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Dutch taxation on cryptocurrency for the Dutch BV

Do you have any questions about the accounting of cryptocurrency? Contact us.

Dutch taxation on cryptocurrency for the Dutch BV

Cryptocurrency, broadly defined as virtual or digital money, is already accepted as payment by some major companies.

You can pay for your coffee at Starbucks using your Bitcoins. Or even buy a Tesla using your Bitcoins. But what are the tax consequences if your Dutch BV (private limited liability company) is paid in Bitcoins or another cryptocurrency

Cryptocurrency and taxation of the Dutch BV

By law, the Dutch BV carries out its business with all its assets. Bitcoins and other cryptocurrency that a BV holds, therefore belong to the company’s capital. As a result, realized gains are taken into account as profits. Losses are deductible. The taxable profit is taxed with corporate income tax. The current (for 2021) Dutch corporate income tax rate is 25% (15% on the first €245.000).

Cryptocurrency as payment

Received Bitcoins and other cryptocurrency in return for goods sold or services rendered are recognized as turnover. The value has to be converted into euros. The converted amount is the turnover taken into account. When exchanging cryptocurrency, you make a profit or loss. This is reflected as well in your profit and loss statement.

Cryptocurrency present on balance sheet date

In addition, Bitcoin and other cryptocurrency that are present on balance sheet date in the BV are valued at cost price or lower market value (as current assets or inventory). Consequently, no profit needs to be taken into account if the value has increased above cost price on balance sheet date. When the market value is lower than the cost price, this loss is taken into account. When the cryptocurrency is sold, the profit or loss is reflected in the profit and loss statement.

In practice Cryptocurrency

Below an example of the valuation of cryptocurrency against cost or lower market value. This example illustrates that losses are taken when they occur and gains are accounted for when realized.

Example:

  1. On January 1st 2020 you (the company) have received 1 Bitcoin against a value of €1.000 (cost)
  2. The market value on December 31, 2020, is €500;
  3. The market value on December 31, 2021, is €1.200;
  4. On March 31 2022 you sell your 1 Bitcoin against a value of € 1.600
  Market value (€) Value on balance sheet (€) Gain/loss in P&L (€) Comments 
Purchase on 1-1-2020 1.000 1.000  
Value on 31/12/2020 500 500 -500 (loss) You need to take a loss into account as your Bitcoin is worth less.
Value on 31/12/2021 1.200 1.000 500
(gain)
You must account for a gain of €500 since  the value was set on €500 and €1.000 is the original cost of one Bitcoin. The other €200 gain doesn’t have to be accounted as a gain as this in unrealized. 
Sale on 31/3/2022 1.600 600 (gain) The value was already set on €1.000. The Bitcoin has been sold. Therefore, the unrealized result will become realized and result in a gain of €600.

This treatment result in that each cryptocurrency that is received by the company needs to be tracked. The values are based on a transaction base and/or a monthly approach (this depends on the volume of the transactions). When sales of cryptocurrencies occur, this is treated through a first-In-First-Out (FIFO) methodology.

Note that: if a company only trades in cryptocurrencies and has no other activities, cryptocurrencies shall be valued against market value.

Do you have any questions about the accounting of cryptocurrency? Or curious how you as private individual or entrepreneur are taxed for your cryptocurrency? Contact us for more information.