Denmark’s Crypto Tax Overhaul: New Rules Could Tax Unrealized Gains by 2026

Denmark's Tax Law Council proposes taxing unrealized gains on crypto assets by 2026, recommending inventory taxation for fairer treatment of crypto investors.

Denmark is considering a significant shift in how it taxes crypto assets. A new report from the Tax Law Council suggests taxing unrealized gains and losses on crypto holdings as early as 2026, signaling a potential overhaul for Danish investors. The council's recommendations include several taxation models, with an emphasis on inventory taxation, a system that would apply taxes even to unsold assets.

Denmark considers taxing unrealized crypto gains as early as 2026 in a bid for clearer tax regulations.

Key Points:

1. Crypto Taxation Reform:

   Denmark is on the path to overhauling how crypto assets are taxed. The Tax Law Council has proposed a bill that could tax unrealized gains and losses starting as early as 2026. This move would impact investors who hold cryptocurrencies, even if they haven't sold their assets, marking a major shift in the taxation approach for digital assets in the country.

2. Tax Models Considered:

   In the council’s report, three potential taxation models were explored:

   • Capital Gains Tax: The traditional method where only realized gains (profits after selling an asset) are taxed. However, this method was criticized for being inconsistent and unfair to crypto investors.

   • Warehouse Taxation: This model involves taxing assets based on their value at storage or safekeeping.

   • Inventory Taxation: The favored model, which would tax an investor’s entire crypto portfolio annually, regardless of whether the assets have been sold or not. This method treats the portfolio as "inventory," subject to annual tax assessments.

3. Inventory Taxation Focus:

   Inventory taxation, the preferred model, involves taxing crypto assets similarly to financial assets like stocks and bonds. Every year, investors would be taxed based on the value of their entire crypto portfolio, regardless of whether they have sold their assets. This continuous taxation approach simplifies tax administration and ensures consistent revenue from crypto assets.

4. Reporting Requirements for Exchanges:

   To ensure transparency and accuracy, the proposed bill includes requirements for crypto service providers like exchanges and payment platforms. They would need to report customer transaction information, which could be shared across the European Union. This would increase compliance and reduce tax evasion by crypto investors across Europe.

5. Broader Global Trend:

   Denmark’s move comes amid a global trend of tightening crypto tax regulations. Other nations are implementing stricter tax rules for digital assets. For example, the U.S. recently floated a 25% tax on unsold assets, and Italy is considering raising its capital gains tax on Bitcoin holdings. This trend reflects growing global awareness of the need to regulate and tax crypto assets effectively, as they become more mainstream.

   
   

   Related: Indian Survey Highlights Crypto Tax and AML Challenges for Investors

   
   

   While Denmark’s proposed crypto tax changes are still in the discussion phase, the potential to tax unrealized gains by 2026 marks a significant shift for Danish investors. The inventory taxation model could reshape the way crypto assets are treated, bringing them in line with other financial assets. With the bill not expected to be introduced until 2025, there’s still time for debate and revisions, but Denmark’s stance highlights a growing global focus on crypto regulation and taxation.

   
   

   Source: Cryptonews