Crypto and the Belgian tax authorities: How much tax do I have to pay on my cryptocurrency?

Business AM spoke with Antwerp’s tax lawyer Thomas Spaas – who specializes in the crypto industry – about how the tax law is applied to digital currencies in our country.

First of all: in Belgium you do not (currently) pay tax if you only own cryptocurrencies or if you make a purchase with crypto; in other words, if you use it as a means of payment. However, crypto-capital gains on investments may be subject to three possible tax schemes.

Situation 1: the capital gains are those of a “good family man”

Belgian tax law has no wealth tax. FPS rules state that a “good family man” who invests in cryptocurrencies solely as a hobby or for long-term purposes is exempt from tax on his digital investments. But “good housekeeping” is an ambiguous concept. To fall into that category, the government looks at all the facts and circumstances. What you need to demonstrate: that your investments are relatively risk-free.

  • “A Buy & Hold strategy always points to good housekeeping,” says Thomas Spaas. “Coins you buy and store for a long time; in Germany it must be a year, here one looks primarily at the intention. ”
    • It is therefore best not to put all eggs in the same basket.
  • Start borrowing to invest, with gearing or margin trading is also not a hallmark of a good family man.

So if you can demonstrate that you have not taken any major risks with your crypto investments, do not disclose the profit from the sale on the annual tax return.

  • If your cryptocurrencies increase in value over the years, you do not need to disclose these increases in value either.
  • You do not have to pay VAT on transactions with cryptocurrencies.

Situation 2: the price gain comes from speculation

When the IRS notices that you are taking a risk, buying and selling regularly to speculate in exchange rate differences, they will no longer consider you an amateur, but a private trader. “One must also look at the intent and all the facts and circumstances at the time of purchase,” says Spaas.

  • Traders want to achieve the greatest possible return in the short term and will therefore often buy when the value is at a low point (‘Buy the dip’) to sell at a high level. This is repeated over and over again so they can increase the value of their portfolio.
  • High activity on the crypto exchanges gives the impression that you are actively speculating in volatile price movements with the aim of making your investments pay off in the short term. In this case, the tax authorities will consider your cryptocurrencies as a source of extra income and you will therefore have to pay tax.
  • The profit you have made on your cryptocurrencies during the financial year is then indicated under the heading ‘Miscellaneous income’.
  • On the net surplus of the miscellaneous income, you must give up 33 percent to the tax authorities.

“Whether you pay taxes on certain cryptocurrencies or not depends on the facts and circumstances at the time of purchase and what your intention was: long-term or short-term profit from a risky trade,” Spaas explains.

NB! “It also means that if you have two types of investments (both long-term and more speculative investments in the short term), you need to distinguish between exempt and non-exempt capital gains,” Spaas adds.

Thomas Spaas – source: YouTube

Situation 3: you are a professional trader

The situation is, of course, quite different when trading cryptocurrencies becomes your profession. “Then it becomes difficult to say that your crypto investments are private investments like a good family man, but also that you ‘just’ are a speculator.”

  • So “you are actually in a sole proprietorship” and you fall under the usual business income tax rules. Then, among other things, you must waive a piece of personal income tax on your profits.
  • The percentage depends on how high your annual income from the cryptocurrencies was.
    • If it is less than 12,990 euros per year, you must pay 25 per cent.
    • From an income of 39,660 euros per year, you waive half of the taxes.

Conclusion: “There are enough rules in Belgium,” argues Spaas. The fact that there is no specific crypto-regulation in Belgian tax law is not a shortcoming. “The current tax law is actually not that bad, especially compared to other countries.”

But then Belgians from the crypto world really have to stick to it. “Better to pay taxes correctly, but not too much, than always try to do the best you can, and then stay awake at night,” Spaas concludes.

This article is part of a series of articles that try to gather all the facts about the crypto market: crypto 101† So keep an eye on our website for future pieces!

also read

Leave a Comment