Bitrabo Editorial
Denmark is evaluating the possibility of imposing taxes on unrealized gains from cryptocurrency to create parity with the tax treatment of traditional assets.
Denmark Considers Tax on Unrealized Crypto Gains
The Danish Tax Law Council has published a detailed 93-page report proposing recommendations for the taxation of digital assets.
The central idea of the report is to align tax treatment for digital asset holders with that of traditional asset holders, such as those who own stocks, real estate, or precious metals.
One key recommendation is to enact legislation that would tax unrealized gains and losses on cryptocurrencies held by Danish residents. The proposed law suggests a capital gains tax of 42% on unrealized profits.
If enacted, this law could take effect as early as January 2026. It would oblige Danish investors to pay taxes on their Bitcoin (BTC) and other digital assets from the moment of purchase, without needing to sell them first.
The Danish Tax Law Council has stated that this proposed legislation aims to address the “unfair treatment of cryptocurrency investors.” Denmark’s tax minister, Rasmus Stoklund, expressed:
In recent years, there have been cases where Danish investors in crypto assets faced substantial taxes. The council’s recommendations might be a pathway towards fairer taxation of crypto investors’ gains and losses.
The suggested tax framework introduces a three-part system for digital assets: Capital Gains Tax, Inventory Tax, and Loss Write-Offs.
As previously mentioned, the Capital Gains Tax aims to align digital asset taxation with conventional asset taxation, enforcing a 42% tax rate on profits that are not realized yet.
The Inventory Tax requires crypto investors to report their entire portfolio annually, incurring taxes irrespective of whether they have sold any digital assets.
Lastly, Loss Write-Offs provide relief to taxpayers by allowing them to deduct losses from their profits to lessen their overall tax burden.
This proposed taxation approach reflects Denmark’s perspective on digital assets. In 2022, the Danish Supreme Court established a pivotal ruling indicating that individuals benefiting from the sale of digital assets, whether purchased or received as gifts, are subject to rigorous tax regulations.
Global Approaches to Digital Asset Taxation
Denmark’s initiative to refine crypto taxation is similar to measures adopted by various countries. For instance, Italy recently considered increasing its capital gains tax on cryptocurrencies from 16% to 42%.
In August 2024, the New Zealand government presented a bill aimed at enhancing tax compliance among cryptocurrency holders.
In Japan, opposition leader Yuichiro Tamaki has pledged to reduce crypto taxes should he be elected. Currently, BTC is trading at $67,486, having risen by 2.1% in the last 24 hours.