Op Ed: Tendencies and Opportunities of Bitcoin Taxation in the EU

In the U.S., the IRS is progressively clarifying the ambiguity persisting on the taxation of cryptocurrencies, as illustrated by the recent publication of a fairly detailed FAQ. In parallel, the U.S. tax administration is carrying out numerous tax audits. 

In Europe, while no state has shown hostility, very few are those that have adopted a fiscal environment that encourages a positive development of cryptocurrencies.

To understand taxation of cryptocurrencies in the EU, it must be kept in mind that the EU has no power over direct taxation (however, VAT is an EU matter, which explains the ECJ’s decision that Bitcoin-fiat trade is exempt from VAT). Thus, each member state freely sets its own tax rules at national level. This is a problem in a single market, but it is as old as the EU. 

Within this patchwork of tax regimes, it is still possible to identify key trends and opportunities. 

Key Trends in Taxation of Cryptocurrencies


First, it should be noted that in all states, the tax treatment of Bitcoin gains is closely linked to the country’s tax system. Where no specific regime is provided for, cryptocurrencies fall into pre-existing tax categories. Naturally, countries with favorable capital taxes only slightly tax capital gains on cryptocurrencies. Switzerland (outside the EU but within the European Economic Area) does not tax income from private wealth management. The United Kingdom foresees fairly low flat rates (10 percent or 20 percent). The Netherlands provides for a rate of 30 percent, which, however, only applies to notional interest, i.e., a fictitious amount of income generated by the capital held. 

Example from the Netherlands: A person holds 100 BTC (worth €320,000) on January 1, 2019. To calculate its tax base, it first applies an allowance of €25,000 and then a notional rate of income that its capital should generate, as determined by law. According to this rate, the tax base will be €13,570 subject to a 30 percent rate. The tax payable for the year 2019 will, therefore, be €4,071, regardless of the number of transactions carried out during the year. 

Then, it should be noted that, as in the United States, almost all member states consider any transfer of cryptocurrencies, regardless of the counterpart (other crypto, fiat, good or service) constitutes a taxable event. This is due to the fact that cryptocurrencies are legally considered as a good and not as a currency. 

This distinction constitutes an obstacle on two levels: On the one hand, it creates several difficulties in calculating its capital gain when many crypto-to-crypto exchanges have been conducted; on the other hand, it makes it impossible to use cryptocurrencies in payments since each payment, however slight, involves calculating the capital gain or loss realized in each caset. 

In this regard, it is worth noting that France has decided to exempt crypto-to-crypto trades in order to facilitate taxation by reducing reporting obligations and taxing only exchanges against fiat or purchases. 

Example from France: A person holds 10 BTC worth €50,000 at time of purchase. She later decides to change them against 300 ETH which are then worth €60,000. Before 2019, a capital gain of €10,000 should have been declared. Today, this exchange has no tax implications. If that person then decides to sell her 300 ETH for €65,000, she will have to declare a capital gain of €15,000. 

Finally, quite logically, all member states differentiate, for the purpose of determining the applicable tax regime, between persons acting in the context of the private management of their assets and individuals acting as professionals

Most cryptocurrencies are liquid and easily tradable, so the number of transactions that an individual can make is often very high. The criteria to distinguish a professional from a private individual are, therefore, decisive because the taxation of professional activities is often much higher. Indeed, while all member states provide for a flat-rate tax for individuals (from 0 percent to 35 percent), income from professional activities is almost always subject to a progressive rate (up to 55 percent) to which are added social contributions.


Although the member states present points of convergence in their taxation systems, the various regimes can be opposed in their practical application. 

First, while all member states agree on distinguishing between professionals and individuals, there are significant differences in the criteria used to determine the distinction. Some states provide for purely formal criteria, such as the incorporation of a company to carry on the activity (Austria, Croatia, Greece, Hungary, Ireland). Others provide for more or less severe material criteria, involving a case-by-case analysis of the frequency, duration of positions, amount of trades, resources used, etc. (Germany, France, Belgium, United Kingdom, Luxembourg, Switzerland). Thus, a person who has carried out more…

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