Denmark crypto tax crackdown gathers pace

Denmark Crypto Tax Crackdown

27th December 2019

Denmark, a country we’ve written about many times before, is a premier location for international contractors. Listed as having the best work-life balance worldwide in the OECD Better Life report, it’s no surprise the country is a popular destination.

However, at the same time, Denmark is getting tougher on tax and compliance. Recently, the Skattestyrelsen, the Danish tax authority, has sent letters to cryptocurrency users that it suspects of tax avoidance, demanding a range of information about their trading activities.

Denmark is just one of many nations cracking down on taxing digital currencies as part of a wider push towards tougher tax systems. Here’s what contractors need to know about the crypto tax crackdown in Denmark.

Crypto tax crackdown: A new approach

In these letters, the tax authority in Denmark has asked recipients to amend previous tax returns based on crypto activities and warns of penalties for non-compliance. The agency recently received permission to obtain data on the Danish users of three exchanges earlier this year, ultimately collecting information on around 20,000 individuals.

Crypto users have been asked to provide information on profits and losses from 2016-2018, including crypto-to-crypto trades. Respondents must also provide the rates at the time of the trades and the purpose of the transactions. Other required information includes proof of wallets created, bank statements and a statement of current holdings.

The crypto tax crackdown in Denmark echoes the actions of the U.S. Internal Revenue Service, which in August sent similar letters to crypto traders. Recipients had 30 days to respond, but were able to disagree with the assessment. Since then, the IRS has updated the primary income tax form for individuals to include a question about cryptocurrencies.

World-wide crackdown

However, it’s not just Denmark that is enacting a crypto tax crackdown. On our blog, we have covered the actions of several countries as part of the push towards tougher global tax compliance systems:

  • Australia has been targeting cryptocurrency tax avoidance as part of the J5, an international group formed to prevent transnational tax crime, made up of experts from Australia, Canada, the Netherlands, the United Kingdom and United States. According to reports, the group has been extensively sharing data in order to pursue 60 investigations since its launch in 2018.
  • Despite Brazilian president Jair Bolsonaro claiming he ‘did not know what a bitcoin was’, Brazil have also introduced cryptocurrency tax laws that stipulate that any cryptocurrency exchanges in the location will now have to be reported to the Department of Federal Revenue of Brazil (RFB).
    Once the rules come into force, the RFB will be able to solicit a wide range of information on anyone suspected of tax evasion, including: all types of transactions, personal info of users, value of the transaction and the service fees charged.
  • In Poland, the government took a hard stance against cryptocurrency, pushing for mandatory cryptocurrency tax on all transactions. This was met with widespread disdain, leading to redrafted legislation which stipulates that crypto-to-crypto transactions will not be taxed. For all other cryptocurrency assets, there will be a tax rate of 19%. When someone makes income with a cryptocurrency sale, it will be treated like regular income.

Contractors need to be aware

Ultimately, the world of international tax and compliance is getting far more complex. With governments using cutting-edge technology and diligently chasing lost revenue – the chance of a small tax oversight leading to huge ramifications is higher than ever.

Therefore, contractors looking to make the move to Denmark should be aware of not only the crypto tax crackdown, but also the general compliance landscape in the country. Remaining on the right side of the law can be tricky, but it shouldn’t put you off accepting an opportunity. Why not let the experts handle your legislative concerns instead? Speak to our team today:


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