Cryptocurrency (Bitcoin) and Tax-Related FAQs
Cryptocurrency and bitcoins are rapidly evolving and propose a whole new capital market. Therefore, cryptocurrency also becomes subject to taxes, in the Netherlands as well as abroad. It is thus to your benefit to be well informed about the fiscal issues related to cryptocurrency, whether you are an entrepreneur or private individual. This blog offers answers to the most pressing questions about taxes on bitcoins and other cryptocurrencies.
Are my Bitcoins considered as a part of my taxable assets?
Yes, Bitcoins come under your taxable assets. They are not exempted from capital gains on your Box 3 capital.
You can calculate the taxable amount using the following simple formula:
- First, calculate the total amount of your Box 3 Capital (including cryptocurrency).
- Following that, subtract the levy threshold of EUR 25,000 from the same.
- Having said that, you’ll have to pay: 30% * 4%= 12% tax.
These percentages tend to vary since 2017; for the load may be higher for larger capacities.
How to rate your Bitcoins?
The Box 3 capital is valued on the 1st January of the relevant tax year. Having said that, for your declaration for 2016, you have to state the value of bitcoins or other cryptocurrencies as of 1st January 2016.
Do note that the withholding of any capital in the form of Cryptocurrency is punishable. Moreover, the disclaimer for concealed capital was abolished on 1st January 2017.
Is VAT charged on any Bitcoin transaction?
No, the European Court of Justice has decided that Cryptocurrency are means of payment and hence, Bitcoins or any other cryptocurrency aren’t taxed with VAT.
The same rule also applies if you decide to trade Bitcoin.
Are the profits gained from selling Bitcoins a taxable income?
No, in principle, they are not. Capital gains in Box 3 are already ‘fictitiously’ taxed with the capital yield tax and a return of over 4% is in fact, tax-free.
But, if you’re actively trading in cryptocurrency and the tax authorities see you as an entrepreneur, then the profits from selling Bitcoins will fall into Box 1 and will be taxed at regular income rates. The rates can go up to 52%.
The line between investing and doing business is somewhat thin. But don’t you worry! We can advise you further on the same, for the profits are rather disproportionate to other forms of investments, and the tax authorities are focused on this.
What if I get paid in Bitcoins. Is this income taxed?
Yes, any income from activities in the economic market is taxed, whether you get paid in Euros, Dollars, Natura or any form of Cryptocurrency. This applies to both- The entrepreneurs and the employees.
But when it comes to principle, one-off earnings are taxed as ‘other work results’. Further on, a payment without consideration will usually qualify as a gift. And even if the income is considered as a gift, it can still be taxed under the ‘Donation tax’. (Gifts from abroad are often tax-free though).
I extract Bitcoins myself. Do I have to pay tax on this?
Cryptocurrency is exempt from the VAT by the European Court of Justice. So, you might not be taxed, even if you are an entrepreneur. Though, you cannot deduct the input tax.
Tax Authorities may consider the extraction of cryptocurrency as a business or as ‘other activities’. Either way, we can advise you further on this.
I extract Bitcoins myself. Can I deduct the cost?
No, if you’re doing this as an entrepreneur. But if you are mining bitcoins as an enterprise, you can deduct the business costs (for say, power consumption).
If you have more questions regarding cryptocurrency and taxes or you prefer custom-made advice, please feel free to contact our cryptocurrency expert Joost De Leeuw.