Dutch taxation on Bitcoin according to State Secretary of Finance

//Dutch taxation on Bitcoin according to State Secretary of Finance

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

The following situation will be covered:
• Dutch tax on Bitcoin and other cryptocurrency for private individuals
• Dutch tax on Bitcoin and other cryptocurrencies for entrepreneurs
• Dutch tax on Bitcoin and other cryptocurrency for the Dutch BV

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 have to 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 end result cannot be influenced by performing work.

The State Secretary therefore states that in general, mining and trading of cryptocurrency 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 has to be assessed by the inspector on a case-by-case basis.

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 crypto’s 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 cryptocurrencies 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.

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.

Received Bitcoins and other cryptocurrency in return for goods sold or services rendered are included in the company’s turnover. The value has to 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 taken into account as profits. Losses are deductible.

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

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. This amount is also important for determining profits.

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By |2018-06-15T09:40:21+00:0015 June, 2018|VAT|0 Comments

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