Bitcoin is a digital currency and a form of cryptocurrency that operates without a central bank or authority. All transactions are recorded in a public, decentralized ledger called blockchain.

The Danish Tax Agency (Skattestyrelsen) considers bitcoin and other cryptocurrencies as assets – not as official currency. This means that gains and losses upon disposal are generally taxable if they were acquired with the intention of making a profit (speculation) or are part of a business activity.

In practice, the Danish Tax Agency assesses that most trading with bitcoin is considered speculation, and gains must therefore be included in the income assessment. In Denmark, gains are generally taxed as personal income, and losses are only deductible as a tax deduction.

Taxation occurs when a disposal takes place – this can be:

• Sale for regular currency
• Exchange to another cryptocurrency
• When cryptocurrency is used as payment, if there is a gain

Additionally, under the rules on relocation, if the holdings are valued upon emigration.

Losses can be offset if they arise from disposal, and if the transaction falls under the rules on speculation or assets, depending on the classification.

The calculation of gains and losses must be done correctly, including with reference to purchase time and sale price.

The FIFO principle (first in, first out) is generally applied when calculating gain/loss from trading cryptocurrency, including bitcoin.

This means that the bitcoins you bought first are also considered to be the ones you sell first.

Upon immigration:
You can request a binding response to clarify how your cryptocurrency holdings should be treated for tax purposes.

Upon emigration:
The holdings are considered sold at market value on the emigration date, and any gain must be reported.

The Danish Tax Agency follows practice by issuing binding responses, decisions, notices, and guidance on how cryptocurrencies should be treated for tax purposes, including registration of trades, valuation, and documentation.

There are published decisions and binding responses, and the tax authorities can request documentation for purchase and sale dates, quantities, transaction rates, etc., during audits.

Assets such as cryptocurrencies are considered property, and taxation occurs upon realization, i.e., when there is a disposal.

Under certain circumstances, gains may be tax-free, for example:

• If the asset is inherited and the inheritance tax covers it
• If the speculation rule is not met

Binding responses show specifically that inherited bitcoins can be tax-free if the inherited assets were not acquired with speculation and meet other conditions.

You must be able to document all purchases, sales, and transfers of cryptocurrency. The transaction history must contain all transactions, purchases, sales, deposits, withdrawals, and various allocations of crypto assets.

Documentation can consist of:

• Trade receipts and confirmations
• Wallet addresses to confirm ownership
• Exchange rates on transaction dates

It is a good idea to keep all documentation regarding your cryptocurrency trades, as the Danish Tax Agency can always verify and audit tax assessments. Keep your information for up to 10 years, as the Danish Tax Agency can conduct an extraordinary reassessment.