In a world without boundaries, the cryptocurrency is a very interesting vehicle. It is also an investment vehicle that provides challenges in taxation across the world. The cryptocurrency is not limited to a certain country (as for instance investments in shares in a company), neither is it tangible on the account of a financial institution, who mostly are governed by specific authorizations in their country of residence. It does not provide interest or dividends, but is providing capital gains when selling a portion of the currency or when trading the currency for goods or services.
Tax of Crypto in The Netherlands
The Income Tax in the Netherlands on savings and investments does not impose taxes in income or capital gains, but rather imposes a deemed interest on the value of all assets minus all liabilities a per the start of the tax year (with the exception of the main residence, business income from sole trader businesses and major shareholdings in companies larger than 5%). The deemed interest is taxable against a flat rate of 31% (in 2021, 30% in 2020).
The deemed interest is calculated at a progressive rate (assuming more assets will provide a higher return on investment) with an average deemed interest for 2020 as follows:
The taxation on your cryptocurrency investment therefore will not amount to more than 1.58% of the value of the investment per year and most likely will be a lot less. There is no taxation on the actual capital gains when selling the currency.
Financial Agreements with Tax Authorities
The tax authorities in the Netherlands have entered into an agreement with banks and financial institutions providing them with information about the bank accounts held and investment portfolios managed. For cryptocurrency, you will be responsible to file the correct amount and calculate the tax on the currency yourself.
Please note that the tax office will impose fines if they find out about the omission of these investments in your tax return and the fines can amount to over 100% of the tax payable (including interest). Also, investments in cryptocurrencies by companies will be taxed in a completely different manner.
We would be happy to assist you with your queries about your investments and the tax implications of these investments in the Dutch Income Tax and Profit Tax. Send us a message on Facebook, or fill out our contact form if you would like us to get in touch.
