An Elaboration on the Fiscal Aspects of Bitcoins and other Cryptocurrencies

On May 8th, 2018, Dutch Minister of Finance Hoekstra wrote a public letter in which he discussed the appreciation and taxation of the developments in bitcoins and other cryptocurrencies. On May 28th, 2018, State Secretary of Finance, M. Snel published an elaboration. In this public letter, he focusses on the various ways the Dutch tax authorities approach cryptocurrencies in various situations. 


Dear Madam Chair,

In your letter dated 29 March 2018, you submitted additional questions in response to the letter dated 08 March 2018 in which the Minister of Finance presented an initial appreciation of developments in the area of cryptocurrencies[1], it is your wish that the fiscal aspects of cryptocurrencies should be gone into in more detail. I have accommodated your request with the letter that is now before you, in which I have elaborated on the fiscal treatment meted out to cryptocurrencies across a variety of situations.

As the Minister of Finance previously stated in his letter, cryptocurrencies hardly if at all perform the regular function of money as generally accepted and reliable tender, store of value and unit of account.

This letter reflects the current state of affairs. Having said that, it is altogether possible given how thick and fast developments in the world of cryptocurrencies are coming that the fiscal qualification and treatment of cryptocurrencies will undergo changes in the future.


 The fiscal aspects of cryptocurrencies

This opening chapter first addresses the scenario of cryptocurrency mining and trading by natural persons. It then discusses to cryptocurrencies as a Box 3 asset and goes on to describe the fiscal ramifications in a scenario involving a business owner having liability for income tax or a private limited-liability company selling goods or providing services in exchange for cryptocurrency denominated payment and the fiscal consequences of cryptocurrency based wage payment. Attention is subsequently devoted to the asset labelling doctrine at the level of business owners having liability for income tax followed by a discussion of cryptocurrency mining and trading by private limited-liability companies. The chapter is concluded with a paragraph on the topic of enforcement.

1. Cryptocurrency mining and trading by natural persons

A major consideration when answering the question as to the Tax and Customs Administration’s treatment of cryptocurrency mining, as it has come to be known, and cryptocurrency trading is whether the activities in question qualify in a tax sense as a “source of income”, as would operating profit or result from miscellaneous activities, for example. An important characteristic of such sources of income – in addition to that of their involving labour being performed – is that they are aimed at a benefit being obtained (subjective element) as well as reasonably warranting the expectation of benefit being obtained (objective element). The source question in hand is anything but unambiguous and the answer is dictated to a considerable degree by the actual facts and circumstances of the individual case. Given the increase in the number of individuals involved in mining and the regulation of the cryptocurrency volume to be mined daily (only limited numbers of cryptocurrencies being minable per 24-hour cycle), it remains to be seen whether there is, in fact, an expectation of benefit being obtained. The size of the investment (in computers) too may steer the answer in a particular direction, in addition to which the stage at which cryptocurrency mining is first being taken up (seed stage or established cryptocurrency?) may also shed light on the “benefit expectation”.

It has been established by virtue of case law that there can be no question of “source of income” in a speculative transaction scenario or where the end result is impervious to the work performed. This likewise applies to the cryptocurrency trade. However, in the event that structurally positive results are achieved which can be explained by particular efforts made by the person involved over and above the duties that come with speculation, the transactions in question will be regarded as a source of income. Here the determining factor is that a correlation should exist between the additional yield and the work performed (in a qualitative or quantitative sense).

The facts and circumstances of the actual case will have to be used in assessing whether or not there is a question of the source of income, it being the Inspector of Taxes who has the final say. Generally speaking and with due observance of the facts and circumstances of the actual case, it is not particularly likely given the above that a natural person who dabbles in cryptocurrency mining and trading will be regarded as deriving a source of income from his or her activities in this respect.

2. Box 3 assets

Cryptocurrencies (such as bitcoin) held by a natural person form part of that person’s Box 3 capital yield tax base unless they are assets that generate income from work and dwelling or income from substantial interest such as operating profit or result from sundry operations.

A natural person’s cryptocurrencies are required to be included in their holder’s income tax return at their market value as at the reference date of the relevant calendar year, which boils down to the price as at the reference date having to be adhered to.

Cryptocurrencies have multiple prices. In the absence of a statutory regulation regarding the price to be deployed, the obvious way to go would be to use the price as at the reference date of the conversion platform in question.

The responsibility for filing accurate and complete tax returns rests with the citizen him or herself. This implies that anyone who has cryptocurrency holdings is under the obligation to include them in his or her income tax return, together with any other assets he or she may have.[2] Cryptocurrencies are like any other asset where this is concerned.

