Cryptocurrencies (electronic money) that have become increasingly popular since 2009 – such as Bitcoin, Ripple, Ethereum, Litecoin, IOTA and Dash – raise many questions about their accounting and tax returns. Below, as briefly as possible, what you should take into account.
The Dutch government and the European Union do not consider crypto to be legal tender. As a result, different rules apply to crypto than to common currencies such as the euro.
In certain situations, you must declare your income in box 1 of the income tax. That is the case if you do more than a 'regular' investor, such as 'mining'. 'mining' is validating and recording transactions on the blockchain through a computer. In case you trade crypto; then you must state the exchange rate profit in the declarations before mining. You then deduct the costs incurred from the income/revenues. You enter this information in box 1 “income from other work or profit from business”. The positive result is taxed with a maximum of 49,5% (in 2022) income tax.
Most private individuals do not trade actively but do own crypto. The possession of crypto falls into the category of 'other assets', in box 3 of the taxes. The reference date for the valuation is 01 January of the tax year. However, part of the assets in box 3 are exempt from taxes. This concerns the first 57.000 euros of the total assets. For tax partners, a tax-free capital of EUR 114.000 applies.
Finally: if an employer pays your salary in crypto, the employer must convert the value into euros at the time of payment of your salary.
If you are an entrepreneur for income tax purposes, or a BV, and if your services are paid for with crypto, you must convert the value of the crypto currency to the value in euros at the time the transaction takes place. You include this converted amount in the turnover. If your BV trades cryptocurrencies or engages in mining, you must report the results of both trading and mining in the profit and loss account.
Possible consequences if crypto is not declared on the tax return:
If you do not declare your crypto while you do exceed the exempt wealth threshold, the tax authorities consider this to be a deliberately incorrect declaration or tax fraud. If the tax authorities find out about this, you can be fined up to 300% of the tax you should be paying. In the worst case you could be prosecuted. The Tax and Customs Administration can call for redress up to five years after the tax return has been filed. So keep track of everything and don't forget to include your cryptocurrency in the annual tax return.