Denmark Crypto Tax Guide 2024

Once you’re at the other end of this tax guide, you’ll have everything you need to know about crypto taxation in Denmark. Note that this guide will be regularly updated as the tax authorities issue new guidelines. So make sure you keep revisiting this guide to stay updated.

Now let’s hop into the guide…

Crypto Gains Tax

The Skattestyrelsen doesn't consider crypto as a fiat currency but as a form of personal asset for tax purposes. And personal assets are only taxed in Denmark under two specific circumstances:

1. If the assets are associated with your business
2. If it is considered a speculative asset

If you happen to be involved in transactions with Bitcoin and altcoins, chances are that you’ll be attracting income tax liabilities. However, if you’ve been trading and investing in stablecoins, the gains, if any, will be considered as a capital gain and will be taxed according to the crypto gains tax rate.

Capital Gains Tax Rate Denmark

Denmark doesn’t have separate tax rates for short-term and long-term capital gains. They simply charge a flat tax rate of 42% on all your gains.

Crypto Losses

Crypto losses are a fairly complicated piece of the Danish crypto tax puzzle. Generally, you’re not supposed to write off any of your losses against your gains, but there are certain circumstances under which you can write off your losses.

If you have bought or sold the same assets over a financial year while simultaneously making gains or losses, you can write these losses off against your gains given that you haven’t purchased new assets in between those transactions.

For instance, if you have bought 20 ETH tokens and then sold 5 tokens twice within the financial year, making a gain in one and a loss in another. Then you can offset your loss against these gains. However, if you sold 5 tokens twice and bought 3 new tokens after that, then you cannot write off your losses.

Also, it’s important to note that you cannot offset the losses from one token against the gains made from another token.

Lost or Stolen Crypto

However, you might need assistance from tax experts and legal consultants to make the binding case strong enough to be considered by the tax authorities.

How to Calculate Crypto Gains and Losses

The first step towards calculating your gains or losses is to calculate the cost basis for every asset in your portfolio. Your cost basis is simply the price you paid to acquire a certain asset including any fees paid in the process like gas fees or transaction fees.

Once you have that figured out, you can simply subtract your cost basis from the disposal amount of the asset and have your loss or gain. If it’s a gain then you need to pay a flat income tax on it and if it’s a loss then you don’t need to pay any taxes, but you can offset these losses against some of your gains if you meet certain criteria as discussed in the above sections.

Crypto Tax Breaks Denmark

Although the Danish tax authorities haven’t put out any dedicated tax-break programs for residents. Some existing laws allow you to reduce your tax bill to some extent.

1. Personal Tax Allowance: In Denmark, every individual taxpayer who is 18 years old or above is entitled to a tax-free personal allowance of 46,700 DKK. In situations where one spouse is unable to fully utilize their allowance, the unused portion may be transferred to their partner for tax purposes. This mechanism ensures that eligible taxpayers can maximize their tax benefits and optimize their overall tax liability.
2. HODLing Crypto for Non-Speculative Purposes: Under certain circumstances, it is possible to avoid paying tax on gains from cryptocurrency investments if the investments are not considered speculative. To determine whether your investments fall under this category, you can request an assessment from the Danish Tax Agency, which will evaluate your investments on an individual basis. This approach allows for a fair and personalised assessment of cryptocurrency investments, which may result in tax savings for eligible investors.
3. Gifting crypto: If we take precedant from a previous ruling SKM2019.78.SR, crypto gifts can be completely tax-free if they are non-speculative and low-value. However, you might have to pay taxes on crypto gifts if it’s otherwise. For 2022, the tax-free limit for gifts is DKK 69,500, and for 2021, it's DKK 68,700 if you gift crypto assets to the following:

• Parents and Grandchildren
• Foster Children
• Children, stepchildren and their offsprings
• A joint resident living with you for over 2 years
• A surviving spouse of a deceased child or stepchild
• Stepparents

Crypto Cost Basis Method Denmark

The danish tax authorities recommend using the FIFO accounting method to calculate your cost basis if you’re a danish resident. The FIFO or First-In-First-Out accounting method implies that the first token you buy is the first token you sell. And this accounting method is beneficial when dealing with multiple transactions from across your portfolio of tokens.