3. Cryptocurrency denominated consideration received by business owner having liability for income tax or by private limited-liability company

A further aspect involves the question as to the fiscal consequences in the event of a business owner selling goods or providing services in exchange for a cryptocurrency denominated consideration. Such denomination in cryptocurrency rather than euros of the consideration due and payable calls for the consideration to be converted to euros. The amount in euros is regarded as part of the turnover where the calculation of the profit (income tax, corporation tax) and that of the turnover tax are concerned. Cryptocurrency exchange may result in a gain or a loss to be reflected in the profit determination. Any cryptocurrencies in evidence at the balance sheet date are required to be valued in accordance with sound business practice. Although cryptocurrencies do not qualify as “cash resources”, they may often lend themselves for classification as current assets, or they could in particular circumstances be classified as stocks. The ground rule in either scenario – be it that of classification as part of current assets or that of classification as part of stocks – prescribes that valuation should be effected at cost or lower market value.

4. Cryptocurrency denominated wages payment

In terms of payroll tax returns the payment of wages in cryptocurrency calls for conversion to euros as at the date of the wage being made available to the recipient. Cryptocurrency denominated wage payment is treated as wage payment in kind.

5. Acquisition of cryptocurrencies by a natural person cum business owner having liability for income tax

Any acquisition of cryptocurrencies by a natural person cum business owner having liability for income tax involves the so-called asset labelling doctrine. Any cryptocurrencies acquired using lastingly superfluous cash resources will be accounted for as part of the Box 3 capital yield tax base. In so far as the cryptocurrency acquisition does not take place as part of the regular business operation and there is no question of investment of temporarily superfluous resources in such manner as to enable the relevant resources subsequently being freed up in good time for use within the business where such is called for, the cryptocurrencies in question will have to be treated as mandatory private assets (which come under Box 3).

6. Mining and acquisition of cryptocurrencies by a private limited-liability company

It follows from the Netherlands Corporation Tax Act 1969 that a private limited- liability company uses its entire capital in running its business. This implies that the asset labelling doctrine does not apply in this scenario, by contrast to that of a business owner having liability for income tax. Cryptocurrency mining and acquisition (followed or not by divestment) are thus to be accounted for as gains (or losses), in line with the principles of sound business practice.

7. Enforcement

Attention is increasingly being devoted to the theme of enforcement, with the Tax and Customs Administration for this reason having embarked upon a number of exploratory surveys with the aim of gaining more insight into the phenomenon and the problems it may be accompanied by. Attention is also being devoted internationally to how enforcement can be shaped effectively. The surveys also zoom in on cryptocurrency transactions – and possible holdings – that are occurring on the dark side of the economy.

The EU’s (new) Fifth Anti Money Laundering Directive[3] represents a major enforcement development, providing as it does for identification requirements and other rules and regulations governing trading platforms and other cryptocurrency dealers.

Finally, I would comment where the tax-related aspects are concerned that more detailed information material is currently being developed, for posting to the Tax and Customs Administration’s web site as soon as it has been finalised.



It has been suggested that banks may be involved in a monitoring capacity to help bitcoin holdings being reported to the Tax and Customs Administration. A possibility might be a reporting duty for banks regarding transactions aimed at cryptocurrencies being sourced.

Thought-provoking as the suggestion comes across as, it remains very much to be seen to what extent banks have the sort of relevant information at their disposal that could be put to good use in this respect.

A further question is that of the extent to which this would be a different scenario from that of other items representing a particular value being acquired, in respect of which banks have no reporting duty either. The Cabinet in consultation with the financial regulators is to look more closely into what would be possible given the existing regulatory framework. There may be a role for conversion platforms too where this is concerned, albeit that attention needs to be devoted first to the extent to which they have relevant information at their disposal that lends itself for use and is allowed to be used in connection with tax returns. I will take this aspect into consideration in the further specification of my fiscal policy agenda.


Yours faithfully,


Menno Snel, State Secretary for Finance

[1] Letter to Parliament dated 08 March 2018 on the topic of developments in the area of cryptocurrencies, Parliamentary Papers (Upper House) 2017/2018, file no. 34775, sequential no. W.

[2] Cryptocurrencies and associated products form part of the Box 3 tax base as “non-property related rights including cash and other proprietary rights to which a particular market value accrues” (Section 5.3, subsection 2, sub e. and f. of the Netherlands Income Tax Act 2001).

[3] Directive 2015/849.

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