How to pay taxes on cryptocurrency.

How to pay taxes on cryptocurrency.

When you trade cryptocurrencies , you need to pay taxes on any gains. At the same time, you also get tax deductions on any losses.

When investing in regular stocks and similar assets, it will typically be reported on your taxes automatically. It’s not like that with cryptocurrencies. Here, you need to manually type in your gains and losses on Skat’s (The Danish Taxation Authority) website.

If you purchase cryptocurrency through Lunar Block , we’ll guide you and help you on your way. More on that later.

First, we need to figure out when you need to pay taxes on crypto in the first place. How much can you expect to pay? And which boxes in the form do you need to fill in? 

You’ll get all the answers now. This must be viewed as an indicative overview. You, and you alone, are responsible for reporting any gains to Skat correctly. Visit Skat's website for further information.

When do i need to pay taxes on cryptocurrency?

It’s only when you sell your cryptocurrency that you need to pay taxes on any gains - so after you’ve realised the gains.

If you, on the other hand, lost money on crypto you can get tax deductions on realised losses.

The deadline for reporting your gains and losses follow the very same time schedule you know from the tax assessment notice. An important deadline will typically be in May - in 2022, it was May 1st - where you needed to add cryptocurrency gains/losses at the latest.

How much do i need to pay in taxes from crypto?

The Danish Tax Agency defines cryptocurrency trading as ‘speculation’. That means that all gains are taxed as personal income.

Therefore, it’s the same as you pay in taxes on your salary, for example - so somewhere between 37-52%, depending on your tax bracket. Your actual taxation will also depend on your municipality of residence. For example, if you’re in a higher tax bracket, you need to pay about 52% in taxes for any crypto-gains.
You have to disclose your crypto-gains in box 20 in your tax assessment notice.

If you have realised losses on cryptocurrencies, you need to register it in box 58 in your tax assessment notice.

The fact that gains and losses must be registered in two different places, also means that the taxation is asynchronous.

So, if you were to sell cryptocurrencies in the span of one year, and you have both gains and losses, you can’t deduct the losses from the gains. This you can do with regular stocks, among others.

You can read even more about cryptocurrency taxation on Skat’s website .

Example on calculation on taxation for crypto-gains and losses.

You sell one bitcoin with a gain of 1,000 DKK.

Later that year, you sell another bitcoin with a loss of 1,000 DKK.

With regular stock trading, the gain and the loss would equalise, or even out, each other and you would ‘break even’. Skat then cannot collect more tax or pay you back excess taxes. 
With cryptocurrency, the situation plays out differently. First, your gain on 1,000 DKK will be taxed based on your income tax. Let’s say this is at 37%. This means that Skat will collect 1,000*0.37 = 370 DKK.
Conversely, your loss on 1,000 DKK will give you a deduction value at about 25% (again, depending on your municipality of residence). But let’s say that the deduction value is at 25%.

This means that you have a right to get this deduction as a tax return - corresponding to 1,000*0,25 = 250 DKK.

On the bottom line, you’ve lost 370-250 = 120 DKK due to the asynchronous taxation, even though you’ve technically broken even. You need to be aware of that when trading crypto. 

Important: Remember to save all documentation for your trades, so you’re always able to prove your gains and losses to Skat. Without relevant documentation, you could risk getting your request for tax relief denied.

Easy tax reporting through Lunar Block.

When you buy and sell cryptocurrency , reporting any gains and losses to Skat may seem like an unmanageable task. But it’s actually not as hard as it sounds, because when you trade via Lunar Block, we’ll help you make it easy.

At the end of the year, you’ll receive an overview of your trades, and along with that a guide on how to report your taxes. With the guide, you can handle your tax reporting in a matter of minutes.

Sign up to Lunar Block

Get answers to your questions

Cryptocurrencies can rise and fall.

When you trade cryptocurrencies, you need to be aware that it carries a large risk. The value of your cryptocurrency can both rise and fall, and you can risk losing the entire amount you’ve invested in cryptocurrencies.

Cryptocurrency trading is done through Lunar Block. Lunar Block is not regulated by the Danish Financial Supervisory Authority (Finanstilsynet). That means you won’t have the same protection as when trading e.g. stocks or other regulated assets.

We do not advise
We do not advise on currencies and do not make recommendations for either buying or selling. We can provide factual information about the different currencies, but past price developments are not an indication of future developments. No information from Lunar Block should therefore be considered as recommendations and all decisions are up to you alone.