Key Takeaways
- Crypto gains fall under income tax in Denmark and can reach up to 52.1% in the top brackets.
- Stablecoins are charged a flat 42% capital gains tax rate.
- Danish authorities are considering a 42% tax on unrealized crypto profits.
An overwhelming majority of Denmark’s crypto traders and investors consistently fail to report their crypto gains to tax authorities and prefer to move assets offshore where domestic regulations don’t apply.
The news arrives as the nation prepares to implement a controversial tax on unrealized gains that could date back to Bitcoin’s (BTC) inception.
Offshore Crypto
As per the “Enforcing Taxes on Cryptocurrencies” report from the EU Tax Observatory, over 90% of Denmark’s crypto traders and investors failed to report their crypto holdings and transactions in 2021 despite strict tax reporting rules.
Instead, the report finds that domestic traders are persistently skirting domestic regulations, which require domestic third-party reporting on crypto assets, and are instead shoring up their assets on foreign platforms “outside of regulatory reach.”
“Moreover, we identify a significant and persistent evasion response to the policy,” the report highlighted.
In 2019, Denmark mandated domestic exchanges to automatically share customer data, such as transactions, with tax authorities.
The paper notes that, by the very nature of blockchain, investors can easily move their on-chain assets wherever they please and “escape” third-party reporting.
“Given these challenges, it remains an open question whether third-party reporting is effective for income that is designed to circumvent traditional regulation,” the report noted.
The report highlights that this evasion isn’t limited to wealthy individuals, as is typically the case, and notes that noncompliance is prevalent throughout the nation’s wealth distribution.
Denmark Crypto Tax
At present, Denmark’s tax regime for crypto traders is relatively unattractive. Crypto profits are added to an individual’s total income and then taxed at the marginal rate.
At the bottom bracket, the base rate is roughly 37%. It’s broken up into a 12% national tax and a 22% to 27% municipal tax. At the top bracket, this rate hits 52.1%
For example, if you earned 75,000 Danish Krone (DKK) a year and earned 5,000 DKK on your crypto, you’d be charged roughly 1,855 DKK on those crypto gains.
If you are in the top bracket and earn over 588,901 DKK a year and earn 5,000 DKK on your crypto, you’d be subject to the 52.1 rate and pay 2,605 DKK on your crypto holdings. Oddly, stablecoins are taxed at a flat 42% under capital gains.
Compounding concerns for domestic traders is the proposed 42% tax on unrealized gains from crypto, which could be retroactively taxed all the way back to Bitcoin’s creation.
Global Participation
In its conclusion, the report explains that its findings “highlight the limitations of unilateral enforcement” when it comes to curbing tax avoidance in “decentralized, borderless assets like crypto.”
In 2026, two major pieces of regulation are set to come into force.
Namely the Organization for Economic Co-operation and Development’s (OECD) Crypto-Asset Reporting Framework (CARF), and the EU’s DAC8 0 both of which compel crypto firms around the world to share the relevant data with tax authorities.
However, these measures will need strong, near-universal participation in order to succeed. If certain jurisdictions refuse to cooperate, there will be plenty of challenges, not to mention the difficulties in regulating decentralized finance (DeFi) platforms.
Eddie is a gaming and crypto writer at CCN. Covering the often weird and wonderful world of Web3 with an adoring, but skeptical eye.
Prior to CCN, Eddie has spent the past seven years working his way through the crypto, finance, and technology industry. He began with PR and journalism with Bitcoin PR Buzz and BitcoinNews.com, eventually working his way to become a copywriter with a dozen firms, including the likes of Polkadot before returning to journalism in 2023.
Having studied Radio production and journalism at University in the UK, Eddie spent a few years making podcasts and presenting on a local London radio station as he built up his writing chops.
A lifelong skateboarder, Eddie can often be found at the skatepark or touring the streets looking for something new to try. That, or kicking back playing JRPGs on his original PSP.
