day).

• I am an individual and I mine or trade crypto currencies. If you mine and thereby earn more than your costs, you must report this to the taxes under "Income from other work or business". This is not likely to be the case in the Netherlands.

You do not have to declare the profits from cryptocurrency trading; this is considered speculation. However, if you earn extra income on top of your investment activities through employment, you do have to declare this as "Income from other work or enterprise".

• I am a private individual and I receive my salary in cryptocurrency. The employer must then convert your salary into euros at the time you receive it.

• I am an entrepreneur for income tax purposes and I am paid in cryptocurrency. If you are paid for your services or supplies in cryptocurrencies, you must convert them into euros and count them as part of your turnover.

When exchanging the cryptocurrency, you may make a profit or loss. You put this in your profit and loss account. You can read further details at the link above.

• I am an entrepreneur for sales tax purposes and I am paid in crypto currencies. In your VAT return, you have to convert payments in cryptocurrency for your services or supplies to euros and declare them.

• My BV is paid in crypto currency. Your turnover is calculated by converting crypto currency received into euros.

• My BV mines and trades in cryptocurrency. Your BV runs a business with its total assets. That means that both the mining and the buying and possible selling take place within the company. The results of mining and trading are therefore reflected in the income statement.

If you are an entrepreneur and dealing with cryptocurrency, I would not only read the above webpage of the tax authorities carefully, but also have a tax expert assist you in this subject. He can then tell you exactly how to declare these things.

Crypto and tax for the majority of people

For most people in the Netherlands, their cryptocurrency will fall under box 3 as assets. When filling out your tax return, you will be asked whether your cryptocurrency is worth more than about 50,000 euros (tax-free assets) on the reference date (January 1), or twice as much if you have a partner. If the answer is no, then you can move on to the next question and you won't have to declare anything.

If you have more than 50,000 in assets, you will have to keep yourself informed, because it can quickly become complicated. When filling out the tax return you will have to fill in exactly the right numbers. If you enter too much you will pay too much, if you enter too little you could get into trouble.

If necessary, you can let a tax advisor fill it out once, then you can do it yourself the next time if you pay attention.

Crypto tax in other countries

Germany

This country is very progressive when it comes to cryptocurrency. For example, the Ministry of Finance released a very detailed letter explaining how Germany deals with cryptocurrency.

Clearly, they are well informed in this country, as almost everything you have to deal with in the crypto world, such as airdrops, mining, staking, borrowing and so on are covered in the letter. "For individuals, selling Bitcoin and Ethereum after you have owned them for a year is tax-free," said State Secretary Katja Hessel. Germany clearly wants to be ahead of the curve in this area in the acceptance of cryptocurrency. HODL'ing other cryptocurrencies for longer than a year is also tax-free.

If you sell within a year, 600 euros of the total profit is still tax-free. After that you have to start paying taxes. So it is clear that they want to start encouraging the holding of cryptocurrency. However, if you don't stay within these limits, the tax on profits when trading cryptocurrency can quickly add up. At issue is the individual income tax (individuelle Einkommensteuersatz).

• Up to 9,744 euros and double for married couples, you pay 0%.

• Up to 57,918 euros and double for married couples, you pay 14-42% on your earnings.

• Up to 274,612 euros and double for married couples you pay 42%.

• If you earn more than 274,612 euros and double for married couples with crypto you pay 45%.

Here you pay another 5.5% Solidaritätszuschlag (solidarity surcharge) on top of your income tax.

So if you earn big profits it can pay off to hold this currency for longer than a year. Timing your purchases can then be essential, because you do not want to sell only when the bear market has arrived.

Italy

This country wants to tax crypto profits over 2,000 euros by 26% by 2023. That's a lot. They did build in the clause that if you already report your winnings on Jan. 1 you only pay 14%.

Portugal

Many cryptocurrency traders came here because Portugal was accommodating with cryptocurrency and the climate is nice. In 2023, that could end. The country wants to start charging 28% tax on profits from cryptocurrency sales, except if you hold the coins for more than a year after buying them.

Apparently, Portugal is also looking forward to HODL'ing. Mining of crypto is also likely to be taxed, and brokers may lose 4% of their commissions. Besides, legislation in Portugal may not take effect for years after being announced. However, the solution for brokers and traders is already presenting itself: if you move to lovely Madeira, an island of Portugal, the beneficial conditions remain and Bitcoin even becomes legal tender.

Belgium

In this country, you can submit an investment plan to the tax authorities to know in advance what you will have to pay in taxes if your plan succeeds. If you're smart you can even pay 0% tax. To do so, you must meet a number of conditions, such as HODL'ing, making spread purchases and using your own money. If you start trading on a shorter term or with borrowed money you are at 33% taxes on your profits under " Various income ". For business or professional trading, the rate is 25-50%, depending on the amount of your profit. If you don't convert the crypto coins you have into fiat money, then profits remain untaxed.

EU

The European Commission has a proposal in its portfolio to introduce a European tax on cryptocurrencies. This could go into effect in 2026. What amounts would be involved is not known, but they want to have a clear policy for cryptocurrency trading in all member states so traders and platforms know what to expect.

Conclusion

More and more countries are moving toward cryptocurrency regulation. In general, the rules are still quite flexible. European regulation will come one day, perhaps in 2026. Until then, let's count our blessings and book our successes reasonably tax-free. Two things are certain in life: taxes and death. But I'm not quite sure about the second.