Denmark is considering taxing unrealized gains on crypto assets to reduce the difference in tax treatment between digital assets and traditional asset holders.
Denmark is looking to tax unrealized cryptocurrency gains
Danish Tax Law Board Released A comprehensive 93-page report outlines several recommendations regarding the tax treatment of digital assets.
The main theme of the report is ensuring that holders of digital assets are treated similarly to holders of traditional assets such as stocks, real estate and precious metals.
Among other recommendations, the report calls for legislation that would impose taxes on unrealized gains or losses on digital assets held by Danish citizens. Specifically, the proposed legislation would impose a 42% capital gains tax on unrealized gains.
If passed, the law could be enacted as early as January 2026. It would require Danish investors to pay taxes on their Bitcoin (BTC) and other holdings from the date of acquisition, regardless of whether they sold their assets or not.
The Danish Tax Law Board explains that the proposed legislation is part of a broader effort to eliminate “unfair treatment of cryptocurrency investors.” Commenting on the proposal, Danish Tax Minister Rasmus Stocklund said:
Over recent years, there have been examples of Danes who invested in crypto assets being hit with heavy taxes. The council’s recommendations could be a way to ensure more reasonable taxation of cryptocurrency investors’ gains and losses.
Notably, the proposed tax regime envisions a three-tier tax system for digital assets – namely capital gains tax, inventory tax, and loss write-off.
As previously mentioned, the capital gains tax aims to bring digital assets in line with the tax treatment of traditional assets by imposing a 42% tax rate on unrealized digital asset gains.
The inventory tax aims to make cryptocurrency investors pay taxes on their entire portfolio through a set of data each year, regardless of whether they have sold any assets or not.
Finally, loss write-offs will relieve taxpayers by allowing them to write-off losses on profits in order to reduce their overall tax liability.
The newly proposed tax laws are consistent with Denmark’s position on digital assets. In 2022, the Danish Supreme Court Issued It is a landmark ruling that states that individuals who profit from sales of digital assets, whether acquired through donations or purchases, will be subject to strict tax policies.
Tax treatment of digital assets around the world
Denmark’s decision to simplify taxes on cryptocurrencies mirrors actions taken by other countries. For example, Italy recently Announce It was considering increasing the capital gains tax on cryptocurrencies from 16% to 42%.
Likewise, in August 2024, New Zealand Govt foot A draft law defines new controls and measures to ensure high tax compliance among crypto-asset owners.
In Japan, opposition party leader Yuichiro Tamaki did just that a promise Tax cuts for cryptocurrencies if elected to power. Bitcoin is trading at $67,486 at press time, up 2.1% in the past 24 hours.
Featured image from Unsplash.com, chart from TradingView.com