Taxation of cryptocurrencies in the Netherlands
A cryptocurrency, broadly defined, is virtual or digital money which takes the form of tokens or “coins.” While some cryptocurrencies have ventured into the physical world with credit cards or other projects, the large majority remain entirely intangible.
The “crypto” in cryptocurrencies refers to complicated cryptography which allows for the creation and processing of digital currencies and their transactions across decentralized systems. Alongside this important “crypto” feature of these currencies is a common commitment to decentralization; cryptocurrencies are typically developed as code by teams who build in mechanisms for issuance (often, although not always, through a process called “mining”) and other controls.
Examples of cryptocurrencies are:
- Bitcoin and Bitcoin Cash
- Binance Coin
Do I have to pay tax in the Netherlands on my cryptocurrencies?
How you should declare cryptocurrency in your Dutch tax return depends on your situation.
I am a private individual and I own cryptocurrencies
Cryptocurrencies are part of your assets in Box 3. You indicate the fair value of your cryptovaluta on 1 January (reference date).
For the 2020 income tax return, the value of the cryptocurrencies on January 1, 2020 is decisive. You must therefore fill in the value on that day. Because the tax authorities have no insight into the value and may ask for substantiation of the entered value, we recommend making a print screen of the exchange rate on January 1 and saving it.
You may use the selling rate of an exchange that you frequently use, because that is the value if you were to convert the coins into euros on January 1. That way you can always show how you arrived at the value in your tax return.
If you have the 30% ruling you are in principle exempted from declaring your savings and investments (other than Dutch properties) in Box 3. Reason is that you are treated as partial non tax resident. The choice is made in your tax return. There is no question for this in the return, but the choice is made clear by not declaring your savings and investments. Be aware that this only applies from the start date of the 30% ruling till the end date of the ruling.
I am a private individual and I mine or trade in cryptocurrency
A lot of computer capacity is required for mining. The costs associated with this are often so high that it is difficult to see any profit. Another factor is that you can only mine a limited amount of cryptocurrency per day. Therefore, you do not need to declare the proceeds of mining yourself. This is different if your proceeds exceed your costs. In that case, there may be income from other work or profit from business and you must declare your income in your tax return.
You can compare trading in cryptocurrencies with trading in regular currencies such as the Japanese Yen or the U.S. dollar. You are investing and speculating on price gains. You do not have to declare the proceeds of the trade. This is different if you often earn extra income through extra work, i.e. on top of your investment activities. In that case, you do have to declare the income. Report this income as income from other work or as profit from business activities.
I am a private individual and I receive my salary in cryptocurrency
In that case, your employer must convert the cryptocurrency into euros at the time you receive it. The salary is treated as wages in kind.
I am an entrepreneur for income tax purposes and I am paid in cryptocurrency
If you are paid in cryptocurrency for your services or supplies, you must convert it into euros. You count the converted amount as your turnover.
When exchanging the cryptocurrency, you may make a profit or loss. This is reflected in your profit and loss statement. Do you still have cryptocurrencies at the balance sheet date? Then value them at cost or lower market value.
If you are an entrepreneur and you purchase crypto currencies, these only belong to your business assets if you make the purchase in the normal course of business. In all other cases, the purchase belongs to your private assets. This concerns, for example, permanently surplus funds. These are funds that have no function in your business. They are not directly needed for business operations and are not intended to be spent in the foreseeable future on, for example, investments. You declare these cryptocurrencies in Box 3.
I am an entrepreneur for VAT purposes and I am paid in cryptovaluta
If you are paid in cryptocurrency for your services or supplies, you must convert it into euros. On your VAT return, you will enter the amount in euros.
Do you have to charge VAT on the trading of cryptocurrencies? No you don’t. In a case brought by the Swedish tax authorities against Swedish bitcoin trader David Hedvist, the European Court of Justice decided in 2015 that exchanging bitcoins for other currencies is exempt from VAT. The court ruled that while the virtual currencies are not legal tender, “bitcoins have no other purpose than to be used as a means of payment. Therefore, crypto-currencies should be treated in the same way as traditional money for the purposes of VAT.
My limited company is paid in cryptocurrency
If your limited company (BV or ltd) is paid in cryptocurrency for its services or supplies, you must convert the cryptocurrency into euros. You include the converted amount in your turnover. When converting the cryptocurrency, the company may make a profit or loss. This is reflected in the profit and loss account. Does your company own cryptocurrencies on the balance sheet date? If so, value them at cost or lower market value.
My limited company mines and trades in cryptocurrencies
Your limited company runs a business with its entire assets. This means that both the mining and the purchase of cryptocurrencies (whether or not followed by sale) take place within the company. The results of mining and trading are therefore reflected in the profit and loss statement.
Why should I declare my cryptocurrencies if nobody knows about them or has no idea who owns them?
Because it is in principle secret who is behind a transaction, it is fairly difficult for the tax authorities to check whether people are declaring their assets. The tax authorities can’t see that directly, but the government is getting more and more ingenious. For example, they can ask exchange offices if someone has an online bitcoin wallet or online platforms and crypto exchanges if you have an account with them. The tax authorities may use other methods too, but they don’t make any statements about their monitoring strategy. Countries can also exchange information with each other.
The tax authorities can recover tax up to 5 years back, imposing a penalty of up to 300% of the tax still to be paid.
Those who do not declare the virtual coins and are caught can count on being prosecuted for tax evasion. Justice is on top of it. We advise people who deliberately did not declare their bitcoin holdings or did not know they had to, to still come forward.
If you don’t report it, it’s black money. It is therefore impossible to convert it into euros. If those euros end up in your bank, the bank can consider it an unusual transaction. Banks are obliged to report this immediately to the Financial Intelligence Unit without you knowing it.’ The unit investigates whether the money flow has been used to finance terrorism or to launder money.
Redemption scheme (‘inkeerregeling’)
But anyone who reports it after all can make use of the voluntary disclosure scheme. Van Gemert: “If you then declare the assets after all, criminal prosecution can be avoided. You only receive a fine on top of the tax assessment, but the money is then simply laundered.