Crypto Income Tax Denmark

According to the Danish tax authorities, if you are involved in transactions with crypto assets resulting in gains, you will attract a capital gains tax or income tax based on the nature of these transactions.

If you are using Bitcoin and other altcoins for investment or trading purposes any gains will be considered income by the Danish tax authorities and will be subjected to income tax laws. It’s only when you use stablecoin as an investment instrument that the gains are taxed under the capital gains laws.

Income Tax Rate Denmark

The personal income tax rate in Denmark constitutes four discrete tax brackets:

1- Bottom-Bracket Tax

The flat rate of 12.11% bottom-bracket tax in Denmark is levied on all income earners, with the caveat that it is calculated after the subtraction of their allowance and 8% labour market tax.

2- Top-Bracket Tax

Individuals earning above 552,500 DKK in Denmark are subject to the top bracket tax, which is an extra levy of 15% on their income. It is worth noting that this tax is computed after accounting for labour market contributions.

3- Municipal and Labour Market Tax

In Denmark, all taxpayers must pay the labour market tax and municipal tax. The labour market tax is fixed at 8%, whereas the municipal tax varies, with the mean rate being approximately 25%. Although crypto assets are exempt from the 8% market tax, understanding this tax remains crucial for devising effective tax planning approaches.

It is important to note that in Denmark, a regulation exists stating that the total amount of an individual's bottom-bracket tax, top-bracket tax, and municipal taxes must not exceed 52.06% of their income.

Tax-Free Crypto Transactions

Although a majority of crypto transactions attract tax liabilities in Denmark, some transactions are classified as tax-free by the Danish tax authorities.

• Buying crypto assets with Danish krone or any other fiat currency
• HODLing crypto
• Transferring crypto between your wallets
• Donating crypto

Taxed Crypto Transactions

In general, all cryptocurrency transactions that involve the exchange of cryptocurrency for fiat currency or other assets, or that generate income, are considered taxable in Denmark. Listed below are some of these transactions:

• Buying and selling cryptocurrencies for speculative purposes is considered taxable in Denmark. This includes both short-term and long-term trades.
• Income generated from cryptocurrency mining is also considered taxable. If you receive cryptocurrency as a reward for mining, the value of the cryptocurrency received will be taxed as income.
• Staking cryptocurrency involves holding cryptocurrency in a wallet to support the network and earn rewards. Staking rewards are viewed as personal income from a tax perspective and are taxable at the point of receipt.
• If you receive cryptocurrency as payment for goods or services, the value of the cryptocurrency received will be taxed as income.
• If you receive cryptocurrency as a donation, the value of the cryptocurrency received will be taxed as income.

How to Report Crypto Taxes in Denmark?

Step 1- Log in to the E-Tax Portal

Go to the E-tax portal and log in with your Civil Registration Number and E-tax password. If you don't have it, you can apply for one on the portal.

Step 2- Select the Tax Return

On the main page of the E-tax portal, select "Indkomst" (Income) and then "Forskudsopgørelse og årsopgørelse" (Advance assessment and annual statement). Then, select the year for which you want to file the tax return.

Step 3- Check your Pre-Filled Information

The E-tax portal will pre-fill your information from previous years, such as your name, address, and personal information. Check to make sure that this information is correct.

Step 4- Report your Crypto Income

On the "Indkomst" (Income) page, you will see a section for "Andre indtægter og fradrag" (Other income and deductions). Here, you can report your crypto income by selecting "Anden indkomst" (Other income) and entering the amount of your crypto income.

You need to report income from multiple sources in different sections. Here’s a section-wise breakdown:

• Gains from Bitcoin & altcoins-Box 20.
• Losses from Bitcoin & altcoins-Box 58.
• Gains from stablecoins-Box 346
• Losses from stablecoins-Box 85
• Airdrops-Box 20
• Staking rewards (but only at the point you receive them in your portfolio)-Box 20
• Mining rewards-Box 20
• Other income as interest from crypto-Box 20.

