- New rules to facilitate deduction of losses against gains in other crypto assets, simplifying the financial landscape for investors.
- Legislation expected in early 2025 will mandate crypto service providers to report transactions, enhancing transparency and regulatory compliance.
The Tax Legislation Council of Denmark has recommended the application of conventional tax rules to crypto assets, a significant development given the increasing mainstream adoption of these technologies.
The recommendation came alongside an announcement that a legislative proposal is expected shortly, signaling a proactive approach to cryptocurrency regulation and taxation.
The Danish Tax Agency estimates that around 300,000 Danes now own cryptocurrencies such as Bitcoin. This number underscores the growing relevance of digital assets in Denmark, mirroring global trends.
However, the decentralized nature of cryptocurrencies such as Bitcoin, which are not governed by any central authority like a government or central bank, has historically presented challenges for both taxpayers and tax authorities.
To address these challenges, the Tax Legislation Council has been working since 2021 on a report, now complete, that lays out a clear framework for the taxation of all crypto assets uniformly.
This would entail taxing ‘non-backed crypto assets,’ like Bitcoin, using inventory taxation rules already applied to some other asset-based crypto investments, thereby harmonizing the rules with other investment types.
The council’s recommendations are poised to eliminate the asymmetry in the taxation of gains and losses, allowing investors to deduct losses from gains in other crypto assets and vice versa.
The inventory taxation would be treated as capital income and would occur annually, regardless of whether the crypto assets have been sold, offering a consistent approach to crypto taxation.
Skatteminister Rasmus Stoklund expressed satisfaction with the council’s recommendations, emphasizing that they aim to ensure fair taxation of gains and losses for cryptocurrency investors. He highlighted several instances where Danish crypto investors faced harsh taxation, welcoming the council’s timely and well-considered recommendations as a means to rectify this.
“Throughout recent years, there have been examples of Danes who have invested in crypto-assets being heavily taxed. That is why I am pleased that the Tax Council has today submitted some elaborate and up-to-date recommendations. The council’s recommendations can be a way to ensure more reasonable taxation of crypto investors’ gains and losses,” says Tax Minister Rasmus Stoklund.
Furthermore, the recommendations pave the way for integrating the taxation of crypto assets with financial contracts, enhancing the financial handling of these assets. This approach not only simplifies the taxation process but also aligns it with international regulatory standards aimed at combating money laundering and ensuring financial regulation.
In addition to these domestic changes, international agreements on the financial regulation of cryptocurrencies are being negotiated, which include agreements for the exchange of information for tax purposes.
Starting in 2027, data on Danish investors’ crypto transactions will be shared across various exchange agreements, ensuring accurate tax assessments.
Skatteminister Rasmus Stoklund announced plans to introduce a bill in early 2025 that would require crypto service providers to report information on their customers’ transactions. This information would then be shared among EU countries, enhancing transparency and compliance across borders.
“It is my opinion that there is a need for clearer and more appropriate rules in the area. That is why I am also looking forward to putting forward a bill and discussing it with the parties in the Folketing,” says the tax minister.
These regulatory advancements reflect a significant shift towards a more regulated and transparent crypto market in Denmark, with implications for investors and the broader financial ecosystem.
The proposed rules, recommended to take effect no earlier than January 1, 2026, consider the time needed to implement international agreements and allow investors to adapt to the new regulations.
