Anyone who evades tax with cryptocurrencies should quickly improve the returns

For those who have not reported their bitcoins or other cryptocurrencies to the IRS in recent years, forensic lawyers and tax advisors have compelling advice: Improve old tax returns quickly.

The tax authorities will soon have the power to see for themselves how much capital someone has in cryptocurrencies. This is stated in a new EU directive on data sharing, which is likely to enter into force later this year.

So far, the collection of taxes on cryptocurrencies such as bitcoin has largely been based on good faith. The tax authorities can only hope that the owners themselves honestly report their crypto assets on their tax return, under the heading ‘other assets’.

It is useless to lie

Tax can already now request information about citizens from many authorities, such as banks and pension funds. It allows the tax authorities to check how much money someone has on e.g. bank account. So there is no point in lying about it. This will soon also apply to cryptocurrencies. A survey among advisors shows that they therefore encourage their clients to improve old declarations where necessary.

Tax evasion is illegal and can result in fines and even jail time. Today, citizens who did not realize they were doing something wrong, or who later regret it, are no longer automatically released when they ‘return’. The voluntary disclosure scheme has been abolished for tax on income from savings and investments (Box 3). It does not make much sense to lie

According to Woody Jansen de Lannoy of the Jaeger Lawyer, improving old statements leads to a greater chance of a reduced sentence. “That is why I say, ‘Come forward.’

Agree with yourself

After correcting old returns, the tax due must still be paid plus interest thereon and a fine. But then the bitcoin owner is back to ‘manage with himself’ and with the government, says Jansen de Lannoy.

The Netherlands has about 1.6 million crypto investors, the research firm Kantar reported recently. Anke Feenstra, criminal lawyer and partner at Hertoghs Advocaten, notes that not all of her clients are aware that they are making a false statement if they do not give up bitcoins.

“Slowly, awareness of this is rising,” she says. “But a few years ago, when a lot of people came in with their savings, this awareness was even less there than it is now.”

In those few years, bitcoin has risen in value, reaching $ 69,000 for one coin in November. In early 2017, a bitcoin was only worth about a thousand dollars, so whoever came in at that time experienced a huge increase in value. The tax authorities can go 5 years back in time with additional requirements.

More than a ton or even more than a million euros

“Many of my clients have invested a few thousand euros at once,” says Marco Bik, partner at Jongbloed Fiscaal Juristen in Enschede. “They are now over a ton in that net worth, and a few even have over a million.” Bik also says that many of these investors do not know that they have to enter the amounts on the tax return.

The new EU directive – Dac8 in jargon – is already on paper and went through the consultation round last year. It is not yet certain whether all parts of the directive will remain intact, according to experts, some far-reaching plans from the European Commission seem technically difficult to implement.

But that the tax authorities will soon be allowed to look at the accounts of crypto companies to gain insight into crypto assets: It seems to be moving forward anyway, say all lawyers and advisers who have spoken to Trouw.

This is partly because the implementation is relatively simple: Dutch crypto companies are already required to keep track of who their customers are and how much capital they have under the Money Laundering Act.

Fons Overwater, chairman of the Registry Tax Advisers, does not know how many tax advisors approach their clients about it. He says, however, “that one can assume that most advisers include this type of new legislation in general newsletters to their clients”.

Also read:

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