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

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

First of all: In Belgium you do not (currently) pay tax if you simply own crypto coins 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 regimes.

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 crypto-coins purely as a hobby or with a view to the long term is exempt from tax on his digital investments. But “good housekeeping” is an ambiguous term. 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 you primarily look at the intention.”
    • It is therefore best not to put all your eggs in one basket.
  • Start borrowing to invest, with leverage or margin trading is not a characteristic of a good family man either.

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

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

Situation 2: the capital gain comes from speculation

If the tax authorities notice that you run a risk, buy and sell regularly to speculate on exchange rate differences, they will no longer consider you an amateur, but a private trader. “You also need to look again 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’) in order to sell at a high point. This is repeated over and over so that they can increase the value of their portfolio.
  • High activity on the crypto exchanges gives the impression that you are actively speculating on volatile price fluctuations with the aim of making your investments pay off in the short term. In this case, the tax authorities will consider your crypto coins as a source of additional income and you will therefore have to pay taxes.
  • In that case, you enter the profit you made on your crypto coins in the financial year under the heading ‘Miscellaneous income’.
  • On the net profit from the various incomes, you must hand over 33 percent to the tax authorities.

“Whether or not you have to pay tax on certain crypto profits 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,” clarifies Spaas.

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

Thomas Spaas – source: YouTube

Situation 3: you are a professional trader

The situation is of course completely 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 are ‘just’ a speculator.”

  • Then you “actually work 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 profit.
  • The percentage depends on how high your annual income from the crypto coins was.
    • If it is less than 12,990 euros per year, you must waive 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 the Belgian tax code is not a shortcoming. “The current tax code is actually not that bad, especially compared to other countries.”

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

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!

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