General Overview

Crypto assets, such as Bitcoins, Ethereum, NFTs, and other digital tokens, are generally taxed in the Netherlands. As a main rule, they are subject to box 3 tax (tax on savings and investments), but in specific situations they may be taxed in box 1  (income from work or business).

Other than for example shares and or real estate, crypto currency typically does not produce regular income like dividends or rental income. Instead, results are based on capital gains, basically the increase (or rather change) in value over the year or the profits made on selling crypto assets.

Box 3: Tax on Savings and Investments

In most cases, crypto must be declared under box 3. This tax box assumes a deemed (fictitious) return which is based on the value of the assets as per 1 January each year. This means that tax is calculated on an assumed profit—not on your actual gains or losses.

However, the Dutch Supreme Court has ruled that this fictitious method is unlawful and approved that, upon request, the tax charge may also be based on actual returns instead. For crypto, this typically means:

– The change in value between January 1 and December 31, or

– The profit/loss from a sale during the year

Note: The definition of “actual return” is still under development and may differ per asset class.

Box 1: Income from Business or Work

Crypto may fall under box 1 taxation in the following cases:

1. Purchased with business funds: If crypto was bought using funds from a self-employed activity, the gains are in principle taxed as business profits, and losses may be deductible. In case of profits, the tax authorities will not challenge this, but in case of substantial losses, the tax authorities tend to reclassify the activity as a personal investment rather than business-related. The effect of a successful reclassification by the tax authorities is that the losses are not tax deductible.
2. Trading as a business: Frequent, structured crypto trading may be seen as a business. If accepted as such, profits are taxed as income. Losses should be tax deductible, but again, substantial losses are closely scrutinized.
3. Crypto received as salary: Although rare, crypto payments from, for example, employers or clients count as taxable income and are subject to box 1. Once taxed in box 1, they are generally taxed in box 3 after.
4. Crypto as alimony or other personal income: Also rare, but taxable if received in box 1 (and tax deductible for the payer), but after receipt, subject to box 3 tax.

Unreported Crypto and Voluntary Disclosure

Crypto must always be reported (unless the total value of assets are below the tax exempt amount). Due to new EU transparency laws, crypto platforms are required to share account information with Dutch tax authorities. In addition:

– Banks report suspicious or unexplained transfers, especially when crypto is converted into normal currency.

– Advances in AI and blockchain tracking mean hidden wallets can soon be traced. If the tax authorities cannot trace it now, they will be able to do so within the next 12 years. This could result in retroactive assessments with fines and high interest charges. As such, it is better to comply now in order to avoid high expenses in the future.

Voluntary disclosure is often advisable if crypto has not been reported correctly. It may reduce or avoid:

– Fines of up to 300% of the unpaid taxes

– Interest charges

– Legal costs

– Criminal prosecution

-Stress!

Need Help?

If you are unsure how to report your crypto, or whether it falls under box 1 or box 3, don’t hesitate to contact us. We’re happy to help.