- Profits from the sale of Bitcoin-related assets are now subject to taxation, according to the Supreme Court of Denmark.
- The country’s supreme court made two rulings concerning different crypto users who gained profits from Bitcoin sales, with the aim of “speculation”.
- There are more countries outside of Denmark that have created crypto tax laws.
The Supreme Court of Denmark has made two rulings on whether the sale of Bitcoin (BTC) qualifies as a taxable event under certain circumstances. These rulings were delivered on Thursday, March 30, 2023.
According to the country’s supreme court statement, in the first case, a party made six purchases between 2011 – 2015, acquiring Bitcoin and also received donations related to his creation and provision of Bitcoin services. He successfully sold these Bitcoins at a profit between 2017 and 2018. The supreme court referred to the State Tax Act to determine whether the party’s gain from selling the crypto is taxable.
The Supreme Court asserts that the party must be considered to have acquired the Bitcoins for speculation, and the sale of these bitcoins was not tax-free following the State Tax Act.
The Danish supreme court stated:
“On that basis, the Supreme Court finds that the relinquishment of the bitcoins received constituted revenue in A’s non-commercial business. Sales, therefore, trigger tax liability according to section 4, letter an of the State Taxation Act.” [Translated from Dutch using Google translate.]
The court decided that the sale of Bitcoins at a profit by the party is taxable.
In the second case, a party bought Bitcoins between 2011 and 2013 in exchange for powering servers for the Bitcoin system and approving transactions (mining). He made a profit in 2018 when he sold some of these Bitcoins. Just as in the first case, the supreme court was to decide whether or not the party’s profits were taxable.
The supreme court found that the party personally spent 47 of the Bitcoins to get a VPN connection. The court assumes that Bitcoins were typically only purchased to sell them, with specific instances of use as a form of payment.
The Supreme court added:
“The Supreme Court finds that the bitcoins in question must be considered assets acquired with a view to later turnover as an integrated part of B’s business with mining activity. They cannot be considered to have passed to B’s private property assets or possessions, cf. section 5 of the National Tax Act, subsection 1, letter a.3.”
Because of this, the Supreme Court determined that the party’s non-commercial business generated turnover when it sold its holding of 171.68 BTC. Sales, therefore, result in tax duty under the State Taxation Act. The court decided that the party should pay tax to the Ministry of Taxation.
The tax rate that would be applied to Bitcoin sales was still being decided by the top Danish court.
Other Countries Have Implemented Crypto Tax Laws
Other nations are also implementing the cryptocurrency gain tax in their jurisdictions. The Italian government passed a law imposing a 26% capital gains tax on cryptocurrency trading profits over €2,000. Similarly, the Indian government suggested in its 2022 Federal budget that any virtual or cryptocurrency asset transfers will be subject to a 30% tax. Portugal’s government has proposed a 28% tax on capital gains from cryptocurrencies kept for less than a year. Portugal has long been regarded as a cryptocurrency tax haven.
