Soon we will file a tax return again. But what value do you give as a Bitcoin investor than for investments in cryptocurrency? Or perhaps more important: in which box of the tax system do you give up your assets? In this article, I explain the tax side of trading in Bitcoin and Altcoins, yet I will leave out the VAT aspect. Bitcoin is, after all, not taxed with VAT.
The Tax Authorities require you to note the value of your crypto portfolio on 1 January at 00:00 and you give this up before April 1st. You do not yet mention the price and exchange that you have to note. Most exchanges provide an annual overview. Here you will find the value that you must pass on in the declaration.
Of course, you choose the exchange rate where you act most. If you trade on multiple exchanges, you take an average of this. Describe for yourself how you calculated that. With a possible inquiry from the tax authorities, you still know how you did it.
Many exchanges allow you to export your transactions and to include them in your calculation. Keep this calculation well and, if in doubt, discuss it with your tax advisor or accountant.
In principle in box 3
The tax of Bitcoin and/or Altcoin profits is in principle in box 3. But beware: it can certainly happen that the taxation takes place afterward in box 1. This happens especially if you put more than a normal amount of effort in letting your assets rise. The tax authorities then speak of more than ‘normal asset management.’ It will be exciting here because then you will pay a lot more tax afterward (up to 52%). You also have a chance of a hefty fine from the tax authorities.
From box 3 to box 1
When does your crypto power shift from box 3 to box 1? That depends on a combination of the amount of time you spend on it, knowledge, experience and purchased resources. Think of trading software or hardware in the form of mining rigs.
Only after research from the Tax Authorities do you know what will happen. Do you want this to be safe and secure? Then I have some guidelines for you here if you are eligible for box 1 afterward.
If you spend a large part of the day trying to increase your crypt power, there is a chance that the tax authorities will see you as a professional trader. The Tax Administration then speaks of day spending. They probably charge your crypto power in box 1.
Do you have special knowledge or prior knowledge that deprives the speculative aspect of a transaction? Then you will probably also end up in box 1.
Do you perform the above actions for others? In that case, the allowances you earn with this are probably also included in box 1.
Traceable transactions in the blockchain
Thinking that the tax authorities do not understand this and therefore do not give up what you deserved is not smart. You might think so because you did all transactions abroad through various exchanges. But you are still traceable years later: all transactions are in the blockchain (public administrative ledger).
Of course, such a process takes a lot of effort. The Tax Authorities must investigate you to find out all of this. But in theory, the tax authorities can, therefore, view the cryptocurrency history and trading activities of every Dutch citizen. The fine for an incorrect declaration can amount to 300% of the tax payable per year.
So if you trade a lot in cryptocurrencies, it is important not to be surprised by the additional tax assessments from the tax authorities. From Bitmymoney, the best advice is to discuss this with your tax advisor, accountant or accountant before trading in cryptocurrency.
Also check in advance whether the exchange where you trade a lot, you support with an annual overview. That saves time and frustration when calculating your tax return.
How do you experience a tax return as a crypto trader? Are you running into the procedure somewhere? Share your experiences with me in a comment below!