Bitcoins and other forms of cryptocurrency are becoming increasingly popular. Consequently, people are asking more questions regarding taxation of cryptocurrency. Below you will find an overview of the most frequently-asked questions and answers.
Are Bitcoins part of my taxable capital?
Yes. Bitcoins and other cryptocurrency are not exempt from capital yield taxation on your Box 3-capital. On your total Box-3 capital (including cryptocurrency) minus the tax-free threshold of € 25,000, you pay 30%. * 4% = 1.2% tax. Since 2017, these percentages have varied. Taxation can be higher on large amounts of capital. We can calculate this figure for you.
How must I value my Bitcoins?
The Box-3 capital that you declare is valued as of January 1st over the tax year in question. For your 2016 declaration, you therefore declare the value of your Bitcoins or other cryptocurrency on January 1st 2016. Concealing cryptocurrency capital is a prosecutable offence. Furthermore, as of January 1st 2017, there is no longer a tax amnesty for those concealing capital. We can help to make sure the tax impact on you is as low as possible.
Must I calculate VAT for a bitcoin transaction?
No. The European Court of Justice has ruled that cryptocurrency is a means of payment and is therefore not subject to VAT. However, there are certain exceptions. It is sensible to be increasingly better-informed when you are making bitcoin transactions.
Do my Bitcoin sale profits constitute taxable income?
In principle no. Profits on sales in Box 3 have already been “fictitiously” taxed with capital yield tax. Because of this, a return of more than 4% is, in actual fact, tax-free. If you trade in cryptocurrency to such an extent that Revenue sees you as an entrepreneur, this income can fall into the Box 1 category and become subject to normal income tax rates. This can rise to 52%. The line between investment and doing business is sometimes thin. We can give you further information about this. Since the profits on Bitcoins tend to be rather disproportionate in contrast to other investment forms, Revenue has become particularly interested in these.
I am paid in Bitcoins. Is this taxable?
Yes. Income from activities in the course of trade are taxable, whether you are paid in euros, dollars, bitcoins or any other types of currency. This applies to both employers and entrepreneurs. One-off earnings are, as a rule, taxed as the “result of other activities”. In principle, you use the value of the euro at the time of payment. A payment without receiving anything in return generally qualifies as a gift. Gift tax is imposed on this. Gifts from abroad are often tax-free.
I mine bitcoins myself. Must I pay taxation on this?
Cryptocurrency has been made exempt from VAT by the European Court of Justice. Thus, you are not affected, even if you mining bitcoins as an entrepreneur. You are also not allowed to deduct input tax. It is possible that Revenue views your mining cryptocurrency as enterprise or as “other activity”. This depends on the facts and circumstances; we can give you further advice on this.
I’m mining bitcoins myself. Can I deduct the costs of this?
Not when you don’t do this as an entrepreneur. If your mining does indeed constitute enterprise, you may deduct business costs (such as power consumption).
Please do not hesitate to contact us for further information. We are happy to be of assistance.