The Tax Law Council of Denmark has proposed a bill that could see unrealized crypto gains taxed from 2026. According to the council’s 93-page report, recommendations for a uniform set of tax rules on all crypto assets are made. This proposal intends to simplify the current setup and avoid taxing Danish crypto investors unfairly.
Proposed Crypto Tax Model Treats Assets Like Stocks
The council explored three potential models for taxing crypto assets: warehouse taxation, capital gains taxation, and inventory taxation. The report ‘leaned toward recommending’ the ‘inventory taxation’ model. According to this model, an investor would view their whole crypto portfolio as if it were a single equity inventory and would pay annual taxes on unrealized gains and losses applied to the whole.
Inventory taxation for crypto assets will match the treatment of stocks and bonds. These tax rules would not be retroactive to existing crypto holdings, so they aren’t the most generous the IRS could have recommended. The new rules would apply as part of Denmark’s broader effort to modernize digital asset taxation.
Danish Minister Calls for Simplified Crypto Tax Rules
Danish Tax Minister Rasmus Stoklund said the existing profit tax system created unfair results for some investors. Based on this, he stressed the necessity for sharper and better tax regulations. Stoklund argued that the inventory taxation model would also be simpler for the Danish tax authorities and investors.
The bill is still at the proposal stage and will not be introduced to the Danish Parliament until early 2025. If and when approved, the new tax rules will not go into effect until as early as January 1, 2026. If the Tax Law Council makes those recommendations, they will be up for passage through parliament as changes before they become law.
The council also recommended new reporting requirements for crypto service providers in addition to the proposed changes to the taxes. To ensure that this compliance applies across the European Union, crypto exchanges and payment firms may be required to report customer transactions. The aim of these measures is to create transparency and prevent tax evasion in the crypto market.
As part of the global trend towards increasing crypto tax regulation, the council’s proposals are another change. For instance, the US and Italy are looking at similar policies, including pushing to tax unsold assets more, unlike Denmark, which aims to unify the crypto tax framework for all crypto assets, reducing investor and tax administrator hassle in creating taxable data.
Denmark Follows Global Trend in Digital Asset Taxation
These recommendations come as part of a larger international effort to reform the taxation of digital assets. Late last month, U.S. Democratic presidential candidate Kamala Harris made the news by endorsing a 25 percent tax on unsold assets. Another country with similar issues is Italy, which has debated raising the capital gains tax on Bitcoin holdings from 26% to 42% by 2025.
The Parliament must evaluate any laws passed after the Danish Tax Council’s recommendations. However, the final decision depends on future talks between political parties in the Folketing, Denmark’s Parliament. Minister Stoklund was optimistic that the debate next Wednesday would be a success because the country wants to bring its tax laws up to date in today’s digital age.
As Denmark considers taxing unrealized crypto gains, the country follows its peers in the murky world of digital asset taxation. This is meant to do away with simplicity and fairness without making tax liable on crypto investors and should guarantee transparency and compliance with the European Union. Watches on these crypto investors’ regulators how the outcome of these will unfold.
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