Crypto-currencies and taxes

The State Secretary for Finance in a letter to the Upper House of the Dutch Parliament has gone into detail on the fiscal aspects of crypto-currencies such as bitcoins. It cannot be ruled out given the speed of developments in the area of crypto-currencies that the fiscal qualification and treatment of crypto-currencies will be undergoing change.

Crypto-currencies and the private investor

It follows from established case law that speculative transactions and transactions whose outcome is impervious to the work performed do not constitute a source of income. The same essentially applies to the trade in crypto-currencies. However, this may be different where gains are consistently achieved which can be explained by particular efforts made by the person involved over and above the duties that come with speculation, in which case the transactions in question will be regarded as a source of income. It is not particularly likely that this will be the case for a natural person who dabbles in crypto-currency mining and trading.

A natural person’s assets form part of the Box 3 capital yield tax base unless they come under Box 1 or Box 2. A natural person’s crypto-currencies come under Box 3, for mandatory inclusion in the income tax return at their market value on the first day of January of the relevant calendar year. The State Secretary has anchored this in the crypto-currency price as at the reference date of the relevant conversion platform.

Crypto-currencies and the business owner

The denomination in crypto-currency of the consideration due and payable for a business owner’s sale of particular goods or provision of particular services calls for conversion to euros. The amount in euros is regarded as part of the turnover where the calculation of the profit and that of the turnover tax are concerned. Crypto-currency exchange may result in a gain or a loss. Any crypto-currencies in evidence at the balance sheet date are required to be valued in accordance with sound business practice. The ground rule prescribes that valuation should be effected at cost or lower market value.

Crypto-currency denominated wage payment

In terms of payroll tax returns the payment of wages in crypto-currency calls for conversion to euros as at the date of the wage being made available to the recipient.

Crypto-currencies and the business owner having liability for income tax

Any acquisition of crypto-currencies by a business owner having liability for income tax involves the so-called asset labelling doctrine. Any crypto-currencies acquired using lastingly superfluous cash resources will be classified as private rather than business assets, and as such will have to accounted for as a Box 3 item. The same applies where the crypto-currency acquisition does not take place as part of the regular business operation and there is no question of investment of temporarily superfluous resources.

Crypto-currencies and the private limited liability company

A private limited-liability company uses its entire capital in running its business. According to sound business practice, gains derived from crypto-currency mining and trading are required to be accounted for as part of the company’s profit.

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Dutch version: Fiscale aspecten cryptovaluta