Step 5- Report your Crypto Capital Gains

If you have made any capital gains from the sale of cryptocurrencies, you will need to report these on the "Kapitalindkomst" (Capital income) page. Select "Aktier mv." (Shares, etc.) and then "Aktieavance og anden kapitalindkomst" (Share gains and other capital income). Enter the amount of capital gains from the sale of cryptocurrencies.

Step 6- Check your Tax Calculation

After reporting your crypto income and capital gains, the E-tax portal will calculate your tax liability. Check to make sure that the calculation is correct.

Step 7- Submit your Tax Return

If you agree with the tax calculation, submit your tax return by clicking "Godkend" (Approve). You will receive a receipt and confirmation of your submission.

Note that these steps are to be followed after you’ve completed all your tax calculations so that you can accurately co-relate all the tax calculations done by the E-tax software and identify any discrepancies to avoid overpaying.

How to Avoid Taxes on Cryptocurrency in Denmark

There’s no way to legally avoid paying crypto taxes altogether in Denmark and you could get into some serious trouble with the tax authorities if you’re planning to do so. However, there are some legal ways you can reduce your tax bill. Here are some of the most commonly used ones.

1. HODL: If you are a long-term investor, you can hold your cryptocurrency for more than three years before selling it. In Denmark, capital gains from the sale of cryptocurrency held for more than three years are tax-exempt. So, if you hold your cryptocurrency for the long term, you can avoid paying taxes on capital gains.
2. Use Tax Deductions: In Denmark, you can deduct expenses related to your cryptocurrency transactions, such as transaction fees and exchange fees. Keeping track of these expenses can reduce your taxable income.
3. Take advantage of losses: If you sell cryptocurrency at a loss, you can use that loss to offset capital gains from other investments. This can reduce your tax liability.

You can refer to the section titled “Crypto Tax Breaks” for more details on this.

Tax On Mining Crypto in Denmark

According to a recent notification published by the Danish tax authorities, crypto mining is considered a hobby business from a tax perspective and the tokens received as mining rewards are subjected to income tax.

Upon receipt of the tokens, they will be subject to income tax based on their fair market value at that time. Apart from that any subsequent disposition of the tokens will also attract income tax liabilities.

Crypto Margin Trading, Futures, and CFDs

Any income made from margin trades or derivatives like crypto futures and CFDs is considered regular income by the Danish tax authorities and is subjected to income tax. Any losses incurred from the sources mentioned above can be used as an offset against your gains to reduce your tax bill

However, note that only losses incurred from the same class of investments can be used as an offset against the gains. For instance, losses made from margin trades cannot be used to offset gains made from CFDs, they must belong to the same class for them to be a write-off pair.

NFT Taxes Denmark

In Denmark, NFTs are generally taxed in the same way as other cryptocurrencies, such as Bitcoin, altcoins, and stablecoins. The tax treatment of NFTs depends on the purpose for which they are acquired and whether they are held as an investment or used for business purposes.

If you acquire NFTs as an investment, any profits made from the sale or exchange of the NFTs are considered taxable income and subject to capital gains tax.

If you use NFTs for business purposes, such as in the creation and sale of digital art, the income generated from the sale of the NFTs is considered taxable income and subject to income tax.

De-Fi Crypto Taxes Denmark

The Danish tax authorities are yet to declare clear guidelines on the taxation of income from de-fi transactions. However, we can infer from the existing policies and taxation trends that the tax treatment of de-fi transactions will not be much different from that of Bitcoin, altcoins, NFTs, and stablecoins.

