The year 2018 was tough for crypto holders: it started at the price close to 20,000 USD and end up below 4,000 USD, a true price rollercoaster. I wish that would be it, but the tax season is coming and we have to pay the consequences. The goal of this article to gather all information about the crypto tax in the Netherlands.
There are only a few things that are important for the Dutch crypto tax:
– the price of a cryptocurrency on the 1st of January 2018
– is crypto your source of income or not
– your situation: private individual, entrepreneur or a company
Let’s have a look at each aspect in the detail.
What was the price?
According to the Dutch Ministry of Finance, for every cryptocurrency, you need to take a value on the 1st of January 2018 at 0:00. If this is not possible, then the closest point in time to this date.
This should be easy to calculate, right? Sure, if you used only one exchange, then just check the price of the cryptocurrencies at this exchange.
What if you have used several exchanges? The price varies across different exchanges. What to do in this case, the Dutch Ministry of Finance does not say. I could guess that an average over the exchanges that you have used might make sense, but this is only my personal opinion.
Source of income
The income tax in the Netherlands, in a nutshell, is split across 3 ‘boxes’:
- box 1= taxable income from home and work
- box 2= taxable income from substantial interest
- box 3= taxable income from savings and investments (capital)
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. (MFFA)
If your crypto holdings do not qualify as a source of income, then they are taxed in box 3.
Who are you?
The crypto tax in the Netherlands is different for
- private individual
- BV (private limited liability company)
If you are a private individual in the Netherlands, then there are possible following situations:
- you own cryptocurrencies : it is taxed as capital (box 3)
- you mine : if you have profit from mining, then you have to declare it either in box 3 or box 1 (see the previous section)
- you trade : trading is comparable with the investments and therefore most of the time is taxed in box 3 (capital) unless you spent extra time and effort to get “structurally positive results … which goes beyond speculation”, then it is taxed in box 1
- you get paid in crypto : in this case, your employer has to convert it to EUR at the moment of payment and it is taxed in box 1
If you are an entrepreneur, then you can be
- entrepreneur for income tax (“ZZP’er” or “eenmanzaak” in Dutch = “sole trader” or “freelancer” in English)
In this case, the Dutch Ministry of Finance distinguishes whether you hold crypto assets privately or whether the crypto assets belong to the business. In the first case, the crypto is taxed in box 3. In the second case, the crypto forms part of your normal business operation and remains untaxed, but included in the company’s turnover.
- entrepreneur for turnover tax (if you own a company : “eenmanzaak”, partnership, private liability company, etc). This is a simple one: in this case, you convert crypto to EUR and register at the turnover tax.
If you own a Dutch BV (private limited liability company), then all purchased or mined crypto assets belong to the company’s capital. As a result, realized gains are taken into account as profits and losses are deductible. The same holds if you are paid in crypto for goods or services.
How much taxes do I have to pay for my crypto?
In the previous section, we have seen different situations for crypto taxation. Unfortunately is not possible to pre-calculate how much taxes do you have to pay in all these cases, because of the influence of your personal situation. However, we can consider one case when your crypto assets are regarded as capital and taxed in box 3.
For a starter, you should add all your savings and capital, including the value of your crypto assets in EUR on 1 of January 2018 at 0:00. Let’s call it X.
Then subtract 30,000 EUR of tax-free capital.
If you have a fiscal partner, then X is your collective capital and the tax-free capital is 60,000 EUR : X – 60,000 EUR.
On this amount, you have to pay taxes.
The taxable amount is split into so-called discs, for each disk, there are different tax percentages, see Table 1.
Let’s have a look at an example. Let’s say you are a single private individual, a HODLer, and have 10 Bitcoins and nothing else. The price of Bitcoin on the 1st of January of 2018 is 11.325 EUR, which makes the total capital of 113.250 EUR.
Now, we know that on the first 30K EUR, you don’t have to pay taxes, which results in 83.250 EUR of taxable amount.
The from the Table 1 we see, that the first disk is taxed with 0,60 % and the second with 1,30% , which gives 70.800 * 0,006 + (83.250–70.800)*0,0013 = 586,65 EUR of taxes that you have to pay.
I know it is painful to see that at the moment the price is below 4K, but you have to pay for the higher price that was a year ago.
Tips for 2019
The advantage of the Dutch taxes for private individuals is that most of the time you already know how much taxes you have to pay in 2019 because the price is set right at the beginning of the year. Moreover, you can ask for “voorlopige aanslag” (provisional tax calculation) at the Dutch Tax office. Knowing this you can set this amount aside or make for it during trading, or maybe arbitrage.
If the tax amount is large, you can request to split the payment, but you need to make an arrangement with the Dutch Tax office.
There are few ways you can reduce your capital like a gift to a goodwill or culture, extra mortgage repayment or study. They might help to reduce the taxes for 2018. In this case, you have to consult with the Dutch Tax office.
All in all, it sucks that crypto coins made such a fall in 2018, but now you have an idea what to expect at the tax declaration for 2018:
- the 1st of January 2018 at 0:00 is the critical time to compute the value of your crypto assets
- your status is important: private person, entrepreneur or a company
- in what taxable ‘box’ belong your crypto assets.
Let’s be smarter in 2019 and be prepared for tax season next year.