As soon as you qualify as an entrepreneur for tax purposes, you will have to deal with all kinds of tax levies. And when you qualify as an entrepreneur for turnover tax, this does not automatically mean that you are also an entrepreneur for income tax. The tax system for entrepreneurs can therefore quickly become complicated. When you accept bitcoin as an entrepreneur, you should therefore pay close attention to the possible consequences for taxation. The main consequences are described below.

sales tax

In principle, entrepreneurs must file a turnover tax return every month or every quarter. Depending on the performance of the entrepreneur, 0%, 9% or 21% sales tax must be paid. The turnover tax is calculated on the basis of the turnover in euros. The tax must also be paid in euros. This means that there is an exchange rate risk if you do not immediately convert part of the received bitcoin into euros. A possible exchange rate change is not relevant for turnover tax purposes.

Income tax and corporate tax

In addition to turnover tax, the Netherlands also has taxes that are levied on the basis of the company’s profit. Depending on the legal form in which the company is operated, the profit is taxed in income tax or corporate income tax. Corporate income tax has a link to income tax. This ensures that both taxes are based on the so-called good business practice. Good business practice means that the company must determine the annual profit as a good tradesman would do. It is assumed, among other things, that a good merchant takes losses as soon as they occur and profits only when they are certain, the principle of prudence.

The above is important for how any exchange rate developments should be included in the tax return. Unrealized price gains on the received bitcoin do not have to be recognized as profit. After all, these are not yet certain. At the same time, (unrealised) exchange losses must be included in the tax return. After all, as a good merchant you have to be careful. This does assume that the bitcoins remain in the company during the year.

Exchange rate risk in Income tax and Corporate tax

There therefore appears to be no direct currency risk for income tax and corporation tax. This is not quite the case. There is also a period between the end of the fiscal year and the actual payment of the assessment. The entrepreneur must first submit the tax return and then the Tax and Customs Administration must issue an assessment, after which it must be paid. Normally this process will take several months. In these months there is also an exchange rate risk since the final assessment must be paid in euros. If the price falls during this period between the end of the fiscal year and the payment of the final assessment and you do not have enough euros to pay the assessment, you may have to sell bitcoins with a price loss. This may increase the effective tax burden. However, this (realised) exchange rate loss is deductible in the fiscal year in which the tax is actually paid.

Each case may have a different tax effect. This article only outlines some of the possible consequences that accepting bitcoin can have. You should contact a tax consultant for advice on your situation.