The tax authorities of Denmark recently sent letters to over 20,000 cryptocurrency investors in the country asking them to file their tax returns. The regulator has asked them to pay taxes on gains on cryptocurrencies or get ready to face penalties.
What does the tax agency demand?
The Danish tax authority, Skattestyrelsen, asked crypto investors to amend tax returns of previous years and add their crypto gains as well. They want a complete breakdown of cryptocurrency transactions made by these individuals. The agency received information about thousands of individuals from numerous local exchanges. Koinly, a Swedish crypto tax company, recently posted a copy of the letter on its website this Monday.
It said that the letters were sent out in the last 2 weeks. The authority has asked the investors to amend their tax reports by December 15, or it will start imposing penalties. Koinly CEO Robin Singh said,
“Many of our Danish users have received these letters, Skat is asking for a full breakdown of all their transactions and asking them to fix all past reports as well.”
He said that filing taxes on crypto trades is not easy because a trader may have several accounts on exchanges and may have an even higher number of wallets. Figuring out capital gains on their crypto holdings is thus very difficult. The tax agency said that this is the first time it has acted in the crypto sector after the tax council, Skatterådet, announced its jurisdiction over local crypto exchanges. It also gave the agency the right to get information about crypto traders from the local exchange. The information about 20,000 people was acquired in August.
What does it cover?
The information contains details of all crypto transactions made between January 1, 2016, and December 31, 2018. This time period includes the crypto boom of late 2017 and the crypto winter of 2018. Skattestyrelsen noted that it has data including “information such as names, addresses, social security numbers and possibly CVR [business registration] information,” of crypto traders.
The Danish tax agencies consider Bitcoin and digital currencies as speculations, acquired for the sake of making a profit. Therefore, the crypto investors become liable to disclose their profits and losses to the country’s tax authorities. Interestingly, the Internal Revenue Service (IRS) of the United States also sent letters to crypto investors after receiving their information from a local crypto exchange. However, the Danish authorities have provided investors with a much shorter timespan to amend tax returns compared to the US.