There is a rise of digital assets worldwide, crypto being one among them. As the ownership of digital assets increases, the management and taxes are imposed on all forms of digital currency- crypto.
Chainalysis- an American blockchain analyst company, reported that the Netherlands will be one of the top 40 European countries using crypto in 2022.
Crypto taxes in the Netherlands are regulated by the “Belastingdienst” – the “Tax service,” also called the Dutch Tax Office. This office is part of the Dutch Ministry of Finance, and its job includes managing assets, collecting taxes, dealing with insurance, and handling other banking activities.
Do You Have To Pay Taxes On Crypto In Netherlands
The Netherlands handles crypto taxes differently from other European countries. Instead of taxing crypto based on the gains and income method, they treat it like an asset. Simply put, they calculate your overall wealth, including crypto, and then apply taxes based on that total value.
There is NO capital gain tax in the Netherlands; instead, the taxpayers are taxed on the assumed value of the asset on January 1 of the present tax year, and the value is reset again the following tax year, i.e., January 1. Here, the Belastingdienst always assumes that there is only profit from your assets, never a loss.
Example:
For instance, if an individual’s net worth is €50,000, including the crypto and non-crypto assets, they’re liable to pay tax, i.e., “Vermogensbelasting,” Wealth tax on the entire amount.
How Is Crypto Taxed In the Netherlands?
To understand how the crypto taxes are calculated, it is necessary to know the taxation system of the Dutch Ministry of Finance. The tax system in the Netherlands is classified into three boxes. Boxes 1, 2, and 3 are based on the source of income, and each box has its rules and tax rates.
Box 1 – Under this section, the tax is imposed based on general income and primary residence, i.e., income as an employee, rental income from their property, business income, freelancer, and self-employment. The tax rates in this category fluctuate depending on the income, where the tax rate increases with an increase in income.
Box 2 – This section deals with the source of income a company receives as a shareholder with at least 5% of the claims. The tax rate in this category remains the same—a flat rate of 26.9%—even if the claimed values go high.
Box 3 – This section gathers the income generated from savings accounts, investments, mutual funds, and any other source that generates income for an individual apart from the abovementioned sources. The tax rate here is also fixed, i.e., at the flat rate of 31.6% on individual asset returns.
For calculating the tax implication on crypto, boxes 1 & 3 are relevant as these categories are concerned with the income generated from primary sources like self-employment and secondary sources like investment, trading, mutual funds, etc.
Crypto Taxation under Box 1
As discussed, under the Box 1 category, if an individual is professionally involved in buying and selling crypto and making a proper capital gain, this is considered primary income, i.e., they’re liable to pay the tax.
Trading Tax for Crypto Businesses
Ideally, a person trading as a hobby or a private investor trading in cryptocurrencies is NOT liable to pay taxes if it is a capital gain or loss. However, if a person is involved in business operating with cryptocurrencies, i.e., buying, selling, or investing, and expects a large-scale profit, these are considered primary sources of income and are taxed as per the rate mentioned under Box 1.
Salary Payments In Cryptocurrency
There is a situation where a person receives his salary in the form of a cryptocurrency, which is still considered a source of income through employment and is taxable, according to Box 1.
Similar to other salary receipts, even the income earned in crypto should be held in a salary receipt, and the current value of crypto in euros should be mentioned. Further, the tax rate is imposed according to the income value.
Salary Payments In Cryptocurrency
It’s time to iterate the actual cost of tax that a person needs to pay on crypto – according to Box 1, the tax rate is not constant, i.e., it changes depending on the income value; therefore, the tax rate increases with an increase in income generated.
Taxable income | Tax rate |
If the income is up to €73,031 | 36.93% |
Above €73,031 | 49.50% |
Crypto Taxation Under Box 3
Similar to Box 1, the tax is imposed on investments, savings, and other assets under this section. Box 3 is related to the net worth of taxpayers; therefore, the tax rate remains the same, i.e., a flat rate of 31% on all the deals. This means all taxpayers are liable to pay the fixed value irrespective of their income.
A deductible debt can be paid through the income for which the taxes are not paid so that the amount of tax that needs to be paid gets reduced. Therefore, this debt can reduce the payable tax rate and bring up to tax-free €50000 per tax year.
The annual tax calculation in the Netherlands is calculated from January 1, and the taxpayers are requested to report all the necessary documents of the asset, investment, mutual fund records, and crypto investments for the financial year. The current value of the cryptocurrencies held by the taxpayer on January 1 is considered while calculating the net wealth worth.
