Investing in crypto: business or private?

There has been a lot of buzz in the crypto market over the past year. It is only a few months ago that bitcoin reached a record high of more than 66 thousand euros. Partly because of this kind of messaging, many entrepreneurs in the Netherlands also decided to take the plunge into crypto.

Curious if buying bitcoin is also something for your business? In this article you can read more about investing in crypto for business or private, so you can check what is most interesting for you. You can also read more about crypto and the tax system so you know what to expect as an entrepreneur.

Is it wise to invest in crypto as an entrepreneur?

First, it is advisable to know a little more about investing in crypto; regardless of whether you do it privately or for business. In the last year, almost everyone seems to be suffering from the crypto fever. The chance that you know someone who has invested in bitcoin or another currency is very high. It is not particularly strange – partly because of corona, it has become extremely popular to invest in crypto. When COVID-19 triggered a global financial crisis, entrepreneurs and investors decided to look for an alternative for their investments. Investing in shares and other investments turned out to be less interesting at that time, in times of economic crisis.

The principle of supply and demand applies to crypto: when interest in crypto rises, prices rise. The supply becomes smaller when you start investing in it. You can clearly see this in the prices via Satos, a platform where you can buy and sell crypto coins. There you can clearly see how the prices have gone in the past year, so that such digital coins can suddenly be worth much less. Therefore, invest only with money that you can lose, because crypto is extremely unstable. You never really know where things are going on the quotes, so it would be a shame to lose all your (business) money via crypto.

Individuals or companies invest in cryptocurrency as an entrepreneur

If you want to invest in crypto as an entrepreneur, you can do this for both business and private purposes. If you are an independent entrepreneur, such as a freelancer, it is often recommended to buy cryptocurrency privately, e.g. via Satos. Here’s how: If you make a lot of money from your cryptocurrency investment, you don’t have to count the profit as your business’s profit. You don’t have to pay tax on capital gains, which makes it more attractive to invest in crypto at all.

However, if you plan to invest in crypto for business, you should take into account that any increase in the value of a crypto coin can be taxed. Even if there is a decrease in value, you must take this into account in your administration. In short: you should mention profit and loss in crypto when investing in business. This may be fine for one entrepreneur, while it makes certain financial conditions a little more difficult for another entrepreneur. Therefore, discuss with your accountant what is the most sensible thing to do when you want to invest in crypto for business.

Crypto and the tax authorities: you need to know this

Finally, it is good to know more about crypto and the tax authorities in the Netherlands. Although crypto is relatively young, there are more and more regulations surrounding crypto and the tax authorities. For example, you must always declare such investments in your tax return, and you can get a hefty fine if you don’t do this, and the Tax Administration finds out. You must state your investments in crypto in box 3 (capital tax). The tax-free capital for crypto in 2021 is 50,000 euros or 100,000 euros with a tax partner. If you exceed this amount, you must include it in your tax return.

Are you a step ahead in crypto and making money mining coins? In that case, you must state your capital based on that in box 1. From that box, you must pay more tax on that capital. Finally, what you need to know is that the value of your crypto wallet changes every moment. Therefore, the Tax Office calculates the value of the currency in question on 1 January at 00:01 in the year you file your tax return. Our tip? Read even more about this topic via this page of the Tax Administration, so you can start buying bitcoin as an entrepreneur with sufficient knowledge.

Leave a Comment