Do I have to pay tax on cryptocurrencies?

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How much extra tax do you pay when you invest in cryptocurrencies? You should definitely know these Belgian tax rules for cryptocurrencies.

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Cryptocurrencies such as bitcoin are sometimes referred to as the ‘Wild West’ in the financial sector. Due to their low entry barrier, both professional investors and many individuals invest in digital coins, but because they are still relatively new to the market (Bitcoin has been around for 12 years this month), the legal rules are far from complete. Especially when it comes to paying taxes, cryptocurrencies create a lot of confusion.

In Belgium, for example, it was not until the end of 2017 that the first tax legislation on cryptocurrencies was put on paper. Following a legal incident involving a student who had built a crypto-trading platform for his studies, Federal Public Service Finance established some principles regarding reporting and collecting income tax from cryptocurrencies. These tax rules do not provide 100 percent clarity, but it is important to know them if you want to invest in bitcoin.

When do I pay tax on my cryptocurrencies in Belgium?

Situation 1: I’m a good family man

FPS ‘rules say that the’ good family man ‘who invests in cryptocurrencies solely as a hobby is exempt from tax on his digital assets. A vague term and to fall into this category, the tax authorities apply different criteria. For example, you need to demonstrate that your investments are relatively risk-free. You only invest a ‘limited percentage’ of your movable assets in cryptocurrencies. However, there is no legal limit to set the limited percentage.

You must also be able to demonstrate that your investments are intended for the long term. This means that you are using a Buy & Hold strategy. You store cryptocurrencies that you buy for a long time (about a year), and the purchases must also be sufficiently spread out. Finally, do not rely on external investment to finance your purchases.

If you meet all of these criteria, you do not need to enter your cryptocurrencies on the annual tax return. Belgian tax law separates cryptocurrencies from personal assets. If your cryptocurrencies increase in value over the years, you also do not need to disclose these value increases. Because the cryptocurrency market is highly volatile, limited long-term gains are tax-free as long as they are not ‘tangible’. You do not have to pay VAT on transactions with cryptocurrencies.

Situation 2: I am a private trader

If the tax authorities notice that you buy and sell regularly, you will no longer be considered an amateur, but a private trader. 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 miscellaneous income, you must give up 33% to the tax authorities. The good family man will also fall under this rule when he converts his cryptocurrencies into cash and makes his income tangible.

Whether or not you pay taxes on cryptocurrencies depends on how often you trade them.

Situation 3: I am a professional trader

The situation is of course completely different when trading cryptocurrencies is your main activity. Then you fall under the usual tax rules for business income and you must therefore, among other things, waive part of personal 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 waive 25%. From an income of 39,660 euros per year, you waive half of the taxes.

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Stricter rules in the Netherlands

Each country has its own tax collection system and there are major differences between the tax laws for cryptocurrencies in Europe. If we cross the border into Holland, we see that our northern neighbors make far fewer exceptions than we do. Like all the financial assets you own, the Dutch tax authorities count cryptocurrencies as personal assets. In the annual settlements, you must state the value of your cryptocurrencies in euros, regardless of whether you are a good family man or not. You calculate this value based on the exchange rate of the exchange platform used on the reference date (January 1). If your personal assets exceed a value of 30,000 euros, you pay extra tax on it.

The Dutch rules therefore provide much less room for interpretation than Belgian law. Yet the rules of the game in our country have hardly changed since 2017 and they are in danger of falling behind with reality. As cryptocurrencies begin to emerge as a recognized means of payment, the need for clearer rules on tax on digital assets becomes more urgent.

Belgian legislation dates back to a time when the crypto market was much smaller than it is today.

Think before you start

If you are planning to start investing in cryptocurrencies yourself, first inform yourself of any potential pitfalls. After all, the price of cryptocurrencies is very erratic. The beginning of 2022 does not seem like the right time to get into cryptocurrencies, but the tide may turn just as quickly.


Last updated on 31/01/2022.

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