Some existing guidelines clarify how income from crypto staking will be taxed. According to the existing guidelines, staking rewards are seen as personal income and are therefore subjected to income tax. But there’s a catch, the income from staking is only taxable when you receive those tokens as part of your portfolio and can dispose of them. So unless you have your rewards in your personal wallet or portfolio, you need not pay any taxes on them

Although there are no specific regulations for crypto lending, general regulations for lending and borrowing can be used as guidance. If a guaranteed interest rate is specified before entering a crypto lending agreement, any returns received would be considered as interest income. Additionally, interest expenses can be deductible in certain situations, but for that, the loan agreement must contain a legally binding obligation to pay the debt and interest on the debt..

Taxes on Income from ICOs

An ICO is the equivalent of an IPO in the securities market, where a company first goes public and raised funds gainst equity shared from retail and institutional investors. In an ICO, you invest in a new project and receive token to represent your ownership in that project.

So what we can imply from this data is that you need to report all your gains and losses from ICOs in your tax return. Any gains will be taxed as income and the losses will be a tax-deductible similar to crypto-to-crypto trades.

Can the Skattestyrelsen Track Crypto?

The answer is yes. The Skattestyrelsen can track your crypto transactions from as far back as 2019 because the Danish Tax Agency collaborated with crypto exchanges operating in Denmark to exchange KYC information that year. Additionally, the agency also sent letters to cryptocurrency investors suspected of evading taxes.

So you should discard any thoughts of trying to underreport your crypto income on the tax return right this moment because if you go ahead with that plan you could get into some serious trouble.

What Records will the Skattestyrelsen Want?

The Danish Tax Agency has conducted audits of Danish taxpayers' cryptocurrency transactions in the past. Therefore, it is crucial to keep accurate records of your cryptocurrency transactions to calculate profits and losses for reporting in your annual tax return and in case of an audit.

Therefore it’s advisable to keep the following records:

• Detailed records of buy/sell transactions
• E-mails with details of the trade sent by the exchanges
• Details of your service providers(exchanges, wallets, blockchains)
• Public keys of your wallets
• Details on your existing portfolio
• Bank statements to correlate with your buy/sell transactions
• Receipts to prove expenses
• Additional documentation of your purchases and sales is required to verify ownership.

How are Airdrops and Forks Taxed in Denmark?

Forks

Airdrops

The tax authorities are yet to issue clear guidelines on the taxation of airdrops. However, we can infer from the existing guidelines that the tax treatment of tokens received as airdrops will be similar to that of gifts.

Frequently Asked Questions(FAQs)

1- Is crypto legal in Denmark?

Yes, cryptocurrencies are legal in Denmark. The Danish Financial Supervisory Authority (FSA) has issued guidelines on how cryptocurrencies are regulated and treated under Danish law. Cryptocurrency exchanges and trading platforms are required to register with the FSA and comply with anti-money laundering (AML) and know-your-customer (KYC) regulations. Additionally, income and gains from cryptocurrency investments are subject to taxation.

2- How is Crypto taxed in Denmark?

In Denmark, cryptocurrencies are treated as assets for tax purposes. The tax treatment of cryptocurrencies depends on the purpose for which they are acquired and whether they are held as an investment or used for business purposes.

If you acquire cryptocurrencies as an investment, any profits made from the sale or exchange of the cryptocurrencies are considered taxable income and subject to capital gains tax. The capital gains tax rate in Denmark varies depending on the size of the gain, the duration of the investment, and other factors.

While if you use cryptocurrencies for business purposes, such as in the creation and sale of digital products or services, the income generated from the sale of the cryptocurrencies is considered taxable income and subject to income tax. You may also be able to deduct expenses related to the creation and sale of digital products or services, such as software or platform fees, to reduce your taxable income.

3- When do you need to report your crypto taxes?

The Danish tax year spans from January 1st to December 31st annually. To file and submit your tax return, you have until May 1st each year (or July 1st if you have non-Danish income). For the 2022 financial year, the reporting deadline is May 1st, 2023, and the E-tax online portal for tax reporting opens in mid-March 2023.

4- What do assets with speculative purposes mean?

Any assets that you buy, hold or collect in an attempt to make a profit at some later date can be considered speculative assets. The Danish Tax Agency regards crypto assets as speculative investments, which means that any gains or losses are subject to taxation.