Denmark is looking to reconcile its cryptocurrency and financial industries, as the government is hoping to attack industry performers who are defrauding it.
According to sources familiar with the matter, Skattestyrelsen (Skat), the tax agency for the Scandinavian country, has begun to send letters to crypto traders, asking them to provide full details of their cryptocurrency transactions.
In a report on the matter, European crypto tracking and tax compliance startup Koinly claimed that Skat had specifically asked crypto traders on its platform to provide details on their profits and losses from 2016 to 2018, using the FIFO (First in First Out) principles.
Full Information on Trading and Exchange Activities
The FIFO principles are a method of inventory calculation in accounting, which assumes that goods are either consumed or sold in the same chronological order that they were purchased. In addition, Skat also reportedly asked traders to disclose the exchange rates that they used while conducting each transaction, and documentation on the creation of their crypto wallets and information on why they acquired digital assets.
As for crypto exchange services, Skat also requested that customers should reveal a concrete evidence of their trading activities in the form of a screenshot showing their details and evidence of account creation. The tax agency also wants to examine account statements from crypto traders’ bank accounts throughout the period in consideration
Speaking with industry news medium Cointelegraph, Koinly founder Ruben Singh explained that the tax authority is looking to get a complete breakdown of traders’ activities, and is inviting as many people as it can to ensure complete compliance.
“Filing tax on cryptocurrency trades is a difficult task as crypto traders usually hold several exchange accounts & wallets and freely transfer crypto between them, so there’s no easy way to figure out what the capital gains are for any particular trade,” he added.
Another Box Checked for the Industry
Denmark is the latest country to step up plans to tax cryptocurrency activities, signifying yet another step in progress being made by countries with their recognition of the fledgling asset class.
On December 9, The Korea Times reported that South Korea’s Ministry of Economy & Finance is currently in the process of drafting a bill that will essentially allow the government to tax capital gains on crypto transactions. The report adds that the Korean National Assembly is also working on advancing a separate bill, which will help improve the level of transparency viz a viz crypto trading activities in the country.
Industry insiders have voiced their concerns about this; however, as they believe that the measures proposed by the authorities could affect their ability to trade anonymously. Regardless, there are several concessions that will need to be made to bring cryptocurrencies into the financial landscape, and since the bills haven’t been adopted yet, it is still possible to lobby lawmakers to make amendments to it.
Regardless, it’s a step forward in the right direction.