When it comes to tax time, declaring cryptos is already a bit confusing due to the lack of clarity from governments about the status of cryptos in the country. Some countries like Poland and South Africa have put crypto tax laws in place, clearly defining how much tax is payable on crypto assets, but some nations are slow to implement these tax laws. However, in Denmark the tax rate on crypto assets is so high that people are very cautious when it comes to declaring their cryptos, as they can lose as much as 53% to the tax man.
Bitcoin is a Taxable Asset… in Denmark at Least
According to the 1903 Tax Act, Bitcoin fits all the criteria of a taxable asset in Denmark. Under these regulations, crypto hodlers are forced to declare any crypto hodlings or activity and pay a whopping 53% capital gains tax on any profits made. In Denmark, the government isn’t really following up on crypto trading activity, making it relatively easy for holders and traders to not disclose their crypto and pay the huge tax rate.
FATCA Impacting Crypto
America has taken a similar stance to Denmark, in the sense that cryptos are a taxable asset. Yet, America has decided to extend its Foreign Account Tax Compliance Act (FATCA) to the crypto world, forcing crypto exchanges to disclose information about American traders using the platform. Any platform that doesn’t comply with its crypto FATCA will receive hefty fines and could be banned from having American clients.
If Denmark decides to implement a similar act in order to harvest the correct amount of taxes from its citizens who trade cryptos, there could be huge uproar in the country. A Danish FATCA could also encourage citizens to head over the border to conduct their crypto activity, finding a jurisdiction that is more lenient towards taxes and has a lower taxable rate.
Capital Loss Laws Creeping in
Fortunately, just as Denmark has capital gains laws, it also has capital loss laws too. These mean that if you report a overall loss in your crypto trading activities for the tax year, you can actually get a nice chunk of change knocked off your tax bill – sometimes it can even push you into a lower tax bracket.
When it comes to tax time, weigh up the pros and cons of declaring the real amount of your crypto assets. Remember, you only have to declare once you sell your cryptos – meaning if you hold on through the dip and don’t panic sell, you don’t have to pay tax. If in doubt, consult a tax professional or try out the Zenledger crypto tax calculation app.