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Denmark is poised to introduce a groundbreaking tax reform that will levy taxes on unrealized capital gains from cryptocurrencies, set to take effect on January 1, 2026. This initiative is designed to align the taxation of crypto assets, such as Bitcoin, with that of traditional financial assets.
Proposed Tax Rate and Fairness in Taxation
On October 24, 2024, the Danish Ministry of Taxation announced plans to implement a 42% tax on unrealized gains for cryptocurrencies acquired since the launch of Bitcoin in January 2009. Tax Minister Rasmus Stoklund emphasized that many investors in Denmark have faced inequitable taxation under the existing capital gains tax framework. He advocated for a more straightforward approach to the taxation of cryptocurrencies, aiming to alleviate the burden on investors.
Tax Council Recommendations on Crypto Gains and Losses
The recommendations from Denmark’s Tax Law Council focus on rectifying the disparity between the taxation of gains and losses in crypto investments. Under the new framework, investors will be permitted to offset losses from one cryptocurrency against gains from another. Furthermore, gains from cryptocurrencies can be netted against losses from traditional financial contracts, promoting a more balanced tax landscape. This system of “inventory taxation” classifies crypto transactions under capital income, ensuring that taxes are imposed continuously regardless of whether the assets have been sold.
Notably, the proposal includes provisions for taxing Danes on both unrealized gains and losses associated with their crypto assets. However, it remains unspecified how far back these new tax regulations will apply to current crypto holdings.
Upcoming Legislation on Crypto Reporting and Taxation
In early 2025, Minister Stoklund is expected to present legislation mandating that crypto-asset service providers report detailed transaction information for cryptocurrencies, such as Bitcoin. This data-sharing initiative will extend across EU member states. Concurrently, the Minister will propose a comprehensive tax bill that incorporates the Tax Council’s recommendations. Stoklund expressed his commitment to establishing clearer and more appropriate rules in the realm of cryptocurrency taxation, indicating eagerness to engage in discussions with political parties in the Folketing.
International Context: Italy’s Similar Tax Increase
As Denmark considers its tax reforms, other countries are also reevaluating their approaches to cryptocurrency taxation. Recently, Italy announced plans to increase its capital gains tax on Bitcoin and other cryptocurrencies to 42%, a significant rise from the current 26% rate implemented in 2023. This adjustment aims to generate additional resources to support families, youth, and businesses, resonating with Denmark’s ongoing efforts to refine its tax policies for digital assets.
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