Cryptocurrencies are an integral part of current affairs today. However, quite a few questions and problems surrounding this subject remain. Are the capital gains achieved taxed, and if so, how? Can this money just be transferred to a bank account? We briefly summarise the current situation.
To date, there is no specific tax regulation for the capital gains realised on cryptocurrencies. This means that the general principles regarding personal income tax must be applied. A distinction is drawn between three situations: the purchase of cryptocurrencies as a responsible person, as a speculator or as a professional trader.
A responsible person is expected to act cautiously and reasonably. They buy cryptocurrencies in order to resell them after a while and thus make a capital gain (or possibly a capital loss). This capital gain made will not be taxed if this is regarded as the ‘normal management of private assets’. And therefore, should not be mentioned in a personal income tax return either. In particular, the personal situation and underlying intention of the investor are taken into account here.
A speculator, unlike a responsible person, takes great financial risks. They will speculate on steep, rapid price rises in order to generate capital gains in the short term. This income is taxed as miscellaneous income and is subject to a separate tax rate of 33%. In the case of a professional trader, the capital gains obtained are taxed as professional income at the progressive rates (50% maximum). Both the speculator and the professional trader can deduct actual costs incurred or borne in order to obtain the income and deduct capital losses from the taxable base.
The Ruling Service uses a decision tree to assess each situation individually. In a newsletter of January 2018, this service confirmed that investments in virtual currencies should generally be regarded as speculative. However, we can deduce from previous decisions that in most situations the capital gains obtained from cryptocurrencies are exempted as they can be regarded as the normal management of private assets.
In a limited number of rulings, it is decided that the capital gains should be taxed as miscellaneous income because of the speculative aspect. These are the factors that play a role in this:
- The investor has an active investment strategy in the short term;
- Cryptocurrencies are purchased regularly (daily/weekly);
- There are frequent conversions from one currency to another;
- There have been a large number of transactions over the last few years.
If income is taxed as miscellaneous income, and not as professional income, then these factors play a role:
- The investor does not come into contact with cryptocurrencies in their professional activities;
- The investor will not buy/sell via an automated process;
- The investor is not active on forums or blogs in the cryptocurrency community;
- The investor has not taken out any external loans/financing in order to undertake the initial investment;
- The transactions are not organised according to a professional structure, do not require a specific instrument (no mining or software) and do not require the cooperation of several people;
- A minimum investment by the investor (10% to 15% of movable assets).
However, there is a problem with regard to cashing in these profits. In the context of the strict anti-money laundering legislation for banks and combating crime, funds from crypto markets are considered to be very risky as there is no supervision of this. For this reason, bank accounts are regularly blocked, or the bank asks for more information about the origin of the funds. It is then important that the customer can demonstrate that the money was initially invested in cryptocurrencies from a Belgian bank account. For anyone who has ever invested in a cryptocurrency and then forgotten about it, this is not such a great problem. For investors who have traded on various platforms over time, the situation will be more complicated.
For the sake of clarity, it is therefore necessary to wait until a definitive arrangement is reached that clarifies all aspects of this investment vehicle.
Our Bofidi experts will be happy to help you
Do you have specific questions about cryptocurrencies? Then please do not hesitate to contact us. The team from Bofidi experts will be happy to help you.