Business 13 December 2018

Dan Taylor

Danish taxman targets 2,700 crypto traders over possible tax evasion

The Danish tax authority Skattestyrelsen is pursuing as many as 2,700 Bitcoin Core (BTC) traders over taxes in connection with as much as $12.7 million of unreported transactions.

In the latest crackdown from a tax agency, the Danish effort follows reports that some traders had been engaging in transactions through Finnish exchanges, allowing them to avoid reporting gains directly to the domestic tax authorities.

According to information provided by tax enforcement in Sweden, 2,700 Danish traders using Finnish exchanges have been identified, covering the period between 2015 and 2017.

The directorate at SKAT, Karin Bergen, said the Danish tax agency would now pursue each of those individuals for unpaid tax in connection with their undeclared transactions.

In a statement, the tax agency noted: “If you have traded with [BTC] on the specific Finnish Bitcoin exchange and have not specified any winnings, then you can hear from us so we can get your taxes in place.” Losses or profits made in connection with trading in BTC or other cryptocurrencies affect an individual’s taxable income, according to SKAT.

Bergen said 2,700 is “probably just the tip of the iceberg,” explaining, “Although it is a relatively small bitcoin stock exchange, the information is a very valuable source, which clearly shows trends and patterns in the area.”

According to reports in local media, tax inspectors are working with IT experts to examine blockchain transaction records, suggesting a significant number of the users identified had engaged in transactions of more than 1 million Kroner.

Ole B. Sørensen, chairman of the personal data department of SKAT, said there were broadly two types of trades under investigation.

“One is what I want to call a curious trade, which is about a few thousand dollars. And then there are those who have been trading for some enormous amounts,” the official said.

Danish cryptocurrency investors are currently in a grey area, with tax laws on cryptocurrency gains not specifically addressed in law. According to Danish lawyers, there is precedent for gains becoming taxable after the event, but not in the case of payments or cryptocurrencies. With the tax authorities apparently keen on pursuing payments in these cases, it remains to be seen whether the law in this area will soon become much clearer for those who sought to avoid the gaze of the Danish tax authorities when trading cryptocurrencies. 

Note: Tokens on the Bitcoin Core (SegWit) chain are referenced as BTC coins; tokens on the Bitcoin Cash ABC chain are referenced as BCH, BCH-ABC or BAB coins.

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