Cryptocurrency Taxation

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Taxation of Cryptocurrency

In recent years, buying and selling cryptocurrency, whether in the form of Bitcoin, Ethereum, or another type of cryptocurrency, has become very popular. When it comes to taxation of cryptocurrency in Denmark, it is important to understand the applicable rules and guidelines to avoid potential legal issues and ensure the correct calculation of tax. Below is an overview of key points to pay special attention to:

Calculation of Gains and Losses‍

As a general rule, cryptocurrency (e.g., BTC, ETH, etc.) is taxed according to the realization principle. This means that taxation occurs only when the cryptocurrency is sold. Gains are taxed as personal income, while losses can be deducted as itemized deductions. The calculation of gains and losses must be made for each cryptocurrency. The calculation is based on the FIFO principle (First in, First out).

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Exchanging/Converting Between Cryptocurrencies

‍Exchanging between cryptocurrencies is treated as buying and selling for tax purposes. This means that if you exchange/convert Bitcoins to Ethereum, it will be considered a sale of Bitcoin and a purchase of Ethereum.

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Cryptocurrency as Stablecoins‍

There are countless cryptocurrencies, and they are not treated the same for tax purposes. It is therefore important to investigate the specific cryptocurrency you have invested in. Stablecoins resemble financial contracts and are taxed on their annual returns.

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Rewards‍

If you receive cryptocurrency as payment, the value at the time of receipt must be calculated and taxed as personal income.

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Reporting and Documentation to the Danish Tax Authorities (SKAT)‍

It is crucial to report your cryptocurrency transactions correctly to SKAT. Failure to report, or incorrect reporting, to the Danish tax authorities can result in fines and unpleasant adjustments. We ensure that your income and deductions are correctly reported.

It is essential to maintain thorough documentation of all your cryptocurrency transactions. This includes purchases, sales, conversions, rewards, and the use of cryptocurrency. The documentation must include details such as dates, quantities, exchange rates, and the purpose of the transaction. This documentation should be kept as SKAT may request to review it during a potential audit.

New EU agreement on reporting cryptocurrency transactions

What’s new is the agreement that, from 1 January 2026, the EU will automatically report to the tax authorities.

Going forward, the Danish Tax Agency (Skattestyrelsen) will automatically receive all data on purchases and sales, transfers, and payments made with cryptocurrency — including transactions carried out via foreign platforms. The first exchange of data between countries will take place in 2027, covering transaction data going back to 1 January 2026.

Contact Us‍

Do you have questions about cryptocurrency taxation or need assistance navigating the complex tax rules? Our team of tax experts is ready to advise you.

Frequently Asked Questions (FAQ) about crypto taxation

What is cryptocurrency, and what is the difference between crypto assets, stablecoins, staking, and mining?

Cryptocurrencies such as Bitcoin and Ethereum are typically taxed under the realization principle pursuant to the Danish State Tax Act.
Stablecoins that are pegged to a fixed currency (e.g., USDT) are often treated as financial contracts and taxed under the Danish Capital Gains Tax Act.
Staking rewards and mining income are taxed as personal income.

Why are crypto assets treated under the Danish State Tax Act?

Investments in most cryptocurrencies are considered speculative, because the acquirer is expected to buy with the intention of making a profit.
Gains are taxed as personal income, while losses can only be deducted with limited value.

When are crypto assets taxed – and are the rules the same for all types?

As a general rule, taxation occurs under the realization principle, i.e., upon sale or conversion.
Stablecoins are taxed as financial contracts under the mark-to-market principle, where annual increases and decreases in value are included.
This means that not all crypto assets are treated the same for tax purposes.

When can you avoid taxation on cryptocurrency?

Only in very special cases, where the intention to speculate can be disproved, is the sale of cryptocurrency tax-free.
However, this is very difficult to document, and in practice almost all trades are considered taxable.

What is the FIFO principle, and what does it mean for your trading?

FIFO means “First In, First Out,” where the first cryptocurrencies purchased are considered the first sold.
You must calculate each crypto asset separately.

You may offset gains and losses on the same crypto asset, as long as there are no subsequent purchases between the sales and the gain-generating sales occurred in the same income year as the loss-generating sales.
Otherwise, you must calculate gains separately and calculate losses separately.

Do foreign wallets also have to be reported in Denmark?

Yes. If you are fully tax liable in Denmark, all your crypto assets – including those held in foreign wallets – must be reported to the Danish Tax Agency.
The same rules apply to gains, losses, and conversions, regardless of where the assets are held.

How is a conversion from, for example, Bitcoin to Ethereum taxed?

A conversion is treated as a sale of Bitcoin and a purchase of Ethereum.
Any gain on Bitcoin is taxed as personal income.
Upon conversion, Ethereum receives an acquisition value equal to the sale value of the converted Bitcoin.

What should you do if you receive a proposal from the Danish Tax Agency to increase your income?

It is important to respond to the proposal quickly. You normally have two weeks to submit comments.
If a decision is issued, you have three months to appeal to the Danish Tax Appeals Agency.
Often, it can be worthwhile to seek professional assistance to ensure the correct outcome.

If you appeal a decision to a higher authority, you may have part of your legal costs covered by the state corresponding to 50% of the costs, regardless of whether you win your appeal.
If you win to a significant extent, you may have all legal costs covered.

SkatteInform can help with crypto taxation

SkatteInform can help with calculating crypto sales, correctly reporting gains/losses on your crypto, advising on the different types of crypto, and handling tax cases against the Danish Tax Agency.
We ensure that you neither pay too much nor risk unnecessary penalties.

Disclaimer

‍The above information is for guidance purposes only, and we accept no responsibility for decisions made based on this information without prior individual advice. We accept no responsibility for errors or omissions.