FameEX Hot Topics | Supreme Court of Denmark Determines Bitcoin Profits are Taxable

On Thursday, Denmark's Supreme Court announced in two separate rulings that profits from bitcoin sales are taxable, affirming decisions made by lower-instance courts in legal cases brought against the Danish Ministry of Taxation. One case involved an individual who acquired a number of digital coins between 2011 and 2015 via purchases and donations from third parties for the purpose of developing cryptocurrency-related software. The individual subsequently sold these coins at higher prices in 2017 and 2018. The Copenhagen court determined that the bitcoins, acquired for speculative reasons, could not be exempt from taxation under the State Tax Act. Furthermore, the court recognized that the cryptocurrency received as payment constituted turnover for the person's non-business enterprise, resulting in tax liability.

The second case concerned coins awarded as compensation for providing computing power to mine digital currencies between 2011 and 2013. The miner sold some of the earned cryptocurrency for a profit in 2018. A statement cited by Bloomberg clarified, "The Supreme Court assumes that bitcoin is generally only acquired with a view to being sold and, to a limited extent, to be used as a means of payment." These judgments, which confirm that profits from cryptocurrency sales are taxable, are likely to establish a precedent for crypto investment tax treatment in Denmark.

EU member countries have been striving to clarify the taxation of crypto holdings and associated profits. In December 2022, Italy introduced a 26% tax on capital gains from cryptocurrency trading, while Portugal unveiled plans to tax crypto profits at a 28% rate a few months prior. However, EU-wide regulations for crypto assets have not been implemented yet. In summary, Denmark's Supreme Court rulings on the taxability of bitcoin sale profits emphasize the growing need for clear guidance on how cryptocurrencies should be treated within legal and financial frameworks. As EU countries continue to establish taxation guidelines for crypto holdings and associated profits, it is crucial for investors and authorities to comprehend the implications of these emerging financial instruments. As the digital currency landscape evolves rapidly, it is anticipated that further regulations and guidelines will be introduced in the coming years.

Disclaimer: The information provided in this section is for informational purposes only, doesn't represent any investment advice or FameEX's official view.