It’s almost that time again: time for the annual tax return. Bitcoins, like many other valuable assets, are considered ‘equity’ and are therefore taxed in box 3. According to the rules, it is mandatory to declare on your tax return that you own bitcoins and if your equity exceeds certain amounts. Are you required to pay property tax on it? The tax authorities also assume that you make a profit on your assets, on which you are liable to tax.

With all the attention focused on the developments surrounding the coronavirus COVID-19, you would almost forget: the tax return still has to be done. Officially, this is possible until May 1, but you can also request a postponement until September 1 as long as you do so before May 1.

Bitcoin & Tax Return

The Dutch rules regarding bitcoins and tax returns are unchanged compared to last year. Bitcoins are not legally seen as money in the Netherlands, but as assets. For private individuals, therefore, the value of the bitcoins must be stated on the tax form in box 3: savings and investments.

To determine the value to be declared, use 1 January of the year for which you file your tax return as reference date. For the tax return for the year 2019, you therefore look at the value of the bitcoins at the beginning of the year on January 1, 2019.

You add the value of your bitcoins on January 1 to the rest of your equity and if your equity exceeds certain limits, you pay wealth tax on it. You can use the rules on this page to determine your equity. The basis is your assets minus your debts.

Equity capital is tax-free up to certain amounts. You do not have to pay wealth tax on part of your own capital, but you must declare it in the tax return. For the year 2019, assets up to ???????30,360 for single persons are exempt from tax. For people with a tax partner, assets up to ??60,720 are tax-free. If you own less than that, you don’t pay wealth tax.

Fictitious return

The tax authorities assume that you have earned a return on your assets. Even when that’s not the case. The tax authorities use a fictitious return for the calculation, which may deviate from the actual return achieved.

That can be beneficial, but sometimes it isn’t. Any price increases that are higher than the notional return are favorable from a tax point of view, but if you achieve less or no return, it is a disadvantage. Because even then you will have to pay tax on the basis of the notional return.

The tax authorities also assume that you achieve a higher return on capital the more capital you have. Therefore, different notional returns apply to different amounts. You pay 30% tax on the notional return.

For example: Up to ???????71,651, a notional return of 0.13% (savings) applies to 67% of the assets. A notional return of 5.59% (investment) applies to the remaining 33%. On average, this amounts to a fictitious average return of 1.931%. You therefore pay 30% tax on that amount and up to and including ??71,650 that is a maximum of approximately ??415. Other percentages apply from ???????71,651 and above ???????989,737 as well. For an overview of the fictitious returns for higher amounts, you can follow this link. Example calculations can be found here, here, here and here.

Bitcoin & Business Profit

Other rules usually apply to entrepreneurs who have income in bitcoin. This is the case, for example, when a company accepts bitcoin payments, or when a company earns income from mining . You can read which rules apply here.

People sometimes wonder whether regular speculating and trading in bitcoin has a professional character, which means that it should be taxed in box 1. For most people this is not the case. Exchange rate gains achieved by speculation are only taxed under box 1 in exceptional cases. Inspectors must submit cases in which they believe that exchange rate gains should be taxed under box 1 to the Ministry for assessment before they proceed to impose an assessment .

Do report bitcoins

In any case, it is important to indicate to the tax authorities that you have bitcoin(s), even if their value is still relatively low. If the bitcoins rise sharply in value, it will be difficult to explain later and you risk being classified as “black money”. Then you may have a lot of value that you can do nothing with and you also risk large fines.

PLEASE NOTE: We are not tax advisors and this is not tax advice. For professional and specific advice on taxes and bitcoin, it is advisable to seek advice from a professional tax advisor.