Paying taxes on crypto (in The Netherlands)
It's one of the things we don't like to do: pay taxes. Yet, unfortunately, it's part of the job, and it's something that no one can escape. However, it is quite difficult when you have money sitting in cryptocurrency. This is because it is something new, and the tax authorities should have made new rules about it pretty quickly. Therefore, there are also relatively few people who know exactly how it works.
We will describe here how it is in terms of the tax you have to pay on cryptocurrencies
within the Netherlands. We will do this based on information released by the tax authorities for 2021.
How does the government and Tax Administration view crypto?
It's probably clear to you that the Dutch government and Tax Administration are not happy with crypto. Many members of the Dutch parliament think that crypto, especially Bitcoin
, is a dangerous tool. According to them, there are only losers with crypto. Mainly in 2017, during the big bull-run of crypto, there were many politicians who had something to say about crypto currency.
Currently, the Dutch government still does not see crypto as legal tender. Because of this, crypto currency is also not covered by the basic rules that apply to paying taxes on euros. For example, you can't pay in a store by shares in the Netherlands either (this is not seen as a legal payment). Crypto currencies are also viewed in this way.Because of this, different rules apply to paying tax on cryptocurrencies than to paying tax on Euros. And these rules also change quite often.
Do you have to pay tax on crypto in The Netherlands?
In the Netherlands it is obligatory to pay tax on crypto. However, the rules about this are not as black and white as it is for normal income from work.
Crypto as an investment
If you own crypto as an investment, you have to pay tax on it in Box 3. You do this just like with shares. On the income tax you indicate what, the total value was on January 1 of the year on which tax is paid, and what the value is on December 31. Then it is calculated how much money you have earned from your crypto investment.
Your income comes from crypto trading
The moment you actually earn your income from crypto trading, you will also have to declare this on the tax return. However, you don't do this as box 3; this only applies when you own crypto as an investment. In that case you have a job besides that from which you get most of your income, and crypto is seen purely as an investment.
It becomes different when crypto trading is your "job", and you therefore earn your income with it. In that case you have to pay the normal income tax on the money you earn from it, as you would have to do for any other work. This means that the income is placed in box 1. In this article we'll tell you why it's wise to always report your income from crypto trading to the tax authorities.
Making money with crypto mining
It's also possible that you earn your income by means of crypto. This could be through crypto trading, mining or when your employer pays your salary in the form of crypto currency.
When you get your income from crypto mining, you don't have to pay taxes on it. This is because it's quite difficult to earn a large income from mining, considering the costs involved. In addition, you can only mine a limited number of crypto coins per day. However, if the profit you make from mining exceeds the costs many times over, you will have to pay taxes on it. The Tax Authorities are quite unclear when you make "much more profit" from crypto mining than you make in costs.
But how do you declare this income? You do this by stating it under 'income from other work' or as 'profit from business' on your tax return.
Receiving wages in the form of crypto currency
We just said: it is also possible that your employer pays you income in the form of crypto currency. In this case, you will need to convert the value of the crypto currency (at that time) into euros. You then fill in this amount on the tax return that you have to submit to the tax authorities. In this case, you state the income as wages in kind.
Someone paid with crypto currency to your business
The same goes for when you as a business owner are paid in crypto currency. You will have to convert this payment to euros and then enter the amount on the VAT return for sales tax.
However, it is also possible that the value of these crypto currencies will increase over time. You also eventually declare this to the tax authorities.
What happens if you don't declare crypto to the tax authorities?
As you know, cryptocurrencies run on the blockchain, which keeps users anonymous. It is therefore impossible for outsiders to find out who owns a crypto wallet. Because this is very difficult to trace, you might get the idea of not declaring it to the tax authorities. However, that is not a wise choice.
Your bank and the tax authorities work together, of course. The moment you transfer money from your wallet to your bank account every week or month, the bank is going to notice it. The same goes for when you buy a house or car, while this is actually not in line with the income you earn at the job that is known to the tax authorities.
The moment this is noticed, and an investigation is made, they can still find out that you did not declare your crypto income. Subsequently, this could lead to major problems. Therefore, it is better to always declare your crypto income and assets to the Tax Office to avoid major problems.
It is quite unclear for many people whether you have to pay taxes on crypto currencies in the Netherlands. This is because the world of crypto is just 10 years old (a bit longer of course), and so initially there were no rules for this. And the rules that are there, are changed quite often, because this industry is constantly evolving. There are many ways to make money with crypto, such as mining, staking and trading.
When you own crypto as an investment, you have to pay tax on it in Box 3. You look at the value of your crypto currency on January 1 and on December 31, to find out whether the value of your investment has decreased or increased and how much tax you have to pay on this.
The moment you earn your income through crypto trading, you have to pay income tax on it in the normal way, as you would do for any other job.
Despite the fact that crypto is quite anonymous, it is not wise not to report your crypto to the tax authorities. The possible consequences do not outweigh the benefits.