Special Considerations For Crypto Activities
Unlike other forms of asset taxation, cryptocurrencies have special considerations depending on the type of crypto mining hobby or business, the expenses that have got along with the income generated, and a few taxes which are tagged along like – airdrop and hard fork, staking, leading, and HOLding taxes.
Mining Tax: Hobby vs. Business
If an individual is a hobby miner, they are subject to paying tax as per the tax rates under Box 1. But if a person is not making a consistent profit, the income generated can be subjected to net wealth tax and pay a taxable rate of 31% under Box 3.
In contrast, if a person is a business miner, they are liable to pay tax under the category – Box 3. However, if the profit generated through the business is not satisfied or there are more expenses than income, the tax can be reduced and paid under Box 1.
Airdrop And Hard Fork Tax
When a crypto developer transfers free cryptocurrency into your account as tokens or coins, it is called an airdrop. Forking in the blockchain is a condition where the chain diverges into two or more to increase the transactions per second. Forking is performed in two ways, i.e., soft and hard forks.
Under both scenarios, a transaction and coins are dropped in your crypto wallet. However, the major difference lies in how they operate- A hard fork occurs when there is a split in the blockchain; this creates two paths, i.e., one with the new chain and the other with the old.
On the other hand, an airdrop occurs when a new cryptocurrency token is deposited directly into users’ wallets. If a virtual currency forks into two, an airdrop may send the new cryptocurrency straight to users’ wallets.
All the above transactions are subject to a capital gain; the taxpayers are liable to pay tax under Box 3 at the flat rate of 31%.
Staking Tax And Reporting
Staking is the process in which people own cryptocurrency to generate passive income by becoming a transaction validator and earning rewards for validation. The staking is done by a “proof of stake.”
In this method, people who own crypto offer a certain amount to the blockchain network as collateral, AKA stake. The person who stakes it can become a validator for a group of transactions known as a block.
Every time a block is added to a blockchain, rewards are given to the transaction validator as cryptocurrencies. This process is similar to investing in a high-yield savings account. Once a person stakes crypto, they earn a passive income higher than a high-yield savings account. Therefore, staking currencies are subject to capital gain.
As usual, staking rewards are considered a major income and are subject to taxes under Box 3. These rewards are added to the person’s assets and investment, and that person must collect all the rewards staked upon and report them annually.
Lending Tax And Asset Management
Lending is similar to staking, but this involves DeFi (decentralised finance) platforms where crypto can be lent and made profits. Companies such as Blockfi lend one form of crypto to another, i.e., Bitcoin to Ethereum. Lending cryptocurrency is also a form of asset management.
Example:
For instance, let’s assume an individual lent crypto worth $1000 to Blockfi. Blockfi pays 4% interest annually on the crypto deposit, and they can lend the same to another third party with a higher interest rate of 8%, which is a capital gain.
These lending and asset management are subject to taxes under Box 3, where the cryptocurrency being lent is taxable at the flat rate of 31% annually. The current value of the type of cryptocurrency lent is considered while calculating the net wealth worth.
HODLing Tax And Wealth Tax Calculation
Sometimes, the cryptocurrency is just lying as an asset, and no profit, investment, or trading is performed. This condition is termed HODLing – one must pay tax for having crypto as an asset. Holding these crypto affects the taxation while calculating the net wealth tax under Box 3.
If any such assets are held in your account on January 1, they are also considered for annual wealth tax calculations, even if no trading was done during the year.
Dealing With Scams, Theft, And Losses
As per the regulation of Box 3, the crypto-owned on January 1 is subject to be taxed even if the currency is stolen or lost hereafter. Since the value of the crypto owned is included in the wealth tax calculation, even if there is a change in the value of a currency due to market fluctuations, nothing affects the net wealth worth.
Gift Tax For Cryptocurrency
Cryptocurrencies can be exchanged between individuals as gifts and are liable to Gift tax. According to the Dutch Ministry of Finance, gifts received from an individual in the form of money, assets, or property, including cryptocurrency, are subjected to a tax called ‘Schenkbelasting,’ translated as gift tax.
Can You Gift A Cryptocurrency?
Yes, but there are a few pointers to note before gifting. The receiver should be in the country where the cryptocurrency conversion is enabled. Crypto can only be sent to the receivers through an email address. Since crypto gifts cannot be reversed if sent to an active email ID, double-check the ID before sending.
