Cryptocurrency Tax Treatment Netherlands

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MFFA Belastingadvies | Tax Advice

Cryptocurrency Tax Treatment Netherlands

The State Secretary for Finance, Menno Snel, presented the current situation regarding the taxation on Bitcoin and other cryptocurrency in the Netherlands by explaining the tax treatment and qualification of crypto. In his letter of 28 May 2018 to answer questions from the permanent commission of Finance, several situations arise for private individuals and entrepreneurs, which are discussed in more detail below.

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Dutch tax on Bitcoin and other cryptocurrency for private individuals

Mining and trading of Bitcoin and other cryptocurrencies is taxed in the Netherlands in box 1 of the income tax act if it qualifies as a source of income, such as profit or result from other activity. To qualify as a source of income, certain conditions must be met: (1) aiming for profit and (2) the reasonable expectation of profit. Case law has clarified that there is no source of income when it comes to speculative transactions and in case the result cannot be influenced by performing work.

Mining and trading Bitcoins

The State Secretary therefore states that in general, mining and trading of crypto by a private individual are probably not likely to qualify as a source of income. On the other hand, if structurally positive results are achieved that can be explained by performing work which goes beyond speculation, then it does qualify as a source of income. This must be assessed by the inspector on a case-by-case basis.

Exchange Platform

If it does not qualify as a source of income (box 1), the ownership of Bitcoin and other cryptocurrency by a private individual residing in the Netherlands is taxed in Box 3 of the income tax act. The holdings must be included for their listed euro value on 1 January of the relevant tax year. The exchange platform you usually use for the exchange of cryptocurrency can be used for this purpose. It is irrelevant whether the holdings are sold that day, or the price fluctuates. For this reason, it seems plausible, as with the valuation of securities, to use the last available listed price in the previous tax year.

Dutch tax on Bitcoin and other cryptocurrencies for entrepreneurs

The purchase of Bitcoin and other crypto is taxed in box 3 if it is privately held on 1 January of the relevant tax year. Assets belonging to the business, including Bitcoin and other cryptocurrencies, remain untaxed. Generally, assets are required to be regarded as private assets in case the assets are purchased with current assets that are in a permanent surplus and do not serve the business activities anymore, and the Bitcoin and other cryptocurrencies do not form part of the normal business operations.

Cryptocurrency on the company’s balance sheet

Bitcoin and other cryptocurrency on the company’s balance sheet are valued at cost price or lower market value (as current assets or inventory). As a result, no profit needs to be recognized if the value has increased on balance sheet date.

Cryptocurrency turnover

Received Bitcoins and other cryptocurrency in return for goods sold or services rendered are included in the company’s turnover. The value must be converted into euros. This amount is also important for determining profits.

Dutch tax on Bitcoin and other cryptocurrency for the Dutch BV

By law, the Dutch BV (private limited liability company) carries out its business with all its assets. Bitcoins and other cryptocurrency that a BV purchases or obtains through mining therefore belong to the company’s capital. As a result, realized gains are considered profits. Losses are deductible.

Valued at cost price or lower market value

In addition, 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). As a result, no profit needs to be taken if the value has increased on balance sheet date.

Determining profits

Received Bitcoins and other cryptocurrency in return for goods sold or services rendered are recognized as turnover. The value must be converted into euros. This amount is also important for determining profits.

More information about Cryptocurrency Tax Treatment Netherlands?

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Jeroen Mijlof

Specialist in: Expats | International Companies , MFFA Belastingadvies | Tax Advice

Jeroen Mijlof graduated in economics and tax law at the University of Groningen. He has + 15 years’ experience in National and International Tax Law for both individuals and companies. Before MFFA he worked at the Dutch tax authorities, KPMG Meijburg and RSM International Tax Services .

jeroen@mffa.nl

+31 85 0030140