The Danish Tax Authorities Dilemma: The High 53% Tax Doesn’t Encourage The Danish Citizens to Report Earnings
- Danish tax authorities are investigating their citizens’ earnings in the last several years due to the suspicion that they were not reporting profits resulted from crypto trading.
- On estimate, over $15.6 million worth of Bitcoin has been exchanged between 2015 and 2017 in undisclosed Finland-based exchanges.
- It is believed that the reason behind the decision not to report profits made from crypto trading lies in the country’s too-high tax rates.
Even the fact that crypto remains mostly unregulated in countries around the world, governments have already found ways to initialize crypto taxation and charge their citizens for the profits made from crypto trading.
It was recently disclosed that thousands of people living in Denmark managed to sell and purchase around $15.65 million in crypto. These transactions took place on some undisclosed Finland-based crypto exchanges between 2015 and 2017.
It was also stated that only a handful of investors traded more than $1,105, with the most significant amounts going as high up as $110,450. The majority of traders, however, traded volume which is equal to $1,105 or less.
Bitcoin as a Taxable Asset
Bitcoin is considered a taxable asset as it falls under Denmark’s 1903 Tax Act. According to this Act, all cryptocurrencies traders are obligated to report their losses and earnings. However, the Tax Act also states that traders have to pay 53% massive capital gain tax on profits. The size of the figure is likely one of the most substantial reasons behind Danish citizens not reporting their actual earnings.
The situation is similar to the one already witnessed in the US, after the IRS announced that Bitcoin would be a taxable property, back in 2014. Several years later, in 2017, the US government requested that the most prominent US crypto exchange, Coinbase, provides all financial data belonging to its users.
Those who have failed to report their earnings are likely to receive hefty fines, in addition to other potential troubles.
Karin Bergen, tax director of SKAT (the former Danish tax authority), commented that “the earnings of each citizen are currently being researched. “
The goal appears to be the identification of those who have failed to report their income obtained through crypto trading. If the tax authorities discover a mismatch in the collected data, they will contact these individuals to clarify the situation.
For now, this only applies to trades that took place on cryptocurrency exchanges. Those who have managed to make a profit through crypto mining or another type of crypto investments will not be investigated.
Meanwhile, the crypto community has reacted to the news on social networks, criticizing high taxes, and pointing on countries that have found other ways to approach the issue.
For now, the situation seems less-crypto friendly than traders would prefer, and it remains to be seen what consequences might befall those who have avoided reporting their crypto earnings in the last few years.
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