X traded cryptocurrencies. From August 2015 to July 2018, he initiated 124,004 transactions. He used a “trading bot” developed by himself in 2015. It was an algorithm written by X that “looked” at the exchange rate differences as they could occur with respect to the same crypto on different trading platforms and was designed to “capitalize” on imperfections. If certain parameters defined in the algorithm were met, a cryptocurrency transaction was started automatically. The result obtained with the imperfections was called the “arbitration result”. In addition to the arbitrage result, positive exchange rate results were also achieved in 2015 and 2017 as a result of the revaluation of the various cryptocurrencies that X had in its portfolio. For 2015, X filed a tax return for a taxable income from work and housing of € 69,285, consisting of wage income, and filed a tax return for 2017 for a taxable income from work and housing of € 19,667 and a taxable income from savings. and investment of € 22,389. On April 4, 2018, X issued a voluntary improvement announcement for 2015, stating that he owned precious metals and cryptocurrencies with a value per share. January 1, 2015 at € 42,389 and € 18,366 respectively (total € 60,755). Following this announcement, the inspector imposed a further assessment for 2015, in which he took into account the € 15,281 profit and set the box 3 capital at € 90,763. The inspector corrected the 2017 tax return with a company profit of € 10,637,232 and box 3 capital of € 399,231. X appealed, arguing that the source requirements had not been met and the results obtained could therefore not be taxed in box 1. Gelderland’s district court upheld him. The Court held that, according to settled case-law, there was a source of income if the three source criteria were met, namely: (1) participation in economic activity, (2) seeking an advantage (the subjective criterion) and (3) reasonably expecting an advantage ( the objective criterion). According to the Court of First Instance, the burden of proof was on the inspector on the basis of a letter from the Secretary of State of 28. May 2018. The court then ruled that the inspector had made it probable that X participated in trading and intended to take advantage. After all, X had performed many thousands of transactions on various crypto exchanges that were available to the public. Given the nature of the transactions, the Court found it likely that X had thereby intended a subjective advantage. According to the Court, however, the inspector had not made it probable that there were structurally positive results which were causally linked to the extra work carried out by X, as referred to in the letter from the Secretary of State. In light of the large exchange rate movements, cryptocurrencies were to be regarded as highly speculative assets. This was underlined by the fact that X had suffered significant losses in 2018 after a good year in 2017. Although these were facts and circumstances that had occurred in a later year, they could be taken into account in answering the question of, whether there was an objective expectation of benefit. In addition, the Court found that the inspector had not made probable the link between the presumed extra work and the positive results in 2015 and 2017. The fact that X had put himself into the work and written an algorithm next to his work in 2015 that led him into the cryptocurrency market, did not mean that the profits he had made could be attributed to that work. According to the Court, the positive result of 2017 was mainly due to the increased prices of the various, highly speculative, cryptocurrencies. And that was something X had not been able to influence, at least it had not turned out. According to the Court, speculation was the predominant element in X’s activities and there was no objective expectation of benefit attached to “extra” work from X, and therefore no source of income. The court upheld X’s appeals and downgraded the assessments for 2015 and 2017.
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