Since gift tax does not fall under any of the three boxes, the taxable amount to be paid depends on the relationship between the giver and the receiver. For instance, if the gift is exchanged between the spouse or registered partners or between the parent and the child, the first €6,250 is tax-free, and anything above that is taxed depends upon the value of the gift.
When gifts are exchanged between two individuals, like friends, the first €2244 is tax-free, and taxes at a rate of flat 30% are added above this price.
New Tax Calculation Method Explained
The Dutch Ministry of Finance has devised a new method of calculating taxes from 2023. The changes are mostly made for Box 3, where the tax is calculated on the net wealth of an individual and the sources of income like savings accounts, mutual funds, cryptocurrencies, etc.
The new method is designed so that the actual return on investment is expected to give a more accurate assessment of tax liability. Until 2022, the new method was being implemented, and people had a choice between the new or old methods. But as of 2023, all are subject to following the “New Tax Calculation Method.”
New Method
The new method uses the actual value of the assets that one has declared in the tax return rather than assuming value. Here, the tax authority uses fictitious rates closer to the actual savings and investment rates.
The income from savings and investments is calculated based on return per type of asset, calculated using the rates of return provided in the tabular column. This is followed by adding the return on savings to the return on investment and reducing the total with the return on deductible debts.
The next step is to calculate the assets by adding all the types of assets an individual declares in tax returns minus the debts.
To calculate the rate of return, divide the calculated rate of return by the assets and multiply the results by 100%. In the end, you need to multiply the rate of return by your share based on savings and investment to generate your income from these.
After calculating your income through this method, you are liable to pay 31% of tax as per Box 3; this is your final tax rate according to the new method.
Type of Asset | 2022 Income Rate of Return |
Savings | 0.00% |
Investments/ Other assets | 5.53% |
Debts | 2.28% |
Non-Taxable Crypto Transactions
The Netherlands takes a unique approach to crypto taxation, specifically focused on “fictitious gains” rather than realised gains. This results in several non-taxable transactions for individuals classified as private investors. Here’s a breakdown:
1. Buying Crypto With Fiat And Digital Assets
Buying crypto with fiat currency (EUR) is not taxable. Exchanging one digital asset for another (crypto-to-crypto) is also not taxable. This applies regardless of the platforms used.
2. Crypto-to-Crypto Transactions
Swapping, converting, or exchanging one cryptocurrency for another is exempt from capital gains tax. This includes using decentralised exchanges (DEXs) or centralised platforms.
3. Selling Crypto and Tax Implications
It doesn’t count as a taxable event if you sell or get rid of your cryptocurrency and you’re not doing it as part of a job involving cryptocurrencies. Instead, any profits you make from getting rid of cryptocurrency are part of your overall wealth. This means they can be taxed under the Dutch wealth tax, also called Box 3.
But, if you’re professionally working with cryptocurrencies, you must pay income tax on any profits you make from trading them.
4. Transfers Between Wallets
Moving your crypto between wallets you own, regardless of platform or type (custodial vs. non-custodial), is not taxable. This applies to transferring funds to cold, hardware, or exchange wallets.
5. Donations To Registered Organisations
Donating cryptocurrency to registered charities or organisations with a valid ANBI (Algemeen Nut Beogende Instellingen) status is tax-deductible. Donation is deducted from your taxable income, reducing your overall tax burden.
Reporting Crypto Tax In The Netherlands
Cryptocurrency taxation is dynamic and complicated, requiring careful thought and forethought. To minimise taxes and avoid trouble with the law, it is important to understand the tax implications and follow the rules, whether you are a private investor or a professional in cryptocurrency.
Tax Planning For Crypto Investors
Before the end of the year, private investors should analyse their portfolios and determine the market values of each cryptocurrency. Adjustments could be required to reflect market prices accurately. Selling cryptocurrencies or NFTs before December 31 enables investors to realise gains or losses tax-free in uncertain market value.
Transparency And Tax Compliance
Blockchain explorers can disclose transaction information, dispelling the myth that cryptocurrency transactions are confidential and anonymous.
Eventually, even wallets without KYC (Know Your Customer) verification may communicate with KYC-verified accounts, connecting transactions to taxpayers’ identities. AnChain, Chainalysis, Coinfirm, and Crystal are forensic tools offering comprehensive information for tracking blockchain transactions.
