Reporting your cryptocurrency taxes in Denmark can feel like a nightmare.
Cryptocurrency’s unique properties make tax reporting a challenge for investors all around the world. In addition, the Danish Tax Agency (Skattestyrelsen) has not yet provided guidance on how various crypto transactions are taxed.
In this guide, we’ll break down everything you need to know about how cryptocurrency is taxed in Denmark. By the time you finish reading, you’ll learn how different transactions are taxed, how to calculate your gains and losses, and how to report your cryptocurrency transactions on your taxes in minutes.
In Denmark, cryptocurrencies are considered personal assets rather than currencies like the Danish Kroner or the Euro.
As a result, profits from the sales and disposals of cryptocurrencies are subject to income tax, not capital gains tax.
Personal assets like cryptocurrencies are subject to income tax if one of the following conditions are true.
In most cases, investors acquire crypto-assets with the expectation of a future return. As a result, cryptocurrency is subject to income tax in the vast majority of cases.
If you believe that your crypto-assets don’t fall into the ‘speculative asset’ category, you must provide evidence that you acquired your crypto without the intention to make a future profit.
In Denmark, income from cryptocurrency and other sources are subject to the following tax.
All Danish tax residents are required to pay bottom bracket tax on their first 552,000 DKK income.
If you make more than 552,000 DKK of income, you’ll be required to pay 15% tax on all your income above that threshold.
Local taxes include municipal tax and labor market tax.
Your municipal tax varies depending on where you live in Denmark — for the 2022 tax year, the average municipal tax is 24.982%.
The labor market tax is a flat 8% rate.
If you’re a member of the Danish State Church, you’ll pay an additional Church Tax on your income from cryptocurrency and other sources. While church tax varies depending on your municipality, the average Church Tax is around 0.70%.
Including all the tax rates listed above, it’s been estimated that the average Dane pays an effective income tax rate of 37%. This may vary depending on your municipality and your income level.
To calculate your gains and losses from crypto, you can use the following formula.
In this case, your cost basis is how much you paid to acquire your cryptocurrency (including fees related to acquisition). Meanwhile, your proceeds are how much you received for disposing of your cryptocurrency (including fees related to disposal).
To better understand how this works, let’s take a look at an example.
Because cryptocurrency transactions are pseudo-anonymous, many investors assume that tax agencies cannot track cryptocurrency gains, losses, and income. This is a myth.
In the past, the Danish Tax Agency (Skattestyrelsen) has requested and received information from cryptocurrency exchanges — including trades, names, addresses, and central person registration (CPR) numbers.
In addition, it’s important to remember that transactions on blockchains like Ethereum and Bitcoin are publicly visible. Tax agencies around the world use data matching to match ‘anonymous’ wallets to known individuals.
While there’s no legal way to evade your cryptocurrency taxes, you can use the following strategies to legally reduce your tax bill.
Individual taxpayers over 18 receive a tax-free allowance of 46,700 DKK. If your full allowance is not used, you can transfer your allowance to your spouse.
30% of the value of your cryptocurrency losses can be used to offset gains.
There may be some circumstances where you acquired cryptocurrency without the intention to make a profit. If this is the case, your transactions are tax-free. You can petition the Danish Tax Agency to assess your individual investments.
The following transactions are tax-free in Denmark.
If you’ve bought your cryptocurrency at multiple price points, you can use the first-in first-out (FIFO) method to calculate your capital gains and losses. That means that the first units of cryptocurrency that you acquired are also the first units that you dispose of.
Buying cryptocurrency with fiat currency like the Danish kroner is considered tax-free.
However, you should keep careful records of your cryptocurrency purchases so that you can calculate your gains and losses in the case of a future disposal.
There is no tax for simply holding cryptocurrency. You’ll only be taxed on your gains if you dispose of your cryptocurrency.
When you sell cryptocurrency, you recognize income based on how the price of your crypto has changed since you originally received it.
Trading cryptocurrency for other cryptocurrencies is considered a taxable disposal. If the price of the cryptocurrency you’re trading away has gone up since you originally received it, you’ll recognize income subject to income tax.
You’ll recognize income or capital gains depending on whether you’re classified as an investor or a trader.
Transferring crypto between different wallets that you own is considered tax-free.
However, you should keep careful records of the original cost basis of your cryptocurrency so that you can calculate your capital gains and losses in the case of a future disposal.
Capital losses can partially offset your capital gains for the year. In Denmark, 30% of the value of capital losses can be used to offset capital gains.
Cryptocurrency mining rewards are considered income. You’ll pay income tax based on the fair market value of your crypto at the time of receipt.
If you dispose of your mining rewards in the future, you’ll be taxed depending on how the price of your crypto has changed since you originally received it.
The Danish Tax Agency has not put out any guidance on how cryptocurrency staking is taxed.
In most countries, crypto earned through staking is taxed as income based on its fair market value at the time of receipt. It’s likely that Denmark will take a similar approach to taxing staking rewards.
If you dispose of your staking rewards in the future, you’ll be taxed depending on how the price of your crypto has changed since you originally received it.
At this time, the Danish Tax Agency has not put out guidance on how airdrops are taxed.
It’s likely that airdrops will be taxed as income based on the fair market value of your cryptocurrency at the time of receipt.
If you dispose of your airdrop rewards in the future, you’ll be taxed depending on how the price of your crypto has changed since you originally received it.
At this time, the Danish Tax Agency has not put out any guidance on how DeFi is taxed. It’s reasonable to assume that DeFi transactions will be subject to the same rules as other cryptocurrency transactions.
Many DeFi protocols utilize unique transaction structures that make it difficult to tell whether an earning event or disposal occurred. If you have questions about a specific DeFi transaction or protocol, you should reach out to your tax professional.
It’s recommended that you keep records of the following information in case of a cryptocurrency tax audit.
To accurately report your cryptocurrency taxes, you’ll need to calculate your gains, losses, and income from your transactions. You can do this manually or through crypto tax software.
If you wish to calculate your crypto taxes yourself, you can follow the process below.
It’s important to remember that this approach requires serious effort— especially if you’ve used multiple wallets and exchanges during the tax year. In this case, it may be difficult to track your cost basis and calculate your gains from disposals.
Step 1: Import your transactions from your exchanges and wallets.
Step 2: Watch the platform calculate your income and capital gains.
Step 3: Generate your tax report!
You don’t need to rely on spreadsheets to file your cryptocurrency taxes. CoinLedger is designed to simplify the process!
Try CoinLedger today and see for yourself why more than 300,000 investors around the globe use the platform to take the stress out of tax season!
This guide breaks down everything you need to know about cryptocurrency taxes, from the high level tax implications to the actual crypto tax forms you need to fill out.
Everything you need to know about DeFi taxes as they relate to lending, borrowing, yield farming, liquidity pools, and earning.