Tax on crypto. Learn how much tax you pay on crypto
This article discusses tax on crypto, related to investing in crypto. Should tax be paid on crypto at all and if so, how much? How does the entire process around this work and what is involved? In this article, we answer all questions regarding this topic.
Tax in the Netherlands
The Netherlands is known as a welfare state. In short, this means that the state is responsible for the citizens of a country. In the Netherlands, we all have the right to health care, education, employment and social security. In order to finance this, we are all obliged to pay tax.
Do you pay tax on crypto?
Yes, if you are above a certain amount of capital, you have to pay tax on your capital in crypto. As an investor it is therefore important to have the right insights into how the tax authorities work when it comes to crypto and taxes. The tax authorities see not giving up assets in crypto as ‘disguised assets’. In short, this means that if you do not give up your assets in crypto, you can receive a hefty fine.
From what amount do you pay tax on crypto?
Tax on crypto, with a few exceptions, falls under the wealth tax in box 3. In 2021, the tax-free allowance amounted to 50,000 euros for single people. If you have a tax partner, you may jointly own 100,000 euros tax-free. If you exceed this amount, the rest of your assets are no longer tax-free. Please note: if you have minor children who are also in possession of crypto’s, this money will be added to your assets.
How much tax do you have to pay on your crypto?
You have to pay tax on the income from your assets, so this also applies to your crypto assets. The amount on which you have to pay tax is the value of your assets minus your debts and your tax-free allowance. In 2021 there were 3 tranches for calculating the fictitious return within box 3. In the table below you can see how the discs within box 3 are constructed.
|Disk||Capital from savings and investments||Return 0.03%||Return 5.69%||Average return|
|1||Up to €50,001||67%||33%||1,898%|
|2||From €50,001 to €950.001||21%||79%||4,501%|
The return on your capital is calculated as follows:
- In disk 1, a 0.03% return is calculated on the first 67% of your capital. 5.69% is calculated on the remaining 33%.
- In disc 2, a 0.03% return is calculated on the first 21% of your capital. 5.69% is calculated on the remaining 79%.
- If part of your assets fall into bracket 3, then 5.69% will be charged on that full amount.
You ultimately have to pay income tax on the calculated fictitious return. Income tax was 31% in 2021.
Suppose you own €2,100,000 on January 1, 2022 in assets The tax-free allowance for a 1-person household is €50.000. You also have no debts at that time.
How do you calculate the amount on which you have to pay tax?
|Balance on January 1, 2022||EUR||2.100.000|
|Power for box 3||EUR||2.050.000|
The amount on which you have to pay tax is therefore€2,050,000.
How to calculate the fictitious return:
|Up to EUR 50,001||1,898%||EUR||949|
|Between EUR 50,001 to 950,001||4,501%||EUR||40.509|
|From EUR 950,001||5,69%||EUR||60.231|
|Total notional return||EUR||101.689|
|Taxation Box 3||31%||EUR||31.524|
Does tax on crypto only fall under box 3 or also under box 1?
Investing in crypto via Thriven falls under box 3 by default, as it does not fall under income from other work or profit from business. Sometimes it may also be the case that investing in crypto falls under box 1, which means that it is taxed more. This is the case if a person earns income from crypto by mining coins. Read more about Bitcoin mining in a previous article of ours.
Even if you are actively working on the growth of your capital, it may fall under box 1. At that time, there is more than normal asset management. The exact turning point cannot be determined. That tipping point depends on a combination of knowledge & experience, time spent and resources purchased. Any combination of these three factors can lead to a shift of wealth from box 3 to box 1.
Tax on crypto, as was already clear above, rarely falls under box 1. In some exceptional cases it may be that it does fall under box 1, but the vast majority of crypto investors do not have to assume that.
Which crypto value should you use during your tax return?
Since the crypto market is very volatile, you should use January 01 as the reference date when completing your tax return on crypto. It is necessary to use the exchange rate on 01 January 00:00 of the relevant year. In principle you can choose which course you use. It is important, however, that you consult the same fair every year and that you keep to the same time.
Below is an example of the prices of Bitcoin and Ethereum on January 01, 2022 at 00:00. The exchanges Bybit and Binance were consulted for this.
|Exchange||Type of Crypto||Rate on January 1, 2022 at 00:00|
*On the basis of this article, we do not encourage anyone to start investing. This article is not written for advisory purposes and is not intended as any form of expert (financial, tax or legal) advice. This article is purely for conveying knowledge and information. Thriven is therefore not liable for the correctness or completeness of the articles.
** If you have any questions or are uncertainties about your tax return, we always advise you to consult an accountant or tax advisor.
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