Cryptocurrency Taxation

Taxation of Cryptocurrency

In recent years, buying and selling cryptocurrency, whether in the form of Bitcoin, Ethereum, or another type of cryptocurrency, has become very popular. When it comes to taxation of cryptocurrency in Denmark, it is important to understand the applicable rules and guidelines to avoid potential legal issues and ensure the correct calculation of tax. Below is an overview of key points to pay special attention to:

Calculation of Gains and Losses‍

As a general rule, cryptocurrency (e.g., BTC, ETH, etc.) is taxed according to the realization principle. This means that taxation occurs only when the cryptocurrency is sold. Gains are taxed as personal income, while losses can be deducted as itemized deductions. The calculation of gains and losses must be made for each cryptocurrency. The calculation is based on the FIFO principle (First in, First out).

‍

Exchanging/Converting Between Cryptocurrencies

‍Exchanging between cryptocurrencies is treated as buying and selling for tax purposes. This means that if you exchange/convert Bitcoins to Ethereum, it will be considered a sale of Bitcoin and a purchase of Ethereum.

‍

Cryptocurrency as Stablecoins‍

There are countless cryptocurrencies, and they are not treated the same for tax purposes. It is therefore important to investigate the specific cryptocurrency you have invested in. Stablecoins resemble financial contracts and are taxed on their annual returns.

‍

Rewards‍

If you receive cryptocurrency as payment, the value at the time of receipt must be calculated and taxed as personal income.

‍

Reporting and Documentation to the Danish Tax Authorities (SKAT)‍

It is crucial to report your cryptocurrency transactions correctly to SKAT. Failure to report, or incorrect reporting, to the Danish tax authorities can result in fines and unpleasant adjustments. We ensure that your income and deductions are correctly reported.

It is essential to maintain thorough documentation of all your cryptocurrency transactions. This includes purchases, sales, conversions, rewards, and the use of cryptocurrency. The documentation must include details such as dates, quantities, exchange rates, and the purpose of the transaction. This documentation should be kept as SKAT may request to review it during a potential audit.

‍

Contact Us‍

Do you have questions about cryptocurrency taxation or need assistance navigating the complex tax rules? Our team of tax experts is ready to advise you.

‍

Disclaimer

‍The above information is for guidance purposes only, and we accept no responsibility for decisions made based on this information without prior individual advice. We accept no responsibility for errors or omissions.

‍