Skattestyrelsen (SKAT), the Danish tax agency, has accelerated crackdown against a large number of nationals who secretly traded bitcoin on a Finnish crypto exchange.
According to information shared by the Swedish Tax Agency, a total of 2,700 Danes purchased circa $5.80 million worth of bitcoins from the exchange but sold them back for $6.1 million in local currency. That marks approximately $12 million worth of bitcoin trading that went unreported between the financial years of 2015 and 2017.
Karin Bergen, the directorate at SKAT, confirmed that they are reviewing the figures as of now and will go after every individual that ignored to mention their offshore bitcoin trades.
“If you have traded with bitcoins 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,” she warned.
Tip of the Iceberg
Local media reports indicate that Danish tax inspectors and IT specialists are carefully studying the gains and losses made by bitcoin traders. It finds that while some traders invested inadequately in the crypto space with amount lesser than 10,000 Kroner, a notable number among all also purchased and sold cryptocurrencies for amounts exceeding 1 million Kroner.
“There are two types of trades,” explained Ole B. Sørensen, chairman of the personal data department of SKAT. “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.”
Reports also indicate that SKAT has already contacted the big whales involved in institutional-level bitcoin trading activity. The tax agency also plans to go after more such individuals in the coming months.
“It’s probably just the tip of the iceberg,” said Bergen. “Although the Finnish company is a relatively small bitcoin exchange, the information they have revealed is a precious source, which clearly shows trends and patterns in the area.”
Bitcoin is like Paintings
Danish nationals who have traded bitcoin over the years are now caught in a legal gray zone which, in the utmost consequence, may inadvertently put them in line with the law.
Payam Samarghandi, a lawyer and bitcoin expert from Denmark, confirmed that bitcoin is a taxable asset in the country. According to the 1903 Tax Act, the Danish tax agency imposes charges when a property is purchased and sold again for profits. An expensive painting or vase, for instance, resembles how bitcoin taxation functions under the jurisdiction of SKAT.
“It’s a little bit like Kählervasen, a vase whose value increased five years after the first purchase,” Samarghandi explained. “At the time of purchase, the owner didn’t need to pay any tax on it. But when he sold it for at a significantly increased rate, then the profits he made became taxable.”
But again, a painting or a vase cannot be transferred online as payment. SKAT realizes that it would be a difficult task for them to categorize bitcoin holders into those who speculate on the digital currency and those who utilize it.
Louise Schack Elholm, who is also a member of the Tax Council, said that there might be instances where bitcoin and other virtual currencies get purchased for purposes other than speculation.
“But,” she added, “it will be in sporadic cases.”
Featured image from Shutterstock.
Last modified: March 4, 2021 3:15 PM