Benjamin Franklin, a famous American statesman, said, “Nothing is certain in this world except death and taxes.” It’s a comment that may now apply to crypto, as Denmark plans to create one new tax policy which focuses on the unrealized capital gains of cryptocurrencies such as Bitcoin.
Denmark: tax reform for crypto assets
The Danish government is about to take a bold step and initiate a groundbreaking tax reform regarding digital assets like Bitcoin.
It is considered one unprecedented step as the cryptocurrency space has been subject to government regulation in many countries and the ongoing debate on implementing more government regulation and taxation on it.
According to the Danish government, tax authorities will begin collecting a 42% tax on unrealized profits from cryptocurrencies by 2026, which could be seen as a warning of things to come for the crypto space.
Under the new tax policy, Danish authorities wanted to include Bitcoin and other cryptocurrencies in their existing financial taxation. The unprecedented tax reform will treat cryptocurrencies as investment assets.
Cryptocurrency holders who own digital assets that are not tied to a central bank or backed by a physical asset will have to pay a 42% tax on their unrealized gains.
BTCUSD trading at $67,122 on the 24-hour chart: TradingView.com
Taxing crypto assets in the future
The Danish Tax Council said in a press statement that all cryptocurrencies should be taxed in the future in accordance with the country’s tax policy.
The tax authorities explained that the government already taxes some asset-backed crypto assets, so it is only fair to also impose tax rules on Bitcoin and other ‘non-backed crypto assets’. A rule that, according to the Tax Authorities, is in line with the tax policy applied to other types of investments.
BREAKING: Denmark will become the first country in the world to tax unrealized capital gains on crypto from January 1, 2026. The tax on unrealized capital gains is 42%.
This will affect not only the cryptocurrencies acquired from that date, but also the cryptocurrencies acquired since inception…
— Mads Eberhardt (@MadsEberhardt) October 23, 2024
Denmark’s Tax Council admitted that cryptocurrency taxation is a challenge for both the government and crypto asset holders cryptocurrencies are “not centrally regulated” by a central bank or other government agency.
Danish Tax Minister Rasmus Stoklund said the tax recommendation submitted by the council has been updated to better tax crypto traders.
“In recent years there have been examples of Danes investing in crypto assets that are heavily taxed,” Stoklund noted, adding “the recommendations could be a way to ensure more reasonable taxation of the profits and crypto investors lose.”
Image: Vidhi Centre for Legal Policy
Crypto tax around the world
Establishing a tax framework to cover crypto assets is a global trend. Other countries are also exploring how to tax digital assets.
In Italy, the government recently announced its intention to implement a 26% to 42% tax on cryptocurrency, a reform that Italian authorities see as a way to improve capital gains taxes. It is part of the Italian government’s proposal for a comprehensive tax policy on cryptocurrency investment income.
On the other hand, Germany has introduced a 10-year period for tax-free capital gains on digital assets, a milder move to encourage long-term investments among crypto users.
Around the world, many countries are recognizing the need for a structured tax framework for cryptocurrencies.
Featured image by Fedor Selivanov/Alamy Stock Photo, chart from TradingView