Tax authorities gather data on cryptocurrency transactions, including the Belastingdienst. It’s essential to preserve correct records, and caution is suggested. Since deliberate tax evasion is illegal, cryptocurrency transactions must be transparent.
Tax Due Dates And Submission
The tax year begins on January 1 and ends on December 31. Taxpayers must file their taxes by April 30 of the subsequent year. For the tax year 2023, the MijnBelastingdienst online tax portal typically opens on March 1, enabling taxpayers to start filing their declarations. You must submit your taxes before May 1.
Guidelines For Recordkeeping
It is crucial to keep thorough records of all Bitcoin transactions for at least five years to guarantee compliance and confirm the accuracy of tax returns. Tax officials may seek records at any moment, and there are penalties for not providing them. It is advised to keep the following records for an unlimited period:
- Wallet Locations: Keep track of the taxpayer’s transactions in hot or cold cryptocurrency wallet addresses.
- Data on Transaction History: Save transaction history information from wallets and exchanges.
- Records of Fiat Currency: Keep records or account statements that reflect the deposits and withdrawals of fiat money.
Tips For Minimising Crypto Taxes In The Netherlands
Since cryptocurrency is viewed as an investment, Dutch taxpayers may be incentivised to convert their cryptocurrency holdings to fiat, i.e., converting into a government-backed currency like EUR and USD at the end of the year to reduce their tax liability. Cash savings yield a return of 0.01%, while cryptocurrency investments yield a return of 5.53%.
Nevertheless, given the well-known volatility of the cryptocurrency markets, Dutch cryptocurrency owners might decide to pay the tax on their holdings rather than miss a profitable market move.
There is always another option: if a professional trader is not making good profits, the taxation can be changed from Box 3 to Box 1, i.e., considering the capital gain as primary income.
KoinX In Action
KoinX is a tool that compiles and tracks the details of crypto transactions and calculates and creates tax reports. This tool also provides features like – Seamless Integration, compliant tax reports, portfolio insights, and security.
Over 17000 cryptocurrencies and tokens are supported by this tool, and these tokens are used live in markets to calculate profit or loss. Whether you’re a hobby or a business trader, KoinX simplifies the crypto tax calculation according to the crypto tax regulations in the Netherlands.
KoinX can auto-classify the type of transaction, which aids in easing and accurately generating tax reports so that a person can submit these on January 1 for the tax calculation of every financial year.
Conclusion
The crypto tax concept in the Netherlands is easy to comprehend and calculate if a person understands the taxation categories, i.e., Box 1, 2, and 3, especially Box 1 and 2 of the Dutch Ministry of Finance.
To make it easier, tools like KoinX can come into the picture, automating the process of compiling, saving, and generating reports of taxes. Using KoinX is highly recommended whether an individual is a professional or a hobby trader.
Frequently Asked Questions
Here are some of the most asked questions about crypto taxes in Netherlands.
Should I Pay Tax On Crypto In The Netherlands?
Yes, crypto is taxed as an asset; therefore, taxes are paid on the type of trader a person is and the income generated through trading crypto. Crypto tax in the Netherlands is calculated based on the Dutch Ministry of Finance regulations.
What Is The Difference Between Boxes 1, 2, and 3?
The Box 1, 2, and 3 are categories under which a person is liable to pay taxes. For instance-
- Under Box 1– The person is taxed based on the primary source of income – income generated by employment, rental, freelance, and self-employment.
- Under Box 2– Taxed on an individual based on the income generated through the sustainable shares held in a company.
- Under Box 3– Here, the tax is calculated on the source of income, such as savings accounts, mutual funds, and investments, including cryptocurrencies.
What Is The Difference Between The Old And New Methods Of Tax Calculation?
The old method of crypto taxation in the Netherlands was calculated depending on the assumed return of capital from an investment. The new method is designed so that the capital of return is calculated accurately, unlike the assumption in the old method.
Once the capital of return is calculated, the flat rate of 31.6% is imposed as the tax rate according to Box 1.
Should I Pay Taxes On Crypto Even If I Don’t Make A Profit?
Yes, there is a concept called “HODLing tax,” even if a person has not generated any income or invested in crypto, they are liable to pay tax for ‘Holding’ the cryptocurrencies. This is because crypto is considered an asset, and these assets are included when calculating the net wealth tax calculation, according to